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North Carolina: Statutory Changes re HOA/COA Assessments Following Mortgage Foreclosure

Posted By USFN, Wednesday, February 5, 2014
Updated: Monday, October 12, 2015

February 5, 2014


by Lanèe Borsman
Hutchens Law Firm – USFN Member (North Carolina)

House Bill 331/Session Law 2013-202

The North Carolina legislature has amended the provisions of Chapter 47 of the North Carolina General Statutes dealing with the lien of homeowners and condominium association dues. North Carolina is not a “super lien” state. When the holder of a first mortgage forecloses, the purchaser at the foreclosure sale has historically been liable only for HOA/COA dues incurred from the date of the “acquisition of title” to the property. Until now, the “acquisition of title” date was generally regarded as the date the trustee’s foreclosure deed was recorded. This was true even on an FHA loan where the assignment of the bid to HUD could mean a delay in the recording of that deed for long periods of time. The past-due HOA/COA amounts that had accrued against the borrower are pro-rated among all of the property owners, so the longer the delay in the recording of the foreclosure deed, the more concerned the homeowners shouldering the burden became, and they let their legislature know it.

The change comes via clarification of the definition of “acquisition of title.” Going forward, the determinative date is the day the “rights of the parties become fixed,” otherwise known as the end of the upset bid period, which is typically 10 days after the sale date. The result of this change is that upon the foreclosure of a first lien, any homeowners/condominium association dues will start accruing against the purchaser on the day of confirmation of the foreclosure sale, no matter when the foreclosure deed is actually recorded. FHA conveyances will have to be watched very closely now, because if the dues are not paid, HUD and the servicer risk losing the property to an HOA/COA foreclosure before the conveyance even goes on record.

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