Last week’s post dealt with a lien priority dispute between a mortgagee and a commercial property management association. I thought that a natural follow-up post would be to clarify priorities between a more traditional residential homeowner’s association’s lien and a mortgage. Secured lenders may from time to time foreclose upon its real estate loan collateral and discover that homeowner’s association liens have also been recorded on the subject property. These issues are not exclusive to consumer foreclosures. The can bubble up in commercial cases such as foreclosures upon failed residential subdivision developments.
HOA statute. Indiana has a separate and distinct statute devoted to homeowner’s association liens at Ind. Code § 32-28-14. Homeowner’s associations (HOAs) may claim an interest in real estate that is the subject of a lender’s foreclosure case, and the HOA may even file its own case pursuant to I.C. § 32-28-14-8.
Priority. In determining priority, the critical question is - when did the HOA record its lien on a particular lot? Pursuant to I.C. § 32-28-14-5, the priority of the lien of the HOA “is established on the date the notice of the lien is recorded . . ..” See also, I.C. § 32-28-14-6. Pursuant to Indiana’s recording statute, I.C. § 32-21-4-1(b), a lender’s mortgage will take priority according to the date of its filing. Thus both liens take priority according to their filing/recording. If the mortgage filing predated the filing of the HOA lien, then the mortgage will hold priority. If, on the other hand, the HOA lien was recorded before the mortgage, then the HOA lien will have priority.
Nothing unique. HOA liens carry no special weight or any kind of super priority in Indiana. Like most other liens, Indiana law determines the priority of an HOA lien based upon the date of its recording.