Selling a House with HOA Liens or Unpaid Dues in Indiana & 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.

Homeowners association dues might seem like a minor monthly expense, but when they go unpaid, the balance can grow quickly. Late fees, interest, and attorney fees can be added, and the HOA may place a lien on the property. If you are trying to sell a house with an outstanding HOA lien in Indiana or Kentucky, you need to understand what you are dealing with and what your options are.

This guide explains how HOA liens work in both states, whether an HOA can foreclose, and how a sale can still close with unpaid dues.

How HOA Liens Work

When you buy a home in a community governed by a homeowners association, you agree to pay regular assessments. These assessments fund common area maintenance, insurance, amenities, and other shared expenses. When you stop paying, the HOA has legal tools to collect.

A typical HOA balance can include:

• 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.

Indiana HOA Lien Laws

Indiana's rules depend on the type of community:

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.

Kentucky HOA Lien Laws

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 vs. Kentucky HOA Lien Laws at a Glance

Can an HOA Foreclose on Your Home?

Yes, in both Indiana and Kentucky. Many homeowners are surprised to learn that an HOA can enforce its lien through foreclosure.

HOA Foreclosure in Indiana

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.

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.

HOA Foreclosure in Kentucky

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.

HOA Lien Priority vs. Your Mortgage

Understanding where the HOA stands in the payment line matters when you are considering selling. 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 are dealing with both HOA liens and tax liens on your property, property taxes come first.

How HOA Liens Get Resolved at Closing

When you sell a home with an HOA lien, the resolution happens through the title company at closing. Here is how it typically works:

1. Title search reveals the lien — the title company identifies recorded liens, including HOA assessment liens, during its preliminary title search
2. Payoff statement requested — the title company or closing attorney 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).
3. Funds held at closing — the HOA payoff is deducted from your sale proceeds
4. HOA paid and lien released — the title company sends payment to the HOA, which files a lien release
5. Clear title transferred — the buyer receives title free of the HOA lien

This process is straightforward when there are enough sale proceeds to cover everything. It gets complicated when proceeds are insufficient, which is where negotiation becomes important.

Negotiating with the HOA

If you owe a significant amount to your HOA and are trying to sell, you may have room to negotiate. Associations often prefer recovering a balance over the cost and uncertainty of litigation.

What You Can Ask About

• Late fees and interest — sometimes waived in a good-faith settlement
• Attorney fees — if the account has been sent to collections, these may be a large portion of the total, and some HOAs will reduce them
• Payment plans — if you need time to arrange a sale, the HOA may agree to a plan to pause further legal action
• Lump-sum settlement — a reduced payoff at closing may appeal to an HOA facing a drawn-out case

Tips for Negotiating

Put your request in writing to the HOA board, not just the management company. Explain your situation honestly, present your plan to sell, and make a specific offer. A signed purchase agreement shows the HOA a payoff is likely.

Selling with Unpaid HOA Dues — Disclosure

Indiana Disclosure

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.

Kentucky Disclosure

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.

How a Direct Sale Compares

Selling a home with HOA liens through a traditional listing can take time, and late fees and interest may keep accruing on the HOA balance while it is on the market.

A direct sale offers a different path:

• Fewer financing conditions — a direct offer can remove buyer-financing and formal inspection contingencies, while HOA payoff, title, lien, and closing requirements still apply
• Payoff coordination: the title company still obtains the HOA payoff and lien release; the buyer does not control what the HOA accepts.
• As-is purchase — you do not need to make repairs or bring the property up to HOA compliance standards before selling

Steps to Take If You Have HOA Arrears

If you are behind on HOA dues and considering selling your home, here is a practical roadmap:

1. Get your ledger — request a complete account statement from your HOA or management company showing every charge, payment, and outstanding balance
2. Review your governing documents — check the declaration, bylaws, and rules for late fees, interest, collection procedures, and lien rights
3. Check for recorded liens — search your county recorder's or clerk's office to see whether the HOA has recorded a lien
4. Calculate your total exposure — add up base assessments, late fees, interest, and any attorney fees
5. Determine your equity position — compare your home's market value against your mortgage balance and total HOA debt
6. Talk with the HOA — let them know you intend to sell and resolve the debt
7. Explore your sale options — compare a direct offer with a traditional listing using net proceeds and timeline
8. Negotiate before closing — use a signed purchase agreement to ask for a reduced payoff, focusing on late fees, interest, and attorney costs

Address HOA Debt Early

HOA balances tend to grow with time as fees and attorney costs are added, and a lawsuit can follow. HOA balances can often be resolved at closing when there is enough equity, or through negotiation when there is not. Start with a current ledger and payoff.

If a property has HOA dues or liens, obtain a current ledger and payoff and have the title company review it. Mortgage Forfeiture can inspect a property in its operating area and prepare a written offer when the records support one. Call (502) 528-7273 or request a property review.

General information only; not legal advice. HOA rights depend on the governing documents and state law; 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.