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Liens and foreclosureLesson 18 of 26

Academy/Collections & Delinquencies

Judicial vs nonjudicial remedies

Two different roads to foreclosing an association's lien, and only one may be open to your board.

Judicial foreclosure means the association sues and must win a court judgment before selling the property. Nonjudicial foreclosure lets the association sell under a state statutory power of sale without suing first. Whether your state allows, or requires, one or the other depends on state law, so confirm with your collection attorney before assuming a path is open.

01

Two paths, one goal

Both routes end the same way: the property is sold to satisfy the association's lien. How you get there is different. Judicial foreclosure runs through a lawsuit; the association files a case, and a court has to issue a judgment before any sale can happen. Nonjudicial foreclosure skips that step and relies on a power-of-sale process that the state's own statute has to authorize.

"A nonjudicial foreclosure is when lenders foreclose property without getting a court order first."

Source: Nonjudicial foreclosure, Cornell Legal Information Institute, Wex

The same underlying idea applies to an association enforcing its own lien: a statute either grants a power of sale, or it does not, and the board does not get to choose.

02

What decides which path you're on

Whether an association's assessment lien can be foreclosed nonjudicially, must be foreclosed judicially, or gives the association a choice between the two is set state by state, and sometimes county by county within a state. There is no national default, and no comprehensive list to memorize. Your declaration and your state's condominium or HOA act, not this page, control the answer for your association.

This is a question for your collection attorney to answer before the board authorizes a foreclosure, not a detail to discover partway through one. Ask directly: does our state statute give us a nonjudicial option for this lien, and if so, does our declaration also need a power-of-sale clause to use it?

03

Two federal triggers that pause either path

Some events stop a foreclosure no matter which track the board is on. If the owner files bankruptcy, the automatic stay halts collection the instant the case is filed, with no court order needed.

"any act to create, perfect, or enforce any lien against property of the estate"

Source: 11 U.S.C. § 362(a), U.S. Code, via Cornell Legal Information Institute

A board that keeps a judicial case moving, or proceeds with a nonjudicial sale, after learning of the filing is violating federal law, not just being pushy. Active military service can pause a foreclosure too: under the Servicemembers Civil Relief Act, a sale made during, or within one year after, a servicemember's period of service can be invalid unless a court approved it beforehand. Both triggers apply on top of, not instead of, whatever your state's process requires. See Bankruptcy and When to pause collection action for more.

Check yourself

Answer before you read the explanation, recalling it is what makes it stick.

Your attorney says the state statute lets the association sell the property under a power-of-sale clause, without filing a lawsuit first. Which remedy is this?

Before the board assumes it can foreclose without going to court, what should it check first?

Two weeks into a foreclosure, the delinquent owner files Chapter 7 bankruptcy. What must the board do, judicial or nonjudicial track alike?

Sources

Collections & Delinquencies

Once you know which foreclosure path your state allows, the next question is how much of the debt that sale can actually recover. See Lien priority.

Whether foreclosure on an association's lien must go through court, can skip it, or gives the association a choice between the two varies by state, and sometimes by county within a state. Confirm your state's rule, and your declaration's language, with your association's attorney before authorizing either path.