Unpaid Assessments: Liens & Personal Obligations—Part I

This two-part article discusses the personal obligation of the owner to pay assessments and the lien that is created when the assessment is not paid. Next time we’ll cover the effects of sales, foreclosures and bankruptcy on both the personal obligation and the lien.

Typically, unpaid assessments constitute a lien on the unit or lot, which arises automatically from the date due. The Association does not have to do anything to “perfect” or create the lien, because the Acts and the Declaration establish them. However, the Association can record a “paper lien” (Notice of Claim of Lien). The lien attaches to the unit or lot – not to the individual owners – and remains until it is paid or is affected by other issues (to be discussed next time).

In addition to constituting a lien, each assessment is typically defined in the governing documents as the “joint and several” personal obligation of the owners. Generally, this means that whoever owns the unit at the time the assessment becomes due has the obligation to pay that amount, even if there are multiple owners on the title. The personal obligation attaches to the owners, not the unit, so the delinquency can be pursued even if the owners sell the unit or lot. Collection of the personal obligation works more like collecting on a contract, so the Association can file a “personal obligation” lawsuit against a delinquent owner to obtain a money judgment.

Associations generally have the option of whether they want to foreclose or pursue an owner on the personal obligation. Most governing documents allow for both. Deciding the best course of action depends on factors such as the amount owed, the age of the debt, occupancy, the sale of a unit, foreclosure, and personal bankruptcy of the owner. These issues will be discussed in further detail next month. Stay tuned!