Michigan HOA Foreclosures

If you fail to pay your HOA or COA assessments in Michigan, the association can likely get a lien on your property and might foreclose on your home.

By , Attorney · University of Denver Sturm College of Law

If your home is part of a condominium owners' association (COA) or homeowners' association (HOA) in Michigan and you fall behind in assessments:

  • 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, such as the association charged you too much, assessed unreasonable fees, or failed to follow state laws.

Or you might be able to negotiate a way to get caught up on the overdue amounts and save your home. For example, you might be able to pay off the entire delinquency, negotiate a reduced payoff amount, or enter into a repayment plan.

How Do COA or HOA Assessments Generally Work?

When you buy a single-family home, townhome, or condominium in a planned community with covenants, you'll most likely pay fees and assessments, often collectively called "assessments," to a COA or HOA.

What Happens If You Don't Pay COA or HOA Fees?

If you fall behind in the assessments, the association will likely initially 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 might try other ways to collect from you. The association could take away your privileges to use the common facilities or file a lawsuit for a money judgment against you.

The Association Also Most Likely Gets a Lien on Your Home

Based on the association's Declaration of Condominium or Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and state law, most COAs and HOAs also have the power to get a lien on your property if you become delinquent in assessments. Once you fall behind in payments, a lien will usually automatically attach to your property. Sometimes, the association will record its lien with the county recorder to provide public notice that the lien exists, regardless of whether state law requires recording.

An assessments lien clouds the title to the property, hindering your ability to sell or refinance the home. In addition, the property can also be foreclosed to force a sale to a new owner—even if the property has a mortgage.

Charges a Michigan 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 may be included in the lien. A COA in Michigan is permitted to include the following in its lien under state law:

  • assessments
  • late charges for any past-due assessments
  • collection costs
  • advances made by the association for taxes or other liens
  • fines in accordance with the COA documents
  • interest, and
  • attorneys' fees. (Mich. Comp. Laws § 559.208(1)).

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

How Does the COA or HOA Foreclosure Process Work in Michigan?

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

COA Lien Foreclosures in Michigan

A COA in Michigan may foreclose its lien judicially or nonjudicially. (Mich. Comp. Laws § 559.208(1), (2)). The foreclosure will be in the same manner as a foreclosure of a real estate mortgage, except to the extent the condominium documents provide otherwise. (Mich. Comp. Laws § 559.208(2)).

A foreclosure can't start unless the COA records the lien in the county where the condominium is located and serves notice of the lien to the unit owner by first-class mail, postage prepaid, at least ten days before initiating the foreclosure proceeding. (Mich. Comp. Laws § 559.208(3)).

If the COA forecloses, the redemption period is:

  • six months from the date of sale, or
  • one month from the date of sale, if the property is abandoned. (Mich. Comp. Laws § 559.208(2)).

HOA Lien Foreclosures in Michigan

Read the association's governing documents to determine the specific notice and foreclosure procedures the HOA must follow.

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.

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 Michigan

A COA's lien is prior to all other liens except for:

  • state or federal tax liens on the condominium unit, and
  • a first mortgage of record unless the mortgage is recorded after the COA records its lien. (Mich. Comp. Laws § 559.208(1)).

Priority of HOA Liens in Michigan

Review the association's governing documents to determine an HOA lien's priority.

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

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

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