In most states, by law or custom, all condominium units have homeowners’ associations (HOA) and those HOA’s have assessments. Generally, these assessments will be subordinated to purchase money liens. As a basic principle, in most states HOA’s can foreclose a lien only through a judicial process. Non-judicial foreclosures are typically reserved only for mortgages and deeds of trust according to statute. However, if you are insuring an HOA’s non-judicial foreclosure, you must check the redemption rights of the owner of the unit and/or the subordination agreements between the condominium homeowner association and the lender per the recorded documents to determine 1) whether there is a redemption right; or 2) that the HOA lien is subordinate to the other liens. Also, it is absolutely necessary to fully comply with all statutory and due process of law requirements before any such insurance is provided.
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