Selling a House with HOA Liens or Unpaid Dues in Indiana or Kentucky

Who this guide is from: Mortgage Forfeiture is Roger Choate's local direct home-buying business serving Southern Indiana and the Louisville metro. Informational guides are general education; legal, tax, lending, and court decisions should be reviewed with the appropriate licensed professional.

You can sell a house with an HOA lien or unpaid dues in Indiana or Kentucky. The balance is paid out of your proceeds at closing, the association releases its lien, and the buyer takes clear title. The hard cases are the ones where the sale will not cover the mortgage and the HOA, or where the HOA has already filed suit.

This guide covers how the lien works in each state, whether the HOA can foreclose, where it stands against your mortgage, how it gets paid at closing, and what you can negotiate.

What is in an HOA balance?

When you buy in an association, you agree to pay regular assessments for common-area upkeep, insurance, and shared amenities. Stop paying, and the balance can grow past the dues themselves:

• Unpaid assessments: the base amount owed for monthly or quarterly dues
• Late fees: usually a flat fee or percentage added while you are delinquent
• Interest: many governing documents allow interest on past-due balances. The rate comes from the declaration or board rules and is limited by state law.
• Attorney fees and collection costs, added where the governing documents or statute allow
• Special assessments: one-time charges for major repairs or capital improvements, which are enforceable like regular assessments

The HOA's strongest collection tool is the assessment lien, a claim against the property that generally must be paid or released before clear title can transfer. Whether a lien exists, when it attached, and who is responsible after a transfer depend on state law, the type of community, and whether the lien was recorded. Ask the title company to confirm.

How do HOA liens work in Indiana?

Subdivision HOAs (IC 32-28-14)

For most Indiana subdivision homeowners associations, the lien statute is IC 32-28-14. The lien attaches when the association records a signed notice of lien with the county recorder, and its priority dates from that recording. The association generally enforces it by filing suit in the county where the property is located, no sooner than 90 days and no later than five years after recording. The day-to-day rules for associations, including budgets, meetings, and notice before fines, are in Indiana's Homeowners Association Act, IC 32-25.5.

Condominiums (IC 32-25-6-3)

For Indiana condominiums, unpaid assessments are a lien on the unit from the time of assessment under IC 32-25-6-3. That lien ranks ahead of other liens except property-tax liens and amounts owed on a first mortgage of record. The association can enforce it by court action.

Lien priority in Indiana

In Indiana, an HOA or condominium lien generally ranks behind property taxes and a first mortgage. For subdivision HOAs, priority against other liens dates from when the HOA recorded its notice of lien. For condominiums, the statute ranks the association ahead of other liens except taxes and the first mortgage. In a voluntary sale, the title company will require the HOA balance to be paid or released at closing.

Two more Indiana points matter when selling. A buyer in a voluntary sale can be jointly liable for the seller's unpaid subdivision assessments, which is why buyers ask for the HOA statement. And an owner can send the HOA written notice demanding that it sue to foreclose its recorded lien; if the HOA does not sue within one year, the lien is void, although the debt itself can still be collected (IC 32-28-14). Ask an Indiana attorney before relying on either rule.

How do HOA liens work in Kentucky?

Which Kentucky law applies

Kentucky has separate statutes for condominiums and for subdivision-style communities. Condominium associations are covered by the Kentucky Condominium Act (KRS 381.9101 to 381.9207), and some of its sections, including the lien section, also reach condominiums created before 2011. Homeowners associations in planned communities are covered by KRS 381.785 to 381.801, which took effect June 29, 2023. Whether the planned-community act applies to a particular development depends on its association and declaration, so ask a Kentucky attorney.

Lien priority in Kentucky

Kentucky associations still have real collection tools. A condominium lien can include late charges, collection costs, attorney fees, fines, and interest unless the declaration says otherwise, and a court judgment must award reasonable attorney fees to the prevailing party (KRS 381.9193). A planned-community HOA's lien can cover assessments plus related interest, fees, and reasonable attorney fees that stay unpaid for 30 days (KRS 381.799).

Indiana and Kentucky HOA lien rules at a glance

Can an HOA foreclose on your home?

Yes, in both Indiana and Kentucky, and it surprises many owners. In Indiana, an HOA enforces its assessment lien through court action (IC 32-28-14-8): the association files a lawsuit, obtains a judgment, and the court can order a sale. If an HOA forecloses, a senior first mortgage survives.

Kentucky associations also enforce liens through court action. A condominium association's lien can be foreclosed like a mortgage, and the association may also sue for a money judgment (KRS 381.9193). A condominium lien is extinguished if enforcement isn't started within five years after the full assessment becomes due.

The process can be slow, but it is real, and attorney fees can make a modest balance grow quickly. Respond to every notice and court filing.

