Oregon Revised Statute 94.712 is worth noting by distressed property sellers and their Realtors®. Section (1) reads as follows: “An owner shall be personally liable for all assessments imposed on the owner or assessed against the owner’s lot by the homeowners association.”
If a seller is trying to complete a short sale, and decides to discontinue his/her monthly payments to their lender(s), that is one thing. The mortgage debt identified in the promissory note is secured by the trust deed on the property. If the home is a primary residence, and occupied by the seller, under ORS 86.770, a foreclosure will not result in any personal liability to the defaulting homeowner. If there is a second note and trust deed on the property, the analysis becomes more complicated, but in most (not all) cases, there will generally be no formal collection action filed against the homeowner prior to the foreclosure.
But this isn’t necessarily the case if the homeowner lives in a planned community with common areas. In virtually all such cases, there will be a homeowners association with dues assessed to each unit owner or homeowner. Under ORS 94.712, cited above, unpaid assessments are a personal obligation of the homeowner, and cash-strapped HOAs have become increasingly aggressive in seeking recovery for unpaid assessments.
In order to avoid the unpleasantness of being sued by the HOA for unpaid assessments and attorney fees, owners of distressed property should strive to either remain current on their dues, or reach some satisfactory repayment arrangement with the association – preferably before the HOA has turned the matter over to its attorneys.
If a homeowner has significant arrearages to the HOA, it can cause difficulties for the closing of a short sale. For this reason, Realtors® should be vigilant in making sure that all issues regarding unpaid association dues are fully vetted at the time of listing.
