Can an HOA Foreclosure in a Non-Super Lien State Wipe Off the Mortgage From the Property?

Generally, lien priority is determined by the lien’s recording date. As the saying goes, “first in time, first in right.” Lien priority is especially important when dealing with foreclosures. If a senior lien forecloses, it will wipe off junior liens from the property. On the other hand, if a junior lien forecloses, the foreclosure is subject to any prior liens. Sounds pretty straightforward, right? Here’s the caveat: HOA Super Lien States. An HOA super lien automatically gives the lien priority over other liens no matter when it was recorded. This means that the HOA lien would take priority over even an older, first position mortgage. There are over 20 states who enforce the HOA super lien statute. Now raises the question: Can a mortgage be wiped from the property after an HOA lien foreclosure in a non-super lien state? The surprising answer is YES.

Let’s take a look at this case in Ohio. There were two mortgages on the property, as well as a few junior HOA liens. Ohio is not a super lien state, so you would think that if the HOA foreclosed, the senior mortgages would be subject to the foreclosure. Unfortunately, this was not the case. When the HOA foreclosed, the judge ordered that the mortgages also be discharged from the property. The senior mortgage lien holder was not represented by an attorney while the junior lien holder was. The judge created an order of payouts to lien holders based on representations, resulting in the junior lien being paid before the senior lien. To help avoid this situation, it is extremely important to review the foreclosure case docket for motions and orders, and make sure the senior lien is well represented. Additionally, always review the mortgage and assignment documents to verify that the lien holder’s address is accurate. If it’s not, the foreclosing attorney’s notice will not get delivered and the lien holder will not be served.