What is lien priority?
Lien priority determines the order in which debts get paid when a property forecloses, and the rule isn’t the same everywhere. In most states an HOA lien is junior to a first mortgage, low on the list behind the lender and often behind tax liens too. A handful of states break from that: Nevada (NRS 116.3116) gives nine months of unpaid common-expense assessments priority over a first mortgage, and Connecticut (Conn. Gen. Stat. §47-258(b)) does the same for nine months of common charges, a threshold state law raised from six months back in 2013. Alaska, Colorado, Delaware, Minnesota, Vermont, and West Virginia have some form of statutory lien priority too, though the details vary by state. Florida gets mistaken for a super-priority state, but it isn’t one; its safe-harbor rule (Fla. Stat. §718.116 for condos, §720.3085 for HOAs) only caps what a foreclosing first mortgagee owes the association for prior unpaid assessments, at the lesser of twelve months or 1% of the original loan balance, which is a liability cap, not a priority lien.
Why does lien priority matter?
Understanding where an HOA’s lien sits in the payment order matters for realistic expectations, an association at the back of the line may recover little or nothing from a foreclosure sale, which shapes how aggressively a board should pursue this route in the first place. That calculation gets harder when Fannie Mae or Freddie Mac holds the mortgage. Under 12 U.S.C. §4617(j)(3), while FHFA holds those loans in conservatorship, no state super-priority lien can extinguish the mortgage through an HOA foreclosure without FHFA’s consent, a position FHFA reaffirmed in its 2015 statement on HOA super-priority lien foreclosures, and one that courts have generally upheld.
When You’ll Run Into This
This becomes relevant the moment a delinquent property heads toward foreclosure and the board needs to know what it can realistically expect to recover.
