Liens for Unpaid Assessments: The Power and Complexity of the Community Association Lien

For this week’s Guest Post Friday here at Musings, I welcome back a good friend. John Tarley is an attorney with the Williamsburg law firm of Tarley Robinson, PLC. John is the managing partner for the firm and leads the firm’s business and litigation practices. A large part of the firm’s practice involves homeowners’ associations, as the firm represents nearly 100 associations throughout southeastern Virginia. In his spare time, John teaches two classes a semester as an adjunct at the William & Mary Law School, serves as the 9^th Judicial Circuit’s representative on the Virginia State Bar Council where he serves as Vice-Chair of the Budget and Finance Committee, and is the editor of the Tarley Robinson blog and the @TarleyRobinson twitter account.

Chris does a wonderful job on his blog helping us make sense of the peculiarities of filing a mechanic’s lien in Virginia. In this blog, I will discuss another lien that can be filed on real property in Virginia, a lien that I will refer to in this blog as the “Association Lien.”

Virginia has two separate code sections that permit community associations to file liens for unpaid assessments. For condominium associations, Va. Code § 55-79.84 sets forth the procedures for filing a lien. For developments governed by the Property Owners Association Act (“POAA”), Va. Code § 55-516 provides the statutory requirements.

The power of an Association Lien

The Association Lien is powerful. First, by the terms of both statutes, once perfected, the Association Lien shall be considered prior to all other liens and encumbrances except

(i)      real estate tax liens on that condominium unit,

(ii)     liens and encumbrances recorded prior to the recordation of the declaration, and

(iii)    for condominium associations, sums unpaid on any first mortgages or first deeds of trust recorded prior to the perfection of said lien for assessments and securing institutional lenders. Under the POAA, sums unpaid on and owing under any mortgage or deed of trust recorded prior to the perfection of said lien.

Note that neither the Condominium Act lien nor the POAA lien shall “affect the priority of mechanics’ and materialmen’s liens.”

Second, once the Association Lien is properly perfected, the property owners’ association (or the unit owners’ association, in a condominium) may conduct a nonjudicial foreclosure sale, selling the lot at public sale, “subject to prior liens.” This nonjudicial foreclosure sale is subject to review of an accounting by the Commissioner of Accounts, similar to foreclosure sales on deeds of trust.

Third, any suit to enforce the Association Lien entitles the association to recover attorneys’ fees, costs, and interest from the date the assessment came due.

Traps for the unwary

However, just as in filing a Memorandum of Mechanic’s Lien, the process seems to be straightforward, but there are many traps for the unwary. Here are just a few of the statutory procedures must be followed strictly:

• The content of the Association Lien. The required content to file a lien for assessments for a condominium is slightly different than filing a lien for assessments pursuant to the POAA, but the requirements are contained within the Virginia Code and must be followed fully. Failure to comply could result in a fatal defect in the Association Lien.
• Time periods. In order to perfect the lien, associations governed by the POAA must file “before the expiration of 12 months from the time the first such assessment became due and payable.” However, community associations governed by the Condominium Act must file within 90 days “from the time the first such assessment became due and payable.” Furthermore, any suit to enforce either lien must be initiated within “36 months from the time when the memorandum of lien was recorded.” Failure to meet any of these time requirements could result in a fatal defect in the Association Lien.
  
• Notice requirements. Prior to filing an Association Lien on a property governed by the POAA, the association must send a written notice to the property owner by certified mail “at least 10 days before the actual filing date of the memorandum of lien.” Failure to comply with the notice requirements could result in a fatal defect in the Association Lien.
• Signature on the Association Lien. For either a condominium lien or a POAA lien, the Association Lien must be signed under oath by the principal officer of the association, or such other officer or officers as the governing documents may specify. In the case of Wilburn v. Pinewood Lawns Condominium, the Fairfax County Circuit Court set aside the association’s nonjudicial foreclosure, determining that the Association Lien was “not verified properly” because it was signed by legal counsel, not a principal officer of the association.

The Association Lien is a powerful tool for community associations to collect dues and assessments. Associations use dues and assessments provide and maintain common areas; pay for community pools, roads, and clubhouses; provide owners with utilities and services like cable, internet, and sewage; to save for future expenses; and to pay necessary expenses like liability insurance. Make sure that your community association takes full advantage of this valuable tool.

As always, John and I welcome your comments below.  Please subscribe to keep up with this and other Guest Post Fridays at Construction Law Musings.