If your home is part of a homeowners' association (HOA) or condominium owners' association (COA) in South Carolina and you fall behind in assessments:
If the HOA or COA 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.
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. 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.
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.
State law and the HOA or COA's governing documents will usually set out the type of charges that may be included in the lien.
Typically, an HOA is permitted to include the following in its lien:
To determine which charges a particular South Carolina HOA may include in its lien, check the association's CC&Rs or other governing documents. Under the SCHA, local magistrate courts have concurrent jurisdiction, presumably with the Circuit Court, to adjudicate monetary disputes of up to $7,500 between homeowners and HOAs. (S.C. Code Ann. § 27-30-160).
In South Carolina, a COA lien consists of all unpaid sums for common expenses. (S.C. Code Ann. § 27-31-210(a)).
State laws often place particular due process requirements on HOAs and COAs regarding how and when an association can foreclose an assessments lien.
An HOA's foreclosure rights come from the governing documents of the association. Read the association's governing documents to find out the process that the HOA must follow to foreclose a lien for unpaid assessments.
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 current on your mortgage payments. 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 might adjust lien priority.
To determine an HOA lien's priority, check the association's governing documents. A COA's lien is prior to all other liens, except for:
So, a foreclosure by an HOA or COA usually won't eliminate a mortgage because the association's lien is usually lower in priority.
If you're facing an HOA or COA foreclosure in South Carolina, consider consulting with a foreclosure attorney to learn more about state laws, how they apply to your situation, and to discuss all legal options available in your particular circumstances.