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.
In Ohio, if your home is part of an HOA or COA and you fall behind in assessments:
If the HOA or COA initiates a foreclosure, you might have a defense to the action, such as the association charged you too much, imposed 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.
Often, different sets of state laws govern HOAs in subdivision communities and COAs. In Ohio, Title 53, Chapter 5312 of the state statutes governs HOA activities. Title 53, Chapter 5311 applies to condominiums. These sets of laws are very similar.
Based on the association's Declaration of Covenants, Conditions, and Restrictions (CC&Rs) or Declaration of Condominium and state law, most HOAs and COAs have the power to place a lien on your home if you become delinquent in paying the assessments. Once you fall behind in payments, a lien will usually automatically attach to your property. In some cases, 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.
In Ohio, an HOA or COA is entitled to a lien for unpaid assessments and related charges once the amount due is ten days late. (Ohio Rev. Code Ann. § 5312.12(A), § 5311.18(A)(1)). The lien becomes effective when the HOA or COA records a certificate of lien in the county records. (Ohio Rev. Code Ann. § 5312.12(B)(1), § 5311.18(3)).
In Ohio, an HOA or COA is permitted to include the following in its lien unless the governing documents provide otherwise:
If a homeowner or condo owner believes that an HOA or COA lien is improper, the owner may file a lawsuit asking a court to discharge the lien. If the owner prevails in the case, all or part of the lien will be discharged, and the court will award attorneys' fees to the owner. (Ohio Rev. Code Ann. § 5312.12(D), § 5311.18(C)).
In Ohio, an HOA or COA may foreclose its lien in the same way that a mortgage on real property is foreclosed. (Ohio Rev. Code Ann. § 5312.12(B)(4), § 5311.18(B)(1)).
An HOA or COA must initiate the foreclosure within five years after the lien is recorded; otherwise, the lien is invalid. (Ohio Rev. Code Ann. § 5312.12(B)(3), § 5311.18(A)(4)).
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 up to date on your mortgage. Instead, lien priority determines what happens in a foreclosure.
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 can adjust lien priority.
In Ohio, an HOA lien or COA lien has priority over liens that were recorded on a later date, except for:
So, a foreclosure by an HOA or COA usually won't eliminate a first mortgage because the association's lien is normally lower in priority.
If you're facing an HOA or COA foreclosure in Ohio, consider consulting with a foreclosure attorney to discuss all legal options available in your particular circumstances.