Filing A ‘Notice Of Covenant Violation’ Lien

Resource Topic: 
Covenant/Rule Enforcement
By: Debra J. Oppenheimer

What Is A Notice Of Covenant Violation Lien?
A Notice of Covenant Violation is filed with the Clerk and Recorder against the property of an individual whose property is in violation of an association’s covenants.  It works much like an assessment lien by placing anyone considering the purchase of the property on notice that the property has a problem that requires resolution. Furthermore, and more importantly, the lien requires the resolution of the covenant violation as a condition of release.

When a title company searches the records to provide a title insurance policy to a new buyer it will discover this lien and contact the association or the attorney that filed the lien to determine the action necessary to release the lien.  At that time the association has a number of different options.  It can require the current owner to fix the violation prior to the sale or the new owner to sign an agreement to correct the violation within a set period of time. If the association chooses the latter option, it should have money placed in escrow as a guarantee that the correction will be made or the money will be released to the association.  Thus, if the new owner does not honor the agreement, the association may access the escrowed money to correct the problem.

Are The Costs Of Filing A Notice Of Covenant Violation Lien Recoverable?
If the association has sent notice to the current owner before filing the lien, a strong argument exists that the current owner has the responsibility to pay the costs of filing the lien, as well as the costs of drafting the agreement with the prospective purchaser.  The owner had an opportunity to resolve the situation before the association resorted to legal action and failed to do so.  Thus, the action of the association to place the lien on the property is reasonable and thus the fees are most likely recoverable.

When Should An Association Place This Type Of Lien On A Property?
An association should seriously consider utilizing this type of lien anytime there is a covenant violation, and the association believes that the property may be sold.  Filing this lien ensures that the violation is corrected and not just passed on to the next owner.  Take, for example, the situation in which a bank has purchased property with a covenant violation at a foreclosure sale, and the association knows that that the bank does not plan to keep the property.  If the association places a lien on the property, prior to the sale from the bank to a new owner the existing violation must be resolved.  Another situation in which filing a notice of covenant violation lien is advisable is one in which the association has sent numerous covenant violation letters to an owner, and he responds by putting the property up for sale. In this instance, placing the lien on the property puts any potential new owners on notice of the covenant violation that they will inherit if they purchase the property.