A condo lien can be an effective tool to collect unpaid dues and assessments. That said, condo boards must understand how these liens work and how they differ from standard liens. While condominiums have the authority to place liens on units, that authority comes with certain requirements and isn’t unlimited.
What is a Condo Lien?
A condo association lien is a legal claim that a COA has on a unit. It is placed on an owner’s unit when they fail to pay their dues, assessments, or other amounts owed to the association.
The lien attaches to the unit itself, not the owner personally. This makes it more difficult to sell or refinance the unit. Typically, the owner must satisfy the lien first by settling their debt with the condo.
While both condominiums and HOAs in Illinois can place liens for unpaid dues and assessments, condo liens are significantly stronger than HOA liens. This is because the Illinois Condominium Property Act grants condominiums a limited super lien priority.
What is a Super Lien?
A super lien is a portion of an association’s lien that receives priority over an otherwise superior mortgage. Normally, liens are paid in the order they were recorded. Property taxes come first, with the first mortgage in second place. The HOA or condominium lien comes third before other junior liens.
Yet, with a super lien, that order changes. With super lien status, part of the condo lien is given priority over the first mortgage. This means that the super lien must be resolved before the first mortgage and everything else lower on the hierarchy.
Condo Lien vs HOA Lien
According to 765 ILCS 605/9, when a unit owner fails to pay their dues, the condo automatically has a lien against the unit. This lien on the condo unit covers regular dues, special assessments, fines (if authorized by the governing documents), late fees, interest, and certain collection costs and attorneys’ fees.
The condo association can then record a claim of lien (or rely on the statutory lien) and demand payment. If the debt remains unpaid, the board may even choose to file a foreclosure lawsuit. The association can obtain a money judgment against the owner or foreclose on the unit, using the proceeds to satisfy the lien.
For common interest communities or HOAs, unpaid dues can also trigger a lien against the owner’s home. Still, an HOA lien generally functions like a standard lien. The HOA may record and enforce the lien, sue the owner for the debt, or foreclose on the lien.
The key difference between a condo lien and an HOA lien is priority. Unlike condominium associations, HOAs don’t receive a statutory super lien under the Common Interest Community Association Act.
How Do Condo Super Liens Work in Illinois?
In Illinois, 765 ILCS 605/9 provides limited super lien priority for condo associations. This means that a portion of the condo lien assumes a higher ranking on the lien hierarchy.
For example, if the first mortgage is $300,000 and unpaid condo fees are $8,000, once the lender forecloses, the COA would normally lose its lien because the mortgage has higher priority. Yet, thanks to Illinois law, the association receives priority for a limited portion of the unpaid dues. To eliminate that priority, the foreclosing lender must pay the COA the amount required by the statute after acquiring title.
If the lender doesn’t make the required payment, the condo’s priority lien persists. This will allow the association to collect the priority amount even after the mortgage foreclosure. For this reason, lenders usually settle the required amount with the association to extinguish the super lien.
Are HOA Liens Considered Super Liens in Illinois?
The Illinois Common Interest Community Association Act does not contain an equivalent super lien provision. As a result, an HOA lien generally ranks lower than the first mortgage. When the lender forecloses, the HOA’s lien is typically extinguished.
That said, the owner’s personal obligation may remain. After the foreclosure, the new owner is responsible for paying dues and assessments to the HOA.
What Happens When There’s a Lien on a Condo?
When an owner fails to pay their dues, the condo will obtain a lien on the unit. After filing a notice of the lien, the condo board can initiate foreclosure proceedings by filing a lawsuit. A condo lien foreclosure follows the same judicial process as real estate mortgages in Illinois.
If the court orders the foreclosure, the association can sell the unit as a judicial foreclosure sale. The buyer can be anyone, including the mortgage lender, the association itself, or a third party. Still, who the buyer is will influence financial obligations.
If the mortgage lender buys the unit, it must begin paying ongoing dues after it takes the title. Those payments will extinguish the prior owner’s lien. If a third party buys the unit, they generally have to pay up to six months of unpaid pre-foreclosure dues.
The statute also allows the condo association to purchase the unit. In that case, unless the governing documents say otherwise, the COA can hold, lease, mortgage, or even sell the unit.
Alternatives to Foreclosure on Condo and Association Fees
Liens and foreclosures may resolve an owner’s debt to the association, but they shouldn’t always be the first option. There are other collection methods to consider before going to extreme measures. After all, an owner stands to lose their home.
Alternatives include:
- Late Fees and Interest. To encourage payment, the condo association can charge a late fee or interest on top of the original debt.
- Suspension of Privileges. If governing documents permit, the COA can temporarily revoke an owner’s access to amenities or voting rights until they settle their outstanding dues.
- Collection Agency. A third-party agency can take on the delinquent account and pursue collection efforts on the association’s behalf.
- File a Lawsuit. A condo board can sue an owner and obtain a money judgment from a court.
Sometimes, owners will simply forget about their financial obligations to the association. To facilitate on-time payments, the condo board can send reminders, provide a grace period, and even offer a payment plan to struggling owners.
Parting Advice for Condo Boards
A condo lien serves as a useful collection measure for unpaid dues and assessments. Board members must know how these liens work and how super lien priority factors into the process. That said, while liens secure the condo’s legal claim, foreclosure should be a last resort.
First Community Management provides expert HOA, condo, and co-op management services to communities in Chicago. Call us today at (312) 829 8900 or contact us online to learn more!
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