The D.I.Y. Lien – Common Mistakes & Pitfalls: Collecting Assessments
Filing a lien and pursuing a civil action are two options available to associations for collecting unpaid assessments and fines from delinquent lot owners. It is also critical that you carefully evaluate the costs and benefits to the association before electing to pursue foreclosure. Many associations attempt to file their own liens without the assistance of an attorney, but because there are very technical statutory requirements involved, many miss the mark. These mistakes are critical because filing an invalid lien can constitute slander of title for which an association may be sued, in addition to creating a permanent obstacle to collecting the unpaid assessments.
Mistake #1: Not waiting long enough before filing the lien.
General Statute section 47F-3-116 governs the procedure for placement and enforcement of liens. Assessments must be unpaid for thirty (30) days or longer before a claim of lien can be filed with the Clerk of Superior Court of the county in which the lot is located.
Mistake #2: Leaving out language required by the statute.
The first page of the lien must include the following statement in print that is in bold face, capital letters, and no smaller than the largest print used elsewhere in the document: “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.”
Mistake #3: Missing the statute of limitations.
An association must begin foreclosure of the lien within three (3) years of the filing date or the lien expires. Foreclosure of the lien is handled in the same manner as a mortgage or deed of trust on real estate under a power of sale if the assessment remains unpaid for ninety (90) days or more.
Mistake #4: Improper notice to the lot owner.
The statute also includes specific requirements on when and where the lot owner must receive notice of the intent to file the lien before the lien can be recorded. Failure to abide by the particulars in the statute can result in an invalid lien and assessments that cannot be collected.
If you have unpaid assessments, contact Bill Cannon or Martha Bradley to discuss the best option available for your situation.