Lien in Homeowners Association: What Triggers It?

A lien in a homeowners association is a legal claim that an HOA or condo uses to secure debt. It is important for the board members to understand how an HOA lien works, the limitations of their authority, and the requirements they must follow. This way, they can ensure legal compliance and avoid liability.

What is a Lien in Homeowners Association?

A lien is a legal claim against a home or unit that an HOA or condominium places on it for unpaid dues, special assessments, or fines. It uses the property as collateral to secure the debt. This makes it more difficult for owners to sell or refinance their home until they pay off the balance.

Can HOA Put a Lien on Your House?

Whether an HOA or condo can place a lien on a home or unit depends on state law and the governing documents. In Illinois, the Condominium Property Act expressly permits a lien for unpaid HOA fees (765 ILCS 605/9).

According to this law, if a unit owner fails or refuses to pay their dues or other charges, those amounts shall constitute a lien. This lien automatically exists, which means the association does not need a court judgment first.

For HOAs, Illinois law does not create a statutory lien on unpaid dues. Instead, an HOA’s lien rights generally come from its governing documents. Board members must check their CC&Rs and bylaws for guidance.

What is the Order of Priority for an HOA Lien on a House?

A condo association’s lien is quite powerful. This lien in homeowners association generally comes ahead of most liens that are recorded later on. That said, condo liens sit behind property taxes, certain government assessments, and mortgages or liens recorded before the delinquency took place.

Can an HOA Put a Lien on Your House for Violations?

While liens aren’t permitted solely for a violation, condo associations can place a lien on a unit for unpaid fines. In fact, they can even place a lien based solely on violation fines that an owner fails to pay.

The key is that the lien is not for the violation itself. Instead, the lien is for the unpaid fine.

Keep in mind that the above only applies to condo associations in Illinois. For HOAs, board members must refer to their governing documents to understand if unpaid fines can constitute a lien.

How Does an HOA Put a Lien on a House?

According to Illinois law, a condo association may record a notice of the lien, but it is not mandatory. Even before recording the lien, it already automatically exists. Recording a memorandum or notice is optional.

The lien also exists so long as the debt remains enforceable. This is unlike other states, where there is a specific deadline to record the lien. Recording the lien notifies the public and strengthens the association’s ability to enforce it.

For HOAs, on the other hand, liens do not automatically exist by law. Instead, the board must check its governing documents, specifically the CC&Rs, to determine whether a lien exists and how it must be enforced.

Is a Notice of HOA Lien on Property Required?

The Illinois Condominium Property Act does not require a notice of the lien in homeowners association. This means that board members are not legally required to send a demand letter or a notice of intent. There is also no hearing or waiting period before a lien is recorded.

That said, the condo association’s governing documents may impose additional requirements. Condo boards must still comply with these requirements even if Illinois law is less restrictive.

Many associations send a late notice, a demand letter, and a notice of intent to record a lien. Owners also usually receive the recorded lien and a foreclosure action prior to the act itself. This is common practice even if the statute does not specifically require all these steps.

Can an HOA Take Your House?

In general, an HOA or condo association can foreclose on a lien similar to a mortgage foreclosure. This means the owner could ultimately lose their home or unit due to unpaid dues.

Foreclosure proceedings take time. An association can’t necessarily foreclose on a home or unit immediately. Under Illinois law, condominiums may be foreclosed like a mortgage, but there are additional procedural rules to follow.

Typically, the association must determine the delinquent balance and send collection notices. While liens automatically exist, it is common practice to record a lien notice as well. From there, the association can file a foreclosure lawsuit.

A foreclosure sale doesn’t just happen after the lawsuit is filed. Before a foreclosure sale can happen, a court proceeding is mandatory.

Can an HOA Foreclose Based Only on Unpaid Fines?

While condo associations can place a lien based on unpaid fines, foreclosure is a different matter. In fact, Illinois law is less clear about whether an association can foreclose solely for unpaid fines.

That said, historically, courts have viewed dues collection more favorably because dues are necessary to operate the association. In comparison, fines are not. Instead, fines are a means to compel owners to comply with the community’s rules.

In practice, many associations record the lien on unpaid fines but won’t foreclose. They will just continue imposing the fines, seek a money judgment, or seek injunctive relief to stop the violation. An association can simply sue the owner to force compliance.

Foreclosure as a Last Resort

Foreclosure can be an effective tool to secure an owner’s debt against the association. That said, it should not be the first collection tactic that an HOA or condo uses.

When an owner stops paying their dues, the board should start with less aggressive collection methods. This includes late fees, interest charges, and the suspension of owner privileges. If the owner is struggling financially, they may even ask to enter a payment plan.

Hiring a collection agency can also prove useful. This agency takes over the collection work in exchange for a flat fee or a percentage of the amount collected. It can also report the debt to a credit bureau.

Typically, liens exist once an owner becomes delinquent, but foreclosure should be the final option. The board can allow the lien to remain even while pursuing alternative strategies. Only after exhausting other methods should an HOA or condo initiate foreclosure proceedings.

A Helping Hand

Navigating the placement and legalities of a lien in a homeowners association can come as a challenge to volunteer boards. It is not easy to understand all the legal jargon, and there are requirements to keep in mind as well. To make the process more efficient and ensure compliance, it is a good idea to hire professional assistance.

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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