This article about HOAs in the Arizona Republic reminded me of what I heard at the real estate Industry Partners Conference last week.
When a home is foreclosed on, all junior liens are wiped out, including liens for unpaid HOA fees.
However, title company reps said some HOA’s are leaning on the new homeowners to pay the unpaid fees of the previous, foreclosed upon, homeowner. The new homeowner will sometimes pay the back fees so they don’t make waves in their new community, although they don’t really owe the money to the HOA.
In a similar strategy, in escrow, the HOA may not provide HOA docs unless the past fees are paid, even though the home was foreclosed upon. The buyer may agree to pony up the overdue fees to move the purchase forward.
If I have this right, it seems the HOA’s don’t have a right to get the past-due fees from the new homeowner after a foreclosure, but some HOAs are of the mind that it doesn’t hurt to ask… repeatedly.
If you know more about this issue, let’s hear about it in the comments.
Added July 2011: See also “Past due HOA fees after foreclosure“. Apparently, the previous owner is still responsible to pay past due HOA fees after foreclosure, even though the HOA lien is removed from the property itself.