Choosing Where to Live

Homeowners Associations and Foreclosure

This article is intended to provide a brief introduction to the world of HOAs and to shed light on how HOAs use the fine print in real estate purchase agreements to foreclose on Arizona homeowners who fall behind on their HOA assessments.

Arizona media reports are increasingly filled with stories related to homeowner associations (“HOAs”). Sometimes these stories involve disputes among residents or between residents and HOA boards about regulations concerning seemingly minor things such as vehicle parking, yard maintenance, exterior paint colors, outdoor grilling, fences, pets, trash and recycling bins, and even holiday decorations. With growing regularity, however, these stories involve attempts by HOAs and their attorneys to take residents’ homes away from them.

As of 2018, there are more than 9,000 HOAs in Arizona, and approximately one-half of all Arizona residents live in an HOA-governed community. According to the United States Census Bureau, more than 70% of the single-family homes sold throughout the country every year are in HOA-governed communities.

What is an HOA?

An HOA is a private association established to govern the marketing, management, maintenance, selling, and leasing of homes within a particular building or subdivision.

An HOA’s governing documents have two distinct purposes. Its Articles of Incorporation and its Bylaws are intended to govern the HOA itself, while its Covenants, Conditions, and Restrictions (or “CC&Rs”) are intended to govern how individual homeowners may occupy and use the property.

An HOA’s governing documents generally “run with the land,” which means that every present and future owner of a property within the HOA’s jurisdiction is legally bound by and to the terms of those governing documents whether they like it or not.

Most HOAs require that all owners of property within the HOA’s jurisdiction belong to the HOA as members and pay regular assessments to the HOA in order to participate in governance decisions and make use of common amenities – such as parks and recreation facilities – provided and maintained by the HOA.

How may HOA membership result in foreclosure?

When a person agrees with the seller of a home to purchase a home in an HOA-governed community, the buyer simultaneously agrees to be subject to the rules and regulations of the HOA. As a general rule, the purchase agreement thus legally obligates the buyer to pay all applicable HOA assessments as well as late fees and penalties.

HOA assessments must be paid in full and on time just like rent and mortgage payments.

If a homeowner (or a tenant whose written rental agreement specifies that the tenant is responsible for paying all applicable HOA fees) fails to pay the applicable HOA fees in full and on time, the HOA will send out an invoice for all overdue fees (and contracted late fees, if any) along with a notice informing the homeowner that if the outstanding balance is not paid within a particular period of time or by a particular date, then the HOA will take legal action.

Once the HOA takes legal action in order recover the outstanding balance, the homeowner (or the tenant) becomes responsible not only for all overdue fees and late fees but also for reasonable collection fees, court costs, reasonable attorneys’ fees, and penalties. Attorneys’ fees, especially, can add up very quickly, causing the amount that the homeowner owes to increase exponentially.

If a homeowner (or a tenant whose written rental agreement specifies that the tenant is responsible for paying all applicable HOA fees) fails to pay the applicable HOAs fees in full and on time, then the HOA has a right to take that person to court to obtain a monetary judgment against them.

Under A.R.S. 33-1807(A) (which applies to planned communities) and A.R.S. 33-1256(A) (which applies to condominiums), once a homeowner has become indebted for unpaid and overdue assessments to an HOA, a lien is automatically attached to their property. The HOA may initiate a foreclosure action either (A) after twelve months of missed payments by the homeowner or (2) if a homeowner accumulates an outstanding balance of $1,200 or more, whichever comes first. (An HOA may only foreclose on a lien that is based on unpaid and overdue assessments and related charges – not just fines and other fees.)

Since 2015, HOAs have initiated foreclosure actions on more than 3,000 Arizona homeowners with overdue HOA balances.

Can an HOA foreclose on a home even if the mortgage is current?

Yes. Arizona law permits HOAs to foreclose on their liens in the very same way that lenders may foreclose on unpaid mortgages – and an HOA’s right to foreclose is completely independent of the homeowner’s mortgage situation.

What happens if a home goes into foreclosure?

If a home goes into foreclosure, it may be sold at auction – and the sale price may be only a little bit more than the amount that the homeowner owes. However, after all debts have been paid, the homeowner generally has a right to recover any excess proceeds.

To learn more about how the foreclosure process works, please read the articles on foreclosure at

What are some potential legal defenses to a HOA-related foreclosure action?

A homeowner whose HOA seeks to foreclose on their property has limited options beyond immediately paying the amount that the HOA claims is owed. Potential legal defenses to the foreclosure action itself include alleging that the HOA has incorrectly calculated its assessments and/or late fees; that the HOA’s assessments and/or late fees are not authorized by the HOA’s governing documents; that the HOA has failed to meet statutory notice or other requirements (including the 12-month or $1,200 rule); and that the HOA is asking for collection fees or attorneys’ fees which are not reasonable.

What non-litigation dispute resolution process is available to homeowners who believe that their HOA is acting improperly?

In addition to suing the HOA in state court, a homeowner who believes that their HOA has violated or is violating either the HOA’s governing documents – its Articles of Incorporation, its Bylaws, and/or its CC&Rs – or broader Arizona law may file a petition (along with a filing fee of $500) with the Arizona Department of Real Estate to have an Administrative Law Judge (“ALJ”) conduct a hearing and determine whether and how the HOA has acted improperly.

The ALJ may order either party to abide by the Arizona statute, governing document, or contract provision at issue and also may levy a civil penalty on the basis of each violation. If the ALJ decides in the homeowner’s favor, and the homeowner was the petitioner, then the HOA will be ordered to pay the homeowner’s filing fee. (If the ALJ decides in the HOA’s favor, and the HOA was the petitioner, then the HOA will be ordered to pay the HOA’s filing fee.)

Sources and further reading

Arizona Department of Real Estate – “HOA Dispute Process”:

Arizona Department of Real Estate – “HOA Dispute Process Brochure”:

Arizona Revised Statutes Title 32 – Chapter 20 (“Real Estate”) – Article 11 (“Administrative Hearings”):

Arizona Revised Statutes Title 33 – Chapter 9 “Condominiums”):

Arizona Revised Statutes Title 33 – Chapter 16 (“Planned Communities”):


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