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HOMEOWNER'S ASSOCIATION LIENS

Congratulations.  You ran for a board position in your homeowners association….and you won!  Like Robert Redford, a winning U.S. Senatorial candidate in the 1972 movie The Candidate, you ask your fellow board members, in shock, “What do we do now?”

Upon assuming your duties, one reality you will likely face is the matter of collection of homeowner's association (“HOA”) dues.  HOA dues provide the financial resources that allow the HOA board to fulfill its responsibilities to maintain common areas and perform other functions.  However, making the safe assumption that your neighborhood is not occupied with perfect people, you may quickly learn that the association has a number of homeowners who have fallen behind or never paid their HOA dues.  Over time these fees can become quite sizable and threaten the financial viability of your association.

Fortunately, the law permits you to take action to get these outstanding HOA fees paid.  In 2007, the Indiana Legislature enacted the Homeowners Association Lien statute, which grants your HOA the power to attach a lien to the real estate of delinquent association members for their unpaid share of “common expenses.”  The statute defines common expenses to include expenses for common areas, expenses outlined in the bylaws or covenants, and other amounts lawfully assessed by the HOA.

Upon determining the amount of an association member’s delinquent fees, the next step in the process is to record a lien on the member’s property with the county recorder of deeds.  This is a very important step, because the date on which you file your lien establishes your priority as to any other creditors.  Priority is important because often people who don’t pay their bills to an HOA are not paying bills of other creditors, either.  Thus, you want to be in the front of this line!  Once you have your lien recorded, the lien is now “attached” to the real property and will entitle the HOA to payment ahead of other creditors who may file liens after the date your lien is filed.

Once the lien is recorded, your HOA may enforce the lien by filing a complaint in state court asking for judgment in favor of the HOA.  However, suit cannot be filed sooner than 90 days nor more than 5 years after the date the lien was recorded.  If you fail to follow these rules, the lien will be void.

Up to this point, the statute has provided Indiana HOA’s with tools to help collect debts rightfully owed to the Association.  But, beware of Indiana Code § 32-28-14-9.  This section provides the homeowner with a weapon.  Under I.C. § 32-28-14-9, the homeowner can file a written demand on the HOA requiring the HOA to initiate suit to foreclose the lien. If the HOA fails to file an action to foreclose within one year after the demand is received, the lien becomes void.

This post is only a brief summary about homeowner association liens and there may be other requirements under the Homeowners Association lien statute or other laws which may apply.  This post does not constitute legal advice nor does it establish an attorney/client relationship.  If your HOA is struggling with unpaid HOA fees, we recommend that you contact an attorney for assistance.  If you have any questions about this article, contact Gregg Sobkowski or Dan Blankenburg.

Hodges and Davis, P.C. - August 2015