Surprise, AZ asked in Bankruptcy, Estate Planning and Foreclosure for Arizona

Q: An irrevocable trust, property as an asset in that irrevocable trust, and collection of delinquent HOA fees in Arizona.

I and my wife are the beneficiary of an irrevocable trust (the settlor is deceased). After speaking with the trustee/attorney, we chose to not transfer the title out of the trust until my wife and I felt comfortable. In addition, my wife and I live in the home (and have since before the trust was executed).

At the time the title was transferred into the trust, the HOA was paid the required fees to transfer the property into the trust's name. For years, my wife and I paid the dues without issue. For that entire time, the HOA is occasionally sending communications to the trustee (which is then forwarded to us).

In short, starting in Jan of 2022 something happened (it was an error on our part) and payments to the HOA stopped. 18 months later we find out that the house itself has a lien for the HOA fees. I spoke with a rep from the attorney's office and she spoke of possible foreclosure if the situation is not resolved.

How would foreclosure work on an irrevocable trust asset?

1 Lawyer Answer
W. J. Winterstein Jr.
W. J. Winterstein Jr.
  • Bankruptcy Lawyer
  • Boyertown, PA

A: Have an experienced attorney in AZ examine your HOA covenants with a title examination of the residential property. Most probably, The Homeowner's Association enjoys written covenants in the real estate records that apply to each property and give it a right to impose the debt with priority over any Mortgage indebtedness, but in any event, a secured lien against the property, entitling it to foreclose if the ongoing HOA debt is not paid.

Assuming that the irrevocable Trust is valid and subsisting under AZ law, most probably it is the Trust, as the property owner, that owes the HOA debt, not you as individuals. However, assuming you wish to retain the property, the HOA debt must be paid, as well as the ongoing, accruing HOA fees.

The only way to control the amount of those ongoing fees is to get elected, with others who wish to control the HOA fee amounts, to the governing board of the HOA.

Timothy Denison agrees with this answer

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