With condo foreclosures, others feel the pain, too |
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Owners can perform some of the work themselves to save money, but that's not without risks of shoddy workmanship or
liability if someone is injured, Muller and Swedelson say.
Liability waivers are a good idea, but "aren't always foolproof," says Muller.
Collection agency help
Nor can associations ignore their obligation to try to collect delinquent dues and assessments. Some associations are "a little bit
lax in their assessment collection," Swedelson says. If that's the case, owners again should take an active interest. Contact the
board, ask for information about the collections process and press for prompt action.
"If someone isn't paying their assessments, you need to follow proper and established procedures to go after those
assessments. It's important to send out those letters immediately and communicate with the residents about the nature of the problem,"
Rathbun says.
Quick action may be necessary to protect the association's interests. In California, for example, it can take 30 days
to record a lien after the appropriate demand letter has been sent to the owner. Any delay is likely to result in more unpaid assessments.
Condo associations also can offer payment plans or loans, or waive late fees or penalties to help owners to catch up on
delinquent dues.
"Boards do have options in working out arrangements so that they can meet the individual owner's financial issues,"
Swedelson says.
Collection procedures differ from state to state, but usually include the right to put a lien on the property and
judicially or nonjudicially foreclose on an individual unit for nonpayment of dues. Again, owners should get involved and be aware
of the process.
One common misconception is that an association owns an individual unit free and clear after a foreclosure; however,
that's not the case. In fact, the association takes title to the property subject to the first mortgage, Muller explains.
Associations may be reluctant to foreclose on a unit that's worth less than the owner's mortgage, but a foreclosure
may be a necessary step toward resolution of the problem, Muller says. Once the association forecloses, the owner typically will stop
paying the mortgage and the lender may be willing to accept a deed to the property from the association in lieu of a bank foreclosure.
That could result in a faster sale of the unit to a new owner.
The "No. 1 thing that you want is to get someone in there who has the money to pay the assessments," Muller says.
Foreclosure isn't a do-it-yourself project. Associations that need to pursue this option should consult an attorney.
What condo buyers can do
Buyers also should be concerned if they want to purchase a property that's governed by a homeowners association.
Buyers who purchase a property at a foreclosure sale or auction should be aware that in some states they can be held
responsible for the prior owner's unpaid assessments, which could amount to many months or even years of accumulated dues, interest
and penalties.
In any case, buyers should ask the seller about the association's financial condition.
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| Information for condo buyers to consider |
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Special assessments in the prior calendar year. |
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Pending assessments that will be due in the next 60 days to 90 days. |
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Homeowner delinquency rates. |
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Pending foreclosures against current owners. |
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"Go to the clerk of the court's Web site and search for the name of the condominium association because the association
is named as a defendant in bank foreclosure lawsuits," Muller suggests. "If you see that a 100-unit condominium has had 21 bank foreclosure
lawsuits filed against various units in the last three months, you know that they have a foreclosure problem and you might want to be
wary about that."
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