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Foreclosures Impact Condo Fee Collections

The effects of the recession on real estate values, and the resulting wave of foreclosures throughout the country, has had a direct and immediate impact on the ability of many condominium councils to collect the assessments necessary to properly operate and maintain their communities. Unit owners who are unable to keep up with their mortgage payments often become delinquent in their fee assessment payments as well. When this happens, the entire association is negatively impacted, because a condominium’s financial viability is entirely dependent upon timely payment of assessments by all unit owners.

Because condominiums cannot operate without full participation of all unit owners in paying their share of the common expenses, the Maryland Condominium Act establishes a procedure in which a council of unit can obtain