The D.I.Y. Lien – Common Mistakes & Pitfalls in Collecting Assessments

Filing a lien and pursuing civil action are two primary options available to homeowners’ associations (HOAs) when collecting unpaid assessments and fines from delinquent lot owners. Before deciding to pursue foreclosure, it is crucial to evaluate the costs and benefits for the association. While some HOAs try to file liens without legal assistance, the process can be complex, and even small errors can lead to significant legal challenges. Filing an invalid lien could result in a lawsuit for slander of title and create permanent barriers to collecting assessments.

Here are some of the common mistakes and pitfalls when attempting a DIY lien filing:

Mistake #1: Filing the Lien Too Soon
Under General Statute Section 47F-3-116, assessments must be unpaid for at least 30 days before filing a claim of lien with the Clerk of Superior Court in the county where the property is located. Filing prematurely may render the lien invalid, hindering the association’s ability to enforce it.

Mistake #2: Omitting Required Statutory Language
The lien document must meet very specific requirements, including the placement of a mandatory statement on the first page of the lien. This statement must appear in boldface, all caps, and be no smaller than the largest print used elsewhere in the document. The exact language is as follows:

“THIS DOCUMENT CONSTITUTES A LIEN AGAINST YOUR PROPERTY, AND IF THE LIEN IS NOT PAID, THE HOMEOWNERS ASSOCIATION MAY PROCEED WITH FORECLOSURE AGAINST YOUR PROPERTY IN LIKE MANNER AS A MORTGAGE UNDER NORTH CAROLINA LAW.”

Failure to include this language correctly could invalidate the lien, making it impossible to collect the unpaid assessments.

Mistake #3: Missing the Statute of Limitations
An association must begin foreclosure within three years of filing the lien. If foreclosure proceedings are not started within this time, the lien expires and can no longer be enforced. Foreclosure is handled similarly to the process of a mortgage or deed of trust foreclosure under a power of sale, but it can only proceed if the assessment remains unpaid for 90 days or more.

Mistake #4: Failing to Provide Proper Notice to the Lot Owner
Before filing a lien, the association must provide the lot owner with proper notice. The statute includes specific requirements on the timing, location, and method for notifying the lot owner of the intent to file a lien. If the association fails to comply with these requirements, the lien may be invalid, and the assessments may become uncollectable.

If your HOA is dealing with unpaid assessments, it’s essential to follow the statutory requirements carefully. Small errors can result in substantial financial losses or legal liabilities. Contact the attorneys at Ferikes Bleynat & Cannon for guidance and support in properly filing liens or pursuing other collection methods. We can help you evaluate the best options for your association’s specific situation.