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Revisiting The Superlien
What Is A ‘Superlien’
To protect against the loss of assessments when a foreclosure occurs on a unit in an association, the Colorado Common Interest Ownership Act (“CCIOA”) grants an association limited protection by providing that a portion of an association’s lien statutorily survives a foreclosure. This surviving lien is known as the “superlien.” CCIOA limits the superlien to an amount equal to “common expense assessments … which would have become due … in six months immediately preceding institution” of a foreclosure action.
Although there is no question that a superlien exists, there is often confusion as to what monetary amounts may be used to determine the amount of the superlien.
First Atlantic V. Sunstone
Fortunately, a Colorado Court of Appeals decision provides guidance regarding amounts that can be included in superliens under the statute.
In November of 2002, First Atlantic Mortgage foreclosed its lien on a home in Sunstone North, an Arapahoe County common interest community. When First Atlantic commenced its foreclosure in the spring of 2003, Sunstone North Homeowners Association was owed more than $1,455 in delinquent assessments, late charges, interest, and attorney fees. Sunstone made a demand and filed a notice of lien for only the amount of the superlien which totaled $804. The $804 figure was arrived at by multiplying the monthly assessment by six to comply with the statutory language limiting the superlien to an amount equal to “common expense assessments … which would have become due … during the six months immediately preceding institution” of a first mortgage foreclosure.
First Atlantic contested Sunstone’s $804 figure and argued that Sunstone’s recovery under the superlien statute was limited to $687 since Sunstone was only owed $687 in delinquent assessments at the time the foreclosure was started. The Court ruled that amounts claimed under the superlien statute could properly include not only delinquent assessment fees, but also late charges, attorney fees, fines, and interest as long as the maximum amount claimed did not exceed an amount equal to six times the monthly assessment. The Court stated that although amounts claimed under the superlien statute could consist of amounts other than delinquent assessments, the maximum amount that could be claimed as a superlien could not exceed an amount equal to six times the monthly assessment. (Click here to access the newsletter article discussing this case when it first was decided.)
Impact On Colorado HOAs
For associations, First Atlantic v. Sunstone has two primary implications. First, the total amount that associations can claim under the superlien statute is limited to an amount equal to six times the monthly assessment. This means that if, at the time the foreclosure commences with the filing of the Notice and Election of Demand, an owner owes the association an amount more than six times the monthly assessment, the association is limited to recovering a total amount equal to six months worth of assessments under the superlien statute.
Second, associations can include such things as late charges, attorney fees, fines, and interest in the superlien amount so long as the total amount claimed does not exceed an amount equal to six times the monthly assessment. Including these amounts will be helpful when an owner is delinquent in an amount less than six times the monthly assessment, but the association has incurred attorney fees or costs attempting to collect the delinquent assessments. The inclusion of these amounts in the superlien amount will help to offset at least a small part of the collection costs incurred by the association in attempting to collect from the delinquent owner Associations should be aware that superliens are only part of successful assessment collection. Click here to read more general HindmanSanchez assessment collection articles.
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