South Carolina 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 HOA 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. The Horizontal Property Act (S.C. Code Ann. §§ 27-31-10 through 27-31-440) governs COAs in South Carolina. For decades, South Carolina didn't have laws that governed HOAs. Then, in 2018, the state passed legislation creating the South Carolina Homeowners Association Act (SCHA). (S.C. Code Ann. §§ 27-30-110 through 27-30-170).

HOAs and COAs are also controlled by their governing documents, which typically include a Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and bylaws. The specific rules regarding assessments liens can usually be found in these governing documents. You likely received copies of the CC&Rs and bylaws when you purchased your property. Under the SCHA, to be enforceable, all governing documents for an HOA must be recorded in the public records of the county where the property is located. The HOA's rules, regulations, and amendments to the rules and regulations also have to be recorded. (S.C. Code Ann. § 27-30-130).

If your home is part of an HOA or COA and you fall behind in assessments in South Carolina:

• The HOA or COA can usually get a lien on your home.
• The association typically can charge you for overdue assessments, late charges, fines, collection costs, interest, and attorneys' fees and costs.
• After you default on the assessments, the HOA or COA may foreclose.
• Lien priority determines what happens to other liens, like mortgages and judgment liens, if an HOA or COA lien is foreclosed.

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.

How HOA and COA Liens Work, Generally

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

Charges the HOA or COA May Include in Its Lien

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.

Charges an HOA may include in the lien. Typically, an HOA is permitted to include the following in its lien:

• past-due assessments
• late charges
• fines
• collection costs
• interest, and
• attorneys' fees and costs.

To find out 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).

Charges a COA may include in the lien. In South Carolina, a COA lien consists of all unpaid sums for common expenses. (S.C. Code Ann. § 27-31-210 (a)).

HOA and COA Lien Foreclosures in South Carolina

State laws often place particular due process requirements on HOAs and COAs regarding how and when an association can foreclose an assessments lien.

COA Foreclosures

As with a regular mortgage foreclosure in South Carolina, a COA lien may foreclose its lien judicially, by filing a lawsuit. (S.C. Code Ann. § 27-31-210 (a)).

HOA Foreclosures

An HOA's foreclosure rights come from the governing documents of the association. To find out the process that the HOA must follow to foreclose a lien for unpaid assessments, read the association's governing documents.

HOA and COA 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 current on your mortgage payments. 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.

Lien Priority of HOA and COA Liens in South Carolina

To find out the priority of an HOA lien, check the association's governing documents. A COA's lien is prior to all other liens, except for:

• tax liens
• recorded mortgages, and
• other recorded liens. (S.C. Code Ann. § 27-31-210 (a)).

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

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

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.