Owning property that's part of a homeowner's association has lots of perks, but it also has some drawbacks. One of those drawbacks is what's known as an HOA lien.
There are several laws regarding HOA liens in Maryland, and those laws can affect your home's rental valuation.
Let's look into an HOA lien explained for a deeper understanding of how these liens may affect you as a property owner.
HOA Lien Explained
An HOA lien is a legal document that a homeowner's association (or HOA) can place on a property. This lien is usually issued when the homeowner does not pay their HOA dues.
In most cases, the lien gives the HOA the right to collect the debt. They may even seek foreclosure in most cases if the debt remains unpaid after a certain period.
These liens are automatically placed when HOA fees and other payments are delinquent. The term delinquent and how long that pertains to depends on what's specifically listed in the HOA governing documents.
What Happens After an HOA Lien is Issued?
There are many negative consequences to receiving an HOA lien, including issues with rental valuation. Other problems include potential foreclosure and difficulty if a homeowner wants to sell or refinance their home. You'd need to pay the debt before you could sell or refinance the home.
An HOA lien can also damage your credit score, and you'll likely be faced with additional fees, legal costs, and interest. It might also make relationships with your neighbors, members of the HOA board, and others feel strained.
Property owners have specific HOA lien rights depending on the state and your HOA's governing documents. Certain states have a limit on when an HOA can foreclose or they may have a minimum debt threshold that homeowners must meet before foreclosure proceedings can begin.
HOA Liens and Rental Valuation
A rental valuation is used to help someone determine the potential rental value of a property, but a lien can get in the way. For example, having an HOA lien on a property makes people think that the homeowner is having financial troubles, or that they're not financially responsible.
This lien also means that the homeowner is not currently fulfilling their obligation to the HOA. That can be a major concern for renters since it could put their ability to stay in the home at risk if it could be up for foreclosure in the future.
Some HOAs may also require landlords to pay their outstanding debts before they can rent their property to tenants. This adds more financial strain on the landlord, which means they may raise the rent to pass the cost along to tenants.
Don't Get Caught in a Lien
Understanding how an HOA lien affects you and your rental valuation is vital. Make sure you're up to date on fees and read your HOA bylaws carefully to find out more.
PMI Village Alliance is a full-service association management company serving HOAs in Jessup, MD, and surrounding areas, so contact us today to find out how we can help you.
