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The vast majority of homeowners use financing to purchase their home. In North Carolina, when a homeowner finances the purchase of their property a deed of trust is recorded with the county register of deeds. The deed of trust grants the lender an interest in the property as collateral for the loan and gives the lender the right to foreclose if the owner does not pay the loan.

North Carolina Homeowners's Association Rights

North Carolina also gives homeowners’ associations the right to file a claim of lien against the property when an owner does not pay the assessments owed pursuant to the association’s governing documents. The association also has the right to foreclose the claim of lien, just like a bank. By law, the association’s lien is subordinate to most bank liens. Simply put, if the bank forecloses, the association’s lien in extinguished and the property passes free and clear of the association’s lien. When this happens, the association no longer has a remedy in the property itself.  

Who is Responsible for Assessments Before, During, & After Foreclosure

It is common for a bank foreclosure to take many months or sometimes even years. The new owner is responsible for the assessments that accumulate after the foreclosure, but not the earlier delinquency.  Under the 2013 changes to N.C. Gen. Stat. § 47C/F-3-116(j), the new owner’s responsibility for the assessments begins when the upset bid period expires which is generally 10 days after the foreclosure sale. The association’s only remedy for the assessments owed before that is to seek recovery from the previous owner by filing a lawsuit against him or her. In neighborhoods with a high percentage of second homes and investment properties, the kind more likely to be foreclosed, this can result in a significant burden on the remaining owners.

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Craige & Fox, PLLC
701 Market Street
Wilmington, NC 28401
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