Illinois HOA and COA Foreclosures

When you buy a single-family home, townhome, or condominium that's part of a planned community with covenants, you'll most likely pay fees and assessments, often collectively called "assessments," to a homeowners' association (HOA) or condominium owners' association (COA). If you fall behind in the assessments, the association will likely first try to collect the debt using traditional methods. For instance, the association will probably call you and send letters. But if those tactics don't get you to pay up, the association will probably try other ways to collect from you. The association might take away your privileges to use the common facilities or file a lawsuit to get a money judgment against you. Most HOAs and COAs also have the power to get a lien on your property if you become delinquent in assessments. Not only will an assessments lien cloud the title to the property, which hinders your ability to sell or refinance the home, but the property can also be foreclosed to force a sale to a new owner—even if the property has a mortgage.

Different sets of state laws often govern HOAs in subdivision communities and COAs. In Illinois, the Illinois Condominium Property Act (765 Ill. Comp. Stat. 605/1 through 605/35) governs COAs. The Illinois Common Interest Community Association Act (765 Ill. Comp. Stat. 160/1-1 through 160/1-90) governs HOAs, although it's not very comprehensive when compared to the Condominium Property Act. Some HOAs for smaller neighborhoods are covered by the General Not For Profit Corporation Act of 1986 (805 Ill. Comp. Stat. 105/101.01 and following). An HOA's governing documents, which include the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and a COA's Declaration of Condominium, usually contain specific information about the rules of the community, including assessments liens. The Declaration is a publicly recorded document, and you should have received copies of this document when you purchased your property.

If your home is part of a COA or HOA and you fall behind in assessments in Illinois:

• The COA or HOA can usually get a lien on your home if you become delinquent in paying the assessments.
• After you default on the assessments, the COA or HOA may foreclose.
• Lien priority determines what happens to other liens, like a mortgage, if a COA or HOA lien is foreclosed.

If the COA or HOA initiates a foreclosure, you might have a defense to the action, or you might be able to negotiate a way to get caught up on the overdue amounts and save your home.

How COA or HOA Liens Work, Generally

Based on the association's governing documents, like the CC&Rs, and state law, a COA or HOA can usually get a lien on your home if you're delinquent in paying the assessments.

COA Liens in Illinois

In Illinois, a COA is entitled to a lien if the condo owner fails or refuses to pay the common expenses or fines. (765 Ill. Comp. Stat. 605/9(g)(1)).

HOA Liens in Illinois

If you're part of an HOA, check the CC&Rs to learn about the association's right to get a lien on your home if you don't pay the assessments.

Charges a COA or HOA May Include in the Lien

State law and the COA or HOA's governing documents will usually set out the type of charges that an association may include in the lien.

Charges a COA May Include In the Lien

Under Illinois law, a COA is permitted to include the following in its lien:

• past-due common expenses
• late charges
• reasonable attorneys' fees
• costs of collection
• fines, and
• interest. (765 Ill. Comp. Stat. 605/9(g)(1)).

Charges an HOA May Include In the Lien

To find out which charges an Illinois HOA may include in its lien, check the association's governing documents.

COA and HOA Lien Foreclosures in Illinois

Once a COA or HOA has a lien, it might foreclose.

COA Foreclosures

A COA lien may be foreclosed in the same manner as a mortgage once the association records the lien in the county records. (765 Ill. Comp. Stat. 605/9(h)).

HOA Foreclosures

To find out about an HOA's right to foreclose if you become delinquent in paying the assessments, read the association's governing documents.

COA or HOA Liens and Your Mortgage

A common misconception is that the association can't foreclose if you're current with your mortgage payments. But an association's right to foreclose isn't dependent on whether you're paid up on your mortgage. Instead, lien priority determines what happens in a foreclosure.

Generally, a foreclosure by a COA or HOA usually won't eliminate a first mortgage because the association's lien is normally lower in priority.

What Is Lien Priority?

The priority of liens establishes who gets paid first following a foreclosure sale and often determines whether a lienholder will get paid at all. Liens generally follow the "first in time, first in right" rule, which says that whichever lien is recorded first in the land records has higher priority than later recorded liens. A first-lien has a higher priority than other liens and gets the first crack at the foreclosure sale proceeds. If any proceeds are left after the first lien is paid in full, the excess proceeds go to the second lienholder until that lien is paid off. And so on. A lien with a low priority might get nothing from a foreclosure sale.

But state law or an association's governing documents might adjust lien priority.

Priority of COA Liens

In Illinois, a COA lien is prior to all other liens, except for:

• taxes and liens by certain governmental entities, and
• encumbrances on the interest of the unit owner recorded before the date of such failure or refusal which by law would be a lien thereon prior to subsequently recorded encumbrances. (765 Ill. Comp. Stat. 605/9(g)(1)).

Priority of HOA Liens

HOA CC&Rs often address lien priority and typically say HOA liens are subordinate to a first mortgage. To find out the priority of an HOA lien in Illinois, check your association's governing documents.

Talk to a Lawyer If You're Facing a COA or HOA Foreclosure

If you're facing a COA or HOA foreclosure in Illinois, consider consulting with a foreclosure attorney to learn more about the law and how it applies to your situation and to discuss all legal options available in your particular circumstances.