Associations continue to suffer from an epidemic of unpaid assessments. Such delinquent owners are often also behind in their mortgage payments, which can lead to the lender foreclosing. Once the lender forecloses and takes title, it becomes responsible for assessments going forward, but not for past due assessments. As in last year’s session, the legislature is again considering a means of providing some relief to associations in these circumstances. The Residential Association Sustainability Act of 2011 is pending as Senate Bill 946 and House Bill 1246. It would provide that, in the case of a foreclosure on a mortgage or deed of trust on a condominium unit, the portion of a lien on the condominium unit that represents up to six months of specified unpaid assessments, including specified fees and costs, has priority over a first mortgage or deed of trust under specified circumstances. Accordingly, if the condominium has obtained a lien on the unit for unpaid assessments, six months of those assessments would constitute a priority over the mortgage or deed of trust. In other words, six months of assessment would be paid first out of a foreclosure sale before payment of the mortgage debt.
The Senate bill, which is sponsored by Senators Mathias and Manno, has been referred to the Judical Proceedings Committee, and the House bill, which is sponsored by Delegates Conway, Arora, Bobo, Braveboy, Cullison, Frush, Kramer and Nieman, has been referred to the Environmental Matters Committee.
The 2006 Maryland Task Force on Common Ownership Communities recommended that delinquent assessements receive a priority lien for six months of assessments, late fees, attorney fees, and cost of collection. During the 2010 session of the General Assembly, the House passed a bill providing for a four month assessment priority. That bill also required that each unit owner post a two-month security deposit, so that the association would have the benefit of a six month cushion. The security deposit requirement was criticized by some as placing an undue burden on homeowners. The bill evenually died in the Senate.
