Position of HOA Trutee Deed

In the recorded CCR’s of an HOA declaration, it is written, “In order to induce lenders and investors to participate in the financing of the SALE OF LOTS AND CONDOMINIUMS in the community, the HOA subordinates its assessment lien to the first mortgage”. According to its language it seems that HOA subordinates its assessment lien to the senior most PURCHASE LOAN. So please let me know if the purchase loan is paid off and the owner takes a CASH OUT Refinance loan and this new loan is the only loan, even then this loan will be senior to the HOA assessment lien. Thanks in anticipation.

Hi Nand,
That is very interesting. Most HOA’s in CA are not pre-liens. The way it is written here would indicate that this HOA is in fact a prelien and would only be subordinate to the purchase money 1st. The reason most HOA’s are not a pre-lien is that most lenders would not go behind a HOA lien. I would contact a local title company that has handled these refi or sale transactions to see if you can get clarification. It is not necessarily a deal breaker but you would certainly want to treat this like a property tax lien and figure out what the past due HOA dues are prior to buying at trustee sale.