If you own a home with a mortgage, you already know one type of lien: your mortgage. However, there are other types of liens that can be placed on homes, such as HOA assessment liens. Nevada recently changed its laws regarding HOA assessment liens, and it’s made a huge difference.
What Are Super Liens?
If a homeowner lives in a neighborhood with an HOA and fails to pay their dues and assessments, that past-due amount can become an HOA assessment lien and be placed on the property. Generally, if a home goes into foreclosure, liens are paid in the order in which they were written, so a first mortgage would usually be first.
Super liens, however, are different. Regardless of when the lien was crafted, if it is a super lien, it gets to go to the front of the line. In many states, HOA assessment liens are considered super liens, so they get paid before the mortgage lender gets their money.
The Problem for Mortgage Lenders?
Nevada became one of the states that made HOA assessment liens super liens, but problems quickly arose for mortgage lenders. When a home with an HOA assessment lien went into foreclosure, as law demanded, it was paid first. However, that’s not all that could happen. The HOA super lien could actually snuff out the first deed of trust (usually the first mortgage). As a result, many lenders were losing significant money.
What Is SB 306?
SB 306 is a law passed by the Nevada legislature and it became effective on October 1, 2015. The new law adds more structure to the previous one. HOA assessment liens are still super liens, but mortgage providers can do more to get their money back.
Firstly, they must be notified that the house has gone into foreclosure and their lien may be extinguished. However, the law also allows that the lienholder can redeem the property within 60 calendar days following the HOA foreclosure. This allows them to recoup some of their money because they can resell the house. The lienholder can only purchase the property if:
- They pay the purchase price plus one percent interest per month
- They pay the HOA assessment lien
- They pay the amount of their own lien with interest
- They pay reasonable amounts to repair and maintain the home
- They pay any senior liens (for example, if the house has a second mortgage and the second mortgage lender wants to purchase the property, they must pay the first mortgage)
In Nevada, HOA assessment liens are still super liens, but SB 306 has added a bit more structure to the laws, making it possible for lenders to recoup their money, so they don’t end up losing millions of dollars.