HOA and COA Foreclosures in Illinois

If you do not pay your HOA or COA assessments in Illinois, the association may get a lien on your property and foreclose on it.

When you purchase a single-family home, townhouse, or condominium in a covenanted neighborhood, you will almost certainly be required to pay fees and assessments to a homeowners’ association (HOA) or condominium owners’ organization (COA). If you fall behind on your assessments, the association will most likely attempt to recover the debt by regular means first. For example, the association will most likely contact you and send you letters. If such efforts don’t work, the association will most likely attempt another method of collecting from you. The association may revoke your usage of the common facilities or initiate a lawsuit to obtain a monetary judgment against you. Most HOAs and COAs have the authority to place a lien on your property if you fall behind on your assessments. Not only would an assessment lien obscure the title to the property, making it difficult to sell or refinance, but the property may also be repossessed to compel a transfer to a new owner—even if the property has a mortgage.

HOAs in subdivision communities and COAs are sometimes governed by different sets of state regulations. COAs in Illinois are governed under the Illinois Condominium Property Act (765 Ill. Comp. Stat. 605/1 through 605/35). HOAs are governed under the Illinois Common Interest Community Association Act (765 Ill. Comp. Stat. 160/1-1 through 160/1-90), which is not as extensive as the Condominium Property Act. The General Not For Profit Corporation Act of 1986 (805 Ill. Comp. Stat. 105/101.01 and following) applies to certain HOAs in smaller areas. The governing papers of a HOA, such as the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and a COA’s Declaration of Condominium, often include precise information regarding the community’s regulations, such as assessments liens. The Declaration is a publicly recorded document, and you should have gotten copies when you bought your home.

If you live in a COA or HOA and fall behind on your assessments in Illinois:

If you become behind on your assessments, the COA or HOA may generally get a lien on your house.
If you get behind on your assessments, the COA or HOA may foreclose.
When a COA or HOA debt is foreclosed, what happens to other liens, such as a mortgage?

If the COA or HOA commences a foreclosure action, you may have a defense or be able to negotiate a means to catch up on the late sums and keep your house.

In General, How Do COA or HOA Liens Work?

A COA or HOA may normally get a lien on your house if you are behind in paying the assessments, based on the governing provisions of the association, such as the CC&Rs, and state law.

Illinois COA Liens

If a condo owner fails or refuses to pay the common expenditures or penalties, the COA is entitled to a lien in Illinois. (Illinois Comp. Stat. 605/9(g)(1)) .

Illinois HOA Liens

If you live in a HOA, read the CC&Rs to understand about the association’s authority to lien your house if you fail to pay your assessments.

Charges that a COA or HOA May Incorporate into the Lien

State law and the governing laws of the COA or HOA will normally specify the types of charges that an association may include in the lien.

Charges Involved in a COA Lien

A COA may include the following in its lien under Illinois law:

overdue common expenses
Late fees, reasonable lawyers’ fees, collection penalties, and interest (765 Ill. Comp. Stat. 605/9(g)(1)).

HOA Fees That May Be Included in the Lien

Check the association’s governing papers to see which charges an Illinois HOA may include in its lien.

Foreclosures on COA and HOA Liens in Illinois

If a COA or HOA has a debt, it may be forced to foreclose.

Foreclosures by COA

Once the COA lien is recorded in the county records, it may be repossessed in the same way as a mortgage. 765 Illinois Comp. Stat. 605/9(h).

Foreclosures by HOA

Read the governing papers of a HOA to learn about the association’s power to foreclose if you fall behind on your assessments.

Your Mortgage and COA or HOA Liens

A widespread misperception is that the association cannot foreclosure if your mortgage payments are current. However, an association’s power to foreclose is not affected by whether you have paid off your mortgage. Instead, what occurs in a foreclosure is determined by lien priority.

In general, a foreclosure by a COA or HOA will not erase a first mortgage since the claim of the association is generally lower in priority.

What Is the Definition of Lien Priority?

The priority of liens affects who gets paid first after a foreclosure auction and, in many cases, whether a lienholder gets paid at all. Liens normally follow the “first in time, first in right” rule, which states that the lien that is registered first in the land records takes precedence over subsequent recorded liens. A first-lien has a higher priority than other liens and receives first dibs on the earnings of the foreclosure auction. If any funds remain after paying off the first lien, they are distributed to the second lienholder until that lien is paid off. And so on. A low-priority lien may get nothing from a foreclosure auction.

However, state law or an association’s governing papers may change lien priority.

COA Lien Priority

A COA lien has precedence over all other liens in Illinois, with the exception of:

Certain governmental agencies’ taxes and liens, as well as encumbrances on the unit owner’s interest recorded previous to the date of such failure or refusal, which by law would constitute a lien thereon prior to later recorded encumbrances. (765 Ill. Comp. Stat. 605/9(g)(1)).

HOA Lien Priority

HOA CC&Rs often address lien priority, stating that HOA debts are secondary to a first mortgage. Check your association’s governing documents to determine the priority of a HOA debt in Illinois.
If you are facing a COA or HOA foreclosure, consult with a lawyer.

If you are facing a COA or HOA foreclosure in Illinois, speak with a foreclosure expert to understand more about the legislation and how it pertains to your case, as well as to explore any legal alternatives available in your specific scenario.