North Dakota HOA Liens: No Association Foreclosure Statute, and a $150,000 Homestead Shield

Start with what does not exist, because it explains everything else. North Dakota never enacted the Uniform Common Interest Ownership Act, a Planned Community Act, a Horizontal Property Act or a homeowners association act. The property title runs from chapter 47-01 to chapter 47-36, and a chapter by chapter reading shows one and only one common-interest chapter in it: 47-04.1, Condominium Ownership of Real Property. There is no cooperative act and no townhouse act. A North Dakota homeowners association that is not a condominium is therefore a creature of its recorded declaration and, almost always, of the Nonprofit Corporation Act in chapter 10-33 rather than of any statute written for associations.

For condominiums, section 47-04.1-11 is the whole lien statute, and it is short. A reasonable assessment for common expenses made by the administrative body in accordance with the recorded declaration and bylaws is a debt of the owner at the time it is made. The amount of that assessment, plus interest, costs and penalties provided for in the declaration and bylaws, becomes a lien on the condominium when the administrative body causes the assessment to be recorded with the recorder for the county where the unit sits. The recorded notice of assessment must state the amount and the name of the record owner and must be signed by an authorized representative of the administrative body or as the declaration and bylaws provide. On payment the body must record a notice of satisfaction and release. Read the list of what is absent from that section: no priority over a first mortgage, no six month or other super-lien window, no power of sale, no notice-and-cure period before enforcement, no cap on the interest or penalties that ride along, and no procedure for foreclosing the lien once it exists. North Dakota created the lien and stopped.

Section 47-04.1-12 supplies the one structural protection specific to condominiums. Once the declaration is recorded and while the property remains enrolled as a condominium project, no lien may arise against the project as a whole. Liens attach only to individual units with their appurtenant common elements, in the same manner as against any other separately owned parcel. Where a lien does become effective against two or more units, the owners of a separate unit may remove their own unit from it by paying the fractional or proportional share attributable to that unit, computed from the fractions or percentages in the declaration. Partial payment discharges that unit and no other, and the lienor may still pursue the units that did not pay.

Enforcement of the underlying obligation runs through section 47-04.1-08, which makes failure to comply with the bylaws, rules and recorded covenants grounds for an action to recover sums due for damages, injunctive relief, or such other relief as a court of proper jurisdiction may provide, brought by the administrative body or in a proper case by an aggrieved unit owner. That is a lawsuit, not a self-help foreclosure.

For everyone else, section 47-10-02.3 is the operative statute, and it defines a homeowners' association plainly as an organization making and enforcing rules and guidelines for a residential subdivision or planned community. Within ten days of executing an agreement to sell a property subject to association rules, or by a mutually agreed date, the seller must disclose in writing the periodic assessment amount and any unpaid common expenses or special assessments currently due from the seller, the amount of approved special assessments, a statement of the remedies available to the association as a result of nonpayment, and the assessment collection policy itself. The association must furnish those documents within ten days of a request by the seller and may charge a reasonable fee disclosed before final acceptance of the purchase agreement. Subsection 6 then supplies the money limit that matters most to a buyer: a buyer is not liable for any unpaid assessment or fee greater than the amount stated in the documents the association prepared, and the purchase contract stays voidable by the buyer until the documents arrive and for five days after receipt or until conveyance, whichever comes first. Subsection 3 requires the documents to include information from at least the ninety days immediately preceding the effective date of the agreement.

The last limit is not an association rule at all but it decides most fights. Section 47-18-01 makes the homestead exempt from judgment lien and from execution or forced sale up to one hundred fifty thousand dollars in value over and above liens or encumbrances. Section 47-18-04 lists the only debts that reach it: mechanics', construction or laborers' liens for work performed exclusively to improve the property, mortgages executed and acknowledged by both spouses or by an unmarried claimant, purchase money debts and taxes, and then all other debts only to the extent the appraised value exceeds the sum of the liens plus the one hundred fifty thousand dollar exemption. An unpaid assessment debt falls in that fourth category. The judgment creditor must apply to the district court for appraisers under section 47-18-06, petition and notice must be served on the claimant at least ten days before the hearing under section 47-18-08, the court may appoint three disinterested residents of the county under section 47-18-09, they must report within fifteen days under section 47-18-11, and under section 47-18-13 no bid may be received at the sale unless it exceeds the amount of the homestead exemption. Section 47-18-14 pays the exemption amount to the owner first and applies only the residue to the execution.

An association collecting unpaid assessments in North Dakota has no statutory power of sale and must go to court. 1-08, an action for sums due, damages, injunctive relief or other relief the court may provide, brought by the administrative body or in a proper case by an aggrieved unit owner. 1-11 creates the lien and fixes the amount and the record owner's name, but nothing in that section converts the recorded notice into a right to sell the unit, and nothing gives it priority over an earlier recorded mortgage.

Once the association has a judgment, execution against a homestead is governed by chapter 47-18 rather than by anything in the condominium chapter: the creditor petitions the district court, serves the claimant at least ten days before the hearing, and can reach the property only to the extent an appraisal by three court-appointed residents shows value above the one hundred fifty thousand dollar exemption plus existing liens, with the exemption paid out of the sale proceeds to the owner first. 1-11 obliges the association to record a satisfaction and release once the assessment and charges are paid or otherwise satisfied, which is the owner's remedy against a stale lien clouding title.

3(6) caps the buyer's exposure at the figures the association itself put in writing. 1-12 an owner facing a lien that covers several units may clear their own unit by paying only the proportional share the declaration assigns to it.