If you do not pay your HOA or COA assessments in Kentucky, the association may get a lien on your property and foreclose on your house.
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 condominium owners’ association (COA) or homeowners’ association (HA) (HOA). 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 COAs and HOAs 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.
If you live in a COA or HOA and fall behind on your assessments in Kentucky:
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 HOA commences foreclosure proceedings, you may have a defense, such as the HOA charging you too much, charging you exorbitant fees, or failing to follow state laws. Alternatively, you may be able to work out a plan to catch up on the past-due sums and preserve your property. You may be able to pay off the full delinquent, negotiate a lower payback amount, or engage into a repayment plan, for example.
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Kentucky Condominium and Homeowners Association Laws
HOAs in subdivision communities and COAs are sometimes governed by different sets of state regulations. In Kentucky, the Kentucky Condominium Act (Ky. Rev. Stat. Ann. 381.9101 through 381.9207) applies to all condos founded after January 1, 2011, and its rules typically apply to previously existing condominiums as far as events or circumstances happening after this date.
In Kentucky, homeowners associations are often formed as nonprofit organizations and are subject to the state regulations that regulate such corporations. The Kentucky Nonprofit Corporation Act is located in the state laws at 273.161 et seq. The regulations regulating the operation of the HOA, particularly those pertaining to assessments liens, may also be found in the governing papers of the association, such as the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and bylaws.
In General, How Do COA or HOA Liens Work?
A COA or HOA may typically get a lien on a property if the homeowner is behind in paying the assessments, based on the CC&Rs and state law. When a homeowner falls behind on his or her assessments, a lien is generally automatically attached to the property. In certain circumstances, regardless of whether state law mandates registration, the organization will register its lien with the county registrar to give public notice that the lien exists.
In Kentucky, there are COA Liens.
A COA is required by several states to register its lien in the county where the property is situated. However, under Kentucky law, the recording of the declaration serves as record notice of the existence of a COA lien, and no more recording is necessary for any claim of lien. 381.9193(4) (Ky. Rev. Stat. Ann.).
Kentucky Homeowners Association Liens
Check the governing papers of the HOA to see when a HOA lien attaches to the property.
Charges that a COA or HOA May Incorporate into the Lien
State law and the governing papers of the COA or HOA will normally specify the kind of charges that may be included in a lien.
What Fees Can a COA Include?
Unless otherwise specified in the declaration, a COA in Kentucky may include the following in its lien:
evaluations that are overdue
penalties for late payment
penalties that are appropriate for breaches of the declaration, bylaws, rules, and regulations (after giving the owner notice and an opportunity to be heard)
cost-effective collection
reasonable lawyers’ fees and expenses certain fees (such as for the drafting and recording of revisions to the declaration or statements of unpaid assessments), and interest at the association’s authorized rate of not more than 18%. 381.9167(1)(k),(l), 381.9193(1), 381.9191(2) (Ky. Rev. Stat. Ann.
If you submit a written request, the COA must furnish you with a statement detailing the amount of outstanding assessments within ten business days of receiving your request. 381.9193(8) (Ky. Rev. Stat. Ann.).
What Fees Can a HOA Charge?
Check the association’s governing papers to see which charges a Kentucky HOA may include in its lien.
Foreclosures on COA and HOA Liens in Kentucky
A COA or HOA may foreclose if it has a debt.
Kentucky COA Foreclosures
In Kentucky, a COA’s lien may be foreclosed in the same way as a mortgage on real land can. 381.9193(1) (Ky. Rev. Stat. Ann.). A COA lien for unpaid assessments is eliminated unless the COA takes measures to enforce the lien within five years of the assessments being due in full. 381.9193(5) (Ky. Rev. Stat. Ann.).
Kentucky HOA Foreclosures
The governing papers of a HOA control the association’s foreclosure rights. Check the governing papers of the HOA to determine the exact notification and foreclosure processes that must be followed.
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 Liens Have Priority in Kentucky
Under Kentucky law, a COA’s lien has precedence over all other liens, with the exception of:
Liens and encumbrances registered prior to the declaration’s recording include liens for real estate taxes and other governmental assessments, as well as a mortgage recorded before to the date on which the assessment sought to be enforced became late. 381.9193(2) (Ky. Rev. Stat. Ann.).
HOA Lien Priority in Kentucky
Check the governing documents of the HOA to determine the priority of a HOA lien.
If you are facing a COA or HOA foreclosure, consult with a lawyer.
If you are facing a COA or HOA foreclosure in Kentucky, speak with a foreclosure expert to learn more about how the law relates to your case and to explore any legal alternatives available in your specific scenario.