Arizona Real Estate Notebook

We’re generating a lot of interest (18 comments and counting) on this post, “Past due HOA fees wiped out in foreclosure but…“.

From link in Comment 15 from Carpenter Hazelwood.

Under state law, an association ’s assessment lien is extinguished when a first position lender (first mortgage) sells property pursuant to the terms of the recorded deed of trust, also known as a trustee ’s sale. Therefore, the new owner, usually the first lender in this economy, takes the property free and clear of any junior liens, including an association’s assessment lien. Any amendment to the CC&Rs to change the lien priority and the effect of a trustee’s sale would violate the statutes and have no effect.

With the standard language of most CC&Rs, the personal obligation to pay assessments is limited to those assessments and other charges that accrued during a homeowner ’s period of ownership. In fact, most CC&Rs provide language that specifically states that the personal obligation for past charges does not pass to successors in title of the homeowner unless expressly assumed by such successors. The reality is that a bank would not normally be willing to expressly assume such debt. There is no upside to the bank in that regard.

Regardless of the CC&Rs, common law principles would dictate that a person or entity is not obligated for the debt of another unless that debt is expressly assumed. If an association wished to change this by amendment, it should do so understanding that it is an aggressive and untested amendment that would not go without risk.