Defending a Collections or Foreclosure Lawsuit from your HOA
Home Owners Association
If you live in a community with homeowner’s association or a condominium association, you might be required to pay regular assessments on a monthly, quarterly, or annual basis. You may also receive notice that you are required to pay a special assessment for a specific cost. Assessments are collected by the HOA to fund, operate and maintain “Common Areas” (as defined by your HOA’s governing documents) or other shared obligations of the HOA like legal fees, maintenance costs, or management fees.
If you don’t pay these assessments, your homeowners association can file a lawsuit against you in an Arizona Justice Court or County Superior Court. Your HOA can also file an action to foreclose on your home in order to get its assessments paid. In a lawsuit, your homeowner’s association or a condominium association can obtain a judgment for any unpaid amounts on your ledger as well as its attorney’s fees for the lawsuit. This judgment can be used to garnish your wages until the amount of the judgment is paid off.
If you’re defending yourself in a collections lawsuit from a homeowners association for failure to pay your assessments, it’s important to understand your rights.
1. Familiarize yourself with Relevant Statutes on Fair Debt Collection and Arizona statutes for the collection of Assessments.
State and Federal statutes and common law provide protections for the homeowner. For example, there are statutes (official laws enacted by the Legislature) in Arizona that mandate what a planned community or condominium association can and cannot do. Additionally, the Fair Debt Collection Practices Act (also known as the “FDCPA”) provides homeowners with protection from unfair treatment by organizations attempting to collect a debt on behalf of the homeowners association.
2. Read the relevant documents from your community regarding collections, assessments, notice, and penalties to make sure you’ve been treated fairly.
Consider whether you have any relevant defenses against the action or counterclaims you can raise against your HOA based on their own documents and rules. Your Association’s governing documents (e.g. Articles of Incorporation, Bylaws, or Covenants, Conditions, and Restrictions (CCRs)) contain provisions on assessments, fees, and penalties which must be followed. Under Arizona law, these documents are considered contracts that govern both the homeowners and the Association itself. The Association may also have resolutions or rules regarding assessments, collections actions, interest on unpaid assessments, or the collection of attorney fees. Scrutinize whether the HOA has appropriately followed its own policies. You have a right to be treated fairly and lawfully by your Association.
3. Review an up-to-date ledger and your transaction records.
Homeowners Associations must keep up-to-date accurate record of their finances. Because assessments are allocated for different purposes, HOAs financial records can be complex. The ledger and transaction records should be scrutinized for accuracy and transparency.
In Arizona, homeowners are entitled to review and scrutinize their HOA documents. In some cases, the ability to review HOA documents are stipulated in the HOA’s policy; but in all cases, Arizona law gives all homeowners the ability to do so. A.R.S. § 33-1805(A) mandate HOAs to make their financial and transaction records available for inspection to homeowners at no cost. Additionally, if the homeowner wants a copy of the documents, A.R.S. § 33-1806(C) limits the fees to provide copies at $400. Laws such as these allow homeowners to hold their HOA’s accountable, ensure that the assessments are distributed properly, and protect homeowners from dishonest HOA boards.
An Owner’s ledger should show the exact amount owed to the Association, including assessments, fines, penalties, late fees, or other charges. There may be an opportunity to negotiate certain amounts in a resolution with the HOA.
4. Check the Procedural Rules for your Jurisdiction.
Read any documents you’re served with carefully. If you’re a party to a lawsuit, the court will require you to know and comply with all procedural rules. Not knowing the rules could negatively impact your case and the ability to contest the lawsuit or allegations against you. For instance, it’s important to answer the lawsuit (the “complaint”) in a timely fashion in accordance with the applicable rules of procedure, or you could face a default judgment, which may include a judgment authorizing foreclosure of your home. If a default judgment is awarded against you, a court may not allow you to raise valid defenses to the lawsuit.