Overview

When a short sale stalls because of an HOA demand, the dispute almost always comes down to what the HOA can lawfully require to release its assessment lien and allow escrow to close. Homeowners are often told that every amount on the HOA ledger must be paid, including fines, fees, and attorney charges, or the HOA will refuse to release its lien. That framing is frequently wrong.

California law draws strict distinctions between delinquent assessments, which may be secured by an assessment lien, and other charges, which may be collectible but do not have the same title-blocking effect. The Davis-Stirling Act regulates what an HOA may include in an assessment lien, how payments must be applied, when foreclosure is permitted, and how quickly a lien must be released after payment. Contrary to what some self-styled HOA experts may have written, HOAs cannot expand their lien rights through governing documents, accounting practices, or negotiation tactics.

This Fact Sheet explains what amounts must be paid to clear title in a short sale, what amounts may be disputed without blocking escrow, how payment application rules work under Civil Code 5655, and how homeowners can protect themselves from inflated or unlawful payoff demands.

For a quick-guide on HOA Short Sales, see my Fact Sheet, “Can Your HOA Stop Your Short Sale?”

Key Points

HOA payoff disputes in short sales turn on statutory limits, not board discretion. The following points explain what must be paid to clear title and what often does not.

• Only delinquent assessments can form the basis of an HOA assessment lien. Under Civil Code 5675, an HOA may record an assessment lien only for delinquent regular or special assessments. If a charge does not qualify as an assessment under the Davis-Stirling Act, it cannot be secured by an assessment lien that clouds title.
• Certain additional charges may be included only if the statute authorizes them. Civil Code 5675 allows an assessment lien to include collection-related charges only when they are imposed in accordance with Civil Code 5650. This means late charges, interest, and collection costs may be included only if they are statutorily authorized and properly assessed. Unauthorized charges do not become lienable simply because they appear on an HOA ledger.
• Fines and disciplinary penalties are not assessments and are not lienable. Civil Code 5725 prohibits an HOA from characterizing monetary penalties imposed for rule violations as assessments that may become part of a recorded assessment lien. While fines may be collectible through a separate lawsuit (e.g., judicial foreclosure), they do not create the same title-blocking effect as delinquent assessments.
• HOAs must apply homeowner payments in the order required by statute. Civil Code 5655 mandates that payments be applied to delinquent assessments first, before being applied to late charges, interest, fees, or fines. While a recent article by a purported HOA “thought leader” suggested otherwise, your HOA’s governing documents do not give your HOA discretion to apply payments to fees or fines first (which could keep your assessments artificially delinquent).
• Misapplication of payments can artificially inflate lien balances. When an HOA applies payments to fees or fines before assessments, it can make it appear that assessments remain delinquent when they should not be. This violates Civil Code 5655 and can undermine the validity of the lien amount asserted in escrow.
• You should demand a detailed, itemized accounting of the amounts claimed in the lien. An HOA assessment lien may include only delinquent assessments and statutorily authorized charges. Homeowners should require the HOA to separately itemize delinquent regular or special assessments, late charges and interest, and collection costs the statute permits. Civil Code 5675 and Civil Code 5650 govern what may be included, and Civil Code 4525 and Civil Code 4530 govern required transfer disclosures and timing, so unsupported line items may be challenged early, not at the end of escrow.
• You should separate lienable amounts from non-lienable charges at the outset. HOAs frequently bundle fines, penalties, management fees, or other non-lienable charges into payoff demands to inflate leverage. Homeowners should insist that payoff discussions focus only on amounts that lawfully support an assessment lien under Civil Code 5675 and Civil Code 5650, while reserving disputes over non-lienable charges for separate resolution.
• The $1,800 and 12-month rule limits foreclosure, not payoff demands. Civil Code 5720 bars an HOA from foreclosing unless delinquent assessments equal or exceed $1,800 or remain unpaid for more than 12 months. That statute does not prevent the HOA from recording or maintaining an assessment lien under Civil Code 5675, but it does limit the remedies available to enforce the lien.
• CC&Rs cannot expand what the Davis-Stirling Act allows an HOA to lien or foreclose. While governing documents may impose obligations on owners, they cannot authorize lien enforcement or foreclosure beyond what the Davis-Stirling Act permits. Statutory limits on lienable amounts and foreclosure cannot be waived or rewritten by CC&Rs.
• HOAs must provide accurate, itemized payoff information. Escrow requests payoff and transfer disclosures as part of the sale process, and Civil Code 4525 and Civil Code 4530 require the HOA to provide the Required Disclosures within the statutory timeline. Your HOA must identify what portion of the claimed balance consists of delinquent assessments versus other charges. In other words, bundling non-lienable charges into a payoff demand can unlawfully stall a short sale and leave your HOA liable to you for related damages.
• Payment of lienable amounts does not require your agreement on non-lienable charges. You may resolve delinquent assessments needed to clear title while reserving disputes over fines or other non-lienable charges for later resolution. Civil Code 5658 expressly allows a homeowner to pay a disputed amount under protest to clear title and close a sale, while preserving the homeowner’s right to pursue a refund of the non-lienable portion through Small Claims or Superior Court.
• Lien release timing is governed by statute, not HOA discretion. After receiving payment of the amounts specified in the notice of delinquent assessment, Civil Code 5685 requires the HOA to record a lien release within 21 days of payment. Delays beyond that period can interfere with escrow and create additional exposure.
• You should force clarity early in the short-sale process. Requesting a ledger, verifying lienable amounts, confirming payment application, and demanding a written payoff that separates assessments from other charges can help prevent last-minute escrow collapse.
• Call us at MBK Chapman if your HOA is violating your rights or the law. Short sales move on tight timelines, and HOA mistakes or overreach can collapse a deal quickly. If you need help enforcing your rights, negotiating a lawful payoff, or forcing a lien release so escrow can close, call us at MBK Chapman, and we’ll set your HOA straight.

Taken together, these rules explain why some HOA payoff demands exceed what the law requires and how homeowners can push back without jeopardizing their short sale.

FAQs

About MBK Chapman Fact Sheets

Homeowners searching for answers online will often come across articles that appear authoritative, but are actually written as search-engine marketing content rather than by an experienced HOA lawyer. These pieces tend to prioritize keyword density over clarity, accuracy, or legal context, which often leaves homeowners more confused than informed.

At MBK Chapman, our Fact Sheets are part of our HOA Law Library and are written by Michael Kushner, an HOA lawyer with decades of hands-on experience representing California homeowners. In fact, Michael Kushner is the HOA lawyer who pioneered the systems and strategies used by some of California’s most successful homeowner-side HOA law firms.

Each Fact Sheet is deliberately concise, statute-based, and designed as a quick-reference guide to help homeowners understand key HOA laws and enforcement rules at a glance.

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