HOA Licensure for Foreclosure?

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R.C. from outside of Connecticut writes:

Dear Mister Condo,

Does the HOA have to be licensed in order to foreclose on a condo?

Mister Condo replies:

R.C., thank you for writing. I can only offer friendly advice here, so, please accept my reply as such. Consult with a qualified attorney if you require a true legal opinion on this matter. I am not exactly sure what you mean by “licensed”. Condominium Associations and HOAs are legal entities unto themselves and are established within the town, city, or county they occupy and are based upon state laws. Typically, when a developer wishes to create a group of homes or condos and wishes to form an HOA, a petition is filed with a local authority that either grants or denies the application. Once approved, the HOA is born. It is not a license; it is a non-profit corporation. I am not aware of any licensing requirements.

Professionals who manage HOAs, on the other hand, may or may not be licensed depending again on state standards. In my state of Connecticut, property managers are required to be licensed. The HOAs that they manage have no such requirement. HOAs often have filing requirements with the state to maintain their status as non-profit corporations. They also have to file tax returns, even though they are non-profit corporations.

The ability to foreclose on a unit owner within the HOA is generally granted by state law and reinforced within the HOA’s by-laws. If a unit owner within the HOA becomes delinquent, it may be necessary for the HOA to take foreclosure action against the unit owner to liquidate the unit so the HOA can be paid. There are times when this practice seems controversial but the details are usually spelled out quite clearly in the HOAs documents which the unit owner agreed to abide by when they purchased into the HOA community.

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