Amongst condo-dwellers and their property management (to a lesser extent, single family home-owners subject to an owners’ association), I frequently hear the phrase, “Let’s just file a lien.” This is often mentioned when an owner and member of the association has failed to make timely payment of their regular monthly assessments. However, “filing a lien” is not really an accurate statement of how the Association should perfect it’s interest in the property.
Under the Texas Uniform Condominium Act (“TUCA”), which applies to all condos in the State of Texas that were formed on or after January 1, 1994, the Association already has a lien against delinquent owners, without the need of any filing. TUCA Section 82.113 provides that an assessment levied by an association against a unit or unit owner is a personal obligation of the unit owner and is secured by a continuing lien on the unit and on rents and insurance proceeds received by the unit owner and relating to the owner’s unit. Emphasis added.
Furthermore, the association’s lien has priority over many other types of liens. Typically, the governing documents for your condominium will echo the statement from §82.113 of TUCA, further stating that a continuing lien in favor of the association exists whenever an owner is delinquent in payment of his/her assessments.
Usually, once I provide this explanation, condo board members follow up with a very good question, “If the lien already exists, why are we filing anything in the real property records?” The answer to that question is simply one of logistics. For sake of explanation, let’s say Bad Neighbor owes the Association $10,000 in past due assessments. Let’s further assume that Bad Neighbor has indicated that he has no intention of ever paying his assessments, because he disagrees with the management decisions that have been made by the Board. If Bad Neighbor then chooses to sell his unit to Innocent Purchaser, there would be nothing to indicate to the innocent purchaser that there are any current amounts owed to the Association. However, if the Association has chosen to file a “Notice of Lien” in the real property records, potential purchasers and title companies will be able to see that Bad Neighbor owes money to the Association. Typically, a title company will require that all liens be cleared before they will issue title insurance, which will likely result in the Association being paid. Therefore, filing a Notice of Lien may just be the lowest-cost method of collection past due assessments. (However, beware of first lien holder foreclosures, as has been discussed previously in this blog)