Timing

• Lien priority with regard to a piece of property always boils down to timing. The first lien to attach to the property is the senior lien, while any liens that attach later are junior liens. Therefore, if a first deed of trust attaches to property before the homeowners association lien attaches to the same property, the first deed of trust lien has senior priority and is unaffected by the homeowners association foreclosure.
  
  

Subordination

• Lien priority can be altered by the terms of a subordination agreement. A subordination agreement allows a senior lien holder to subordinate its priority to a junior lien holder, which essentially reverses the normal rules of priority. Most homeowners association documents that create liens expressly subordinate the association lien to mortgage liens on the property. This means that even if the homeowners association lien was attached to the property first, because of subordination, the lien is probably still junior to the first trust deed lien.
  
  

Subdivision Process

• Homeowners associations generally arise when created by a developer who is developing a planned subdivision. Before selling off any lots in the subdivision, the developer will record covenants, conditions and restrictions on the property in the subdivision. Those covenants, conditions and restrictions are what create the homeowners association and the homeowners association lien. Developers understand that to sell the lots in the subdivision, most people will obtain mortgage loans. Developers further understand that mortgage lenders will generally not provide a mortgage loan unless the lender is in a first priority lien position. This explains why most homeowners association liens are subordinated to mortgage or trust deed liens.
  
  

Unclear Title

• About half of all foreclosures are carried out through nonjudicial, power of sale foreclosure. The problem with these types of foreclosures is that, unlike judicial foreclosures overseen by state judges, power of sale foreclosures do not produce clear title to the property. It may be unclear whether a homeowners association foreclosure eliminates the lien of a first trust deed. To settle this issue, the property owner or a lien holder may need to file a lawsuit, called a quiet title action, asking a judge to make a ruling regarding the priority status of the various liens on the property.