Where does the HOA stand against your mortgage?

In a typical sale, lien priority generally runs:

1. Property taxes and other government liens
2. Mortgages and liens recorded before the HOA lien (in most cases, the first mortgage)
3. The HOA or condominium assessment lien, subject to the state rules above
4. Later-recorded liens, such as some judgment liens or later loans
5. Owner receives any remaining proceeds

Exact order depends on recording dates and state law, so ask the title company for a payoff and lien report.

If you owe more than the home is worth, every lienholder, including the HOA, has to be paid or agree to release its lien before a voluntary sale can close. In a mortgage foreclosure, the first mortgage generally comes ahead of the HOA in both states. If you also have property tax liens on an Indiana house, the taxes come first.

How does the HOA lien get paid at closing?

The title company handles it. Its title search turns up recorded liens, including HOA assessment liens. It then asks the HOA or its management company for a payoff good through the expected closing date; Kentucky condominium associations must provide a written statement of unpaid assessments within 10 business days of a written request (KRS 381.9193). At closing the payoff is deducted from your proceeds, the title company pays the HOA, the HOA files a lien release, and the buyer takes title free of the lien.

That works when the proceeds cover everything. When they do not, you negotiate.

Can you negotiate with the HOA?

Often, yes. Associations usually prefer a sure payoff over the cost and delay of a lawsuit. You can ask about:

• Late fees and interest, sometimes waived in a good-faith settlement
• Attorney fees, which can be a large share of the total once the account goes to collections, and which some HOAs will reduce
• A payment plan to pause further legal action while you arrange a sale
• A reduced lump-sum payoff at closing, which may appeal to an HOA facing a drawn-out case

Put the request in writing to the board, not just the management company. Explain the situation plainly, show your plan to sell, and make a specific offer. A signed purchase agreement shows the HOA that a payoff is close. Before you start, request a full ledger showing every charge: base assessments, late fees, interest, attorney fees, and special assessments. Errors happen, especially after a management company changes, and the breakdown lets you focus on fees and interest rather than the base dues.

What do you have to disclose?

Indiana's seller disclosure form under IC 32-21-5 (State Form 46234) asks whether the property is subject to covenants, conditions, or restrictions of a homeowners association. Unpaid balances and recorded liens usually surface in the title search and HOA payoff statement. Ask the title company and an Indiana attorney what you need to disclose in writing for your sale.

When a Kentucky real estate licensee is paid in the transaction, the seller generally completes the Commission's seller disclosure form (KRS 324.360), which includes homeowners association information. For condominiums, the seller must give the buyer the association's resale certificate, which shows the regular assessment and any unpaid or special assessments currently due (KRS 381.9203). Ask a Kentucky attorney what applies if no licensee is involved.

Do not try to hide unpaid HOA dues. Recorded liens surface during the title search, and concealment can create liability.

Steps to take if you are behind on HOA dues

1. Get your ledger: a complete account statement showing every charge, payment, and the balance
2. Read the governing documents for late fees, interest, collection procedures, and lien rights
3. Check for a recorded lien at the county recorder's or clerk's office
4. Add up your exposure: base assessments, late fees, interest, and attorney fees
5. Compare value to debt: your home's market value against the mortgage balance plus the HOA total
6. Tell the HOA you intend to sell and resolve the balance
7. Compare sale options on net proceeds and timing
8. Negotiate before closing, using a signed purchase agreement to ask for a reduced payoff

What this means if you need to sell

A listing can take months, and late fees and interest keep adding to the HOA balance the whole time. If the house needs work, is already in collections, or you just want it off your hands, a direct sale is one way to stop the meter. Roger Choate buys houses as-is in Louisville and Southern Indiana. He reviews the property and the records, including the HOA ledger and any recorded lien, and gives you a written offer. There is no seller company fee or agent commission, and you do not have to bring the property up to HOA standards first.

Closing still runs through a title company, which obtains the HOA payoff and lien release; the buyer does not control what the HOA accepts. You pick the closing date, subject to title work and the payoffs. A direct offer removes the buyer-financing and inspection contingencies, not the title, lien, payoff, or signature requirements. The mortgage payoff, the HOA balance, taxes, prorations, and other settlement items come out of the proceeds, and no closing date is guaranteed. If you are also behind on the mortgage, say so up front, because the order of payoffs decides what is left.

Frequently asked questions

Have a current ledger and payoff? Call (502) 528-7273 or Get My Cash Offer and Roger will review the property and the HOA figures with the title company. General information only, not legal advice; HOA rights depend on the governing documents and state law, so consult an Indiana or Kentucky attorney about your community.

Roger Choate

Roger Choate is the founder of Mortgage Forfeiture and a local direct home buyer serving the Louisville area and Southern Indiana.