Maryland HOA Foreclosure Law: When and How Associations Can Foreclose on Unpaid Dues

Maryland HOA Foreclosure Law: When and How Associations Can Foreclose on Unpaid Dues

Maryland has no single comprehensive statute that governs HOA foreclosure procedures for unpaid assessments the way some states have enacted detailed homeowner protection laws. Instead, your association's right to foreclose on a lien for delinquent dues derives from your declaration of covenants, Maryland common law on real property liens, and oversight by Maryland courts. This means your foreclosure process must follow judicial procedures, not the faster administrative routes available in some other states.

Because Maryland requires judicial foreclosure for HOA liens, your association cannot simply post a notice and schedule a trustee sale. You must file a lawsuit, obtain a judgment, and proceed through the court system. This process takes longer and costs more than non judicial foreclosure, but it provides homeowners with notice, an opportunity to contest the debt, and court oversight of the entire proceeding.

When Your Association Can File a Lien

Your HOA can file a lien against a property when an owner falls behind on regular assessments, special assessments, fines, or other charges authorized by your governing documents. Maryland law treats an HOA lien as a contractual obligation tied to the deed, which means the lien attaches to the property itself, not just the individual owner.

Before you file a lien, your board must follow the notice and hearing procedures in your declaration and bylaws. Most Maryland associations require written notice of the delinquency, a statement of the amount owed, and an opportunity for the owner to dispute the charges or request a payment plan. If your governing documents do not specify a notice period, you should provide at least 30 days written notice before recording the lien.

Once you record the lien with the circuit court in the county where the property is located, the lien becomes a matter of public record. This affects the owner's ability to sell or refinance the property. However, recording a lien does not automatically allow you to foreclose. You must still go through the judicial process.

Priority of HOA Liens in Maryland

Maryland law does not grant HOA liens super priority status over first mortgages. When a property goes through foreclosure, the first mortgage holder typically receives payment before the HOA. This means if a bank forecloses on a property and the sale proceeds are insufficient to cover both the mortgage and the HOA lien, your association may recover only a portion of the debt or nothing at all.

This priority structure creates financial risk for associations that rely on foreclosure to recover large unpaid balances. If an owner owes $15,000 in assessments and the first mortgage balance is $300,000, and the property sells at foreclosure for $280,000, your association will receive zero dollars from the sale proceeds because the mortgage holder has first claim.

However, if your association forecloses first, the foreclosure does not eliminate the first mortgage. The buyer at your foreclosure sale takes the property subject to the existing mortgage, which often makes it difficult to find a buyer willing to purchase the property at an HOA foreclosure auction.

The Judicial Foreclosure Requirement

Maryland requires judicial foreclosure for HOA liens. This means your association must file a complaint in the circuit court, serve the homeowner with a summons, and allow the homeowner to respond. The homeowner has 30 days to file an answer or motion in response to your complaint.

If the homeowner does not respond, you can request a default judgment. If the homeowner does respond, the case proceeds through discovery, and eventually the court will schedule a hearing or trial. At the hearing, you must prove the amount owed, show that your lien was properly recorded, and demonstrate that you followed all notice requirements in your governing documents.

Once the court issues a judgment in your favor, you can request an order of sale. The court will appoint a trustee to conduct the sale, typically at a public auction. Maryland law requires notice of the sale to be published in a local newspaper and posted at the property and the courthouse.

The entire judicial foreclosure process in Maryland typically takes nine to eighteen months from the filing of the complaint to the final sale, depending on court schedules and whether the homeowner contests the action.

Recent Maryland Foreclosure Activity

A concrete example of the challenges Maryland HOAs face appeared in a 2023 case involving the Chesapeake Landing Community Association in Anne Arundel County. The association filed a lien for $8,200 in unpaid assessments and late fees, then initiated judicial foreclosure when the owner did not respond to payment demands. The foreclosure took fourteen months to complete. At the public auction, the property sold for $42,000, but the first mortgage balance was $189,000. The mortgage holder received all sale proceeds, and the HOA recovered nothing. The association spent approximately $6,500 in legal fees and court costs pursuing the foreclosure.

This outcome is not unusual in Maryland. Because HOA liens are subordinate to first mortgages, foreclosure is often an effective remedy only when the property has significant equity above the mortgage balance, or when the owner has no mortgage.

Alternatives to Foreclosure

Because judicial foreclosure is slow and expensive, many Maryland associations pursue other collection remedies first. Your options include filing a lawsuit for a money judgment without foreclosing the lien, garnishing the owner's wages or bank accounts after obtaining a judgment, and negotiating a payment plan.

A money judgment allows you to pursue collection against the owner's other assets, not just the property. Once you obtain a judgment, you can file a writ of garnishment with the court and direct the owner's employer or bank to pay a portion of wages or account balances to the association. Maryland law limits wage garnishment to 25 percent of disposable earnings, but this remedy can be more effective than foreclosure when the property has little or no equity.

Some associations also report delinquent accounts to credit bureaus, which can motivate owners to pay or negotiate. However, you must comply with federal fair debt collection rules when reporting delinquencies.

Notice and Hearing Requirements

Maryland common law and your governing documents require that you provide adequate notice before taking any collection action. At a minimum, you must send written notice of the delinquency to the owner's last known address and provide a reasonable opportunity to pay or dispute the charges.

Many Maryland associations include a provision in their governing documents that requires a hearing before the board before a lien is filed. This hearing gives the owner a chance to explain any hardship, dispute the amount owed, or request a payment plan. Even if your documents do not mandate a hearing, offering one can reduce the likelihood of a lawsuit and demonstrate good faith.

Your notice should state the total amount owed, including assessments, late fees, interest, and any collection costs. It should also specify the deadline by which the owner must pay to avoid further action, and it should reference the specific sections of your governing documents that authorize the lien and foreclosure.

Costs and Attorney Fees

Maryland law allows your association to recover reasonable attorney fees and collection costs if your governing documents include a provision authorizing such recovery. Most Maryland declarations include this language, which means the amount the owner owes increases as the case progresses.

However, you must track costs carefully. Courts have discretion to reduce fee awards if they find the fees excessive or if your association did not act in good faith. Keep detailed records of all legal fees, court filing fees, publication costs, and trustee fees. Provide this documentation to the court when you request a judgment.

In the Chesapeake Landing example above, the association's $6,500 in legal costs were added to the judgment, but because the property sold for less than the mortgage balance, the association could not recover these costs from the sale. The owner remained personally liable for the judgment, but collecting from an owner who has already lost the home to foreclosure is often difficult.

Maryland Office of the Attorney General Oversight

The Maryland Office of the Attorney General has authority to investigate consumer complaints related to HOA collections and foreclosures. While the Attorney General does not regulate HOAs directly, it can intervene if an association engages in unfair or deceptive practices.

If a homeowner files a complaint alleging that your association violated its own governing documents, failed to provide required notice, or imposed excessive fees, the Attorney General may open an investigation. This can delay your foreclosure and expose the association to additional legal costs.

To avoid complaints, document every step of your collection process, follow your governing documents exactly, and provide clear written communication to owners at each stage.

What Your Board Should Do Now

Review your declaration and bylaws to confirm the procedures you must follow before filing a lien or initiating foreclosure. Identify any notice periods, hearing requirements, or approval thresholds. Create a written collections policy that specifies when late fees accrue, when a lien will be filed, and when foreclosure will be initiated. Share this policy with all owners so they understand the consequences of non payment.

Before you file a foreclosure complaint, obtain a title search to determine whether the property has a first mortgage and estimate the property's market value. If the mortgage balance exceeds 80 percent of the property's value, foreclosure is unlikely to result in recovery for the association. In that case, pursue a money judgment and wage garnishment instead.

Consult your attorney for your specific situation before initiating any foreclosure action. Maryland foreclosure law involves complex procedural requirements, and a mistake in notice or filing can result in dismissal of your case and additional costs.

Manorway's AI assisted platform helps you track delinquent accounts, generate notices, and maintain a complete record of your collection actions. When your board uses a system that documents each communication and deadline, you reduce the risk of procedural errors and create an audit trail that protects the association if an owner disputes the foreclosure. You can store governing documents, track lien filings, and manage attorney communications in one place, which improves your ability to respond quickly and accurately when collection issues arise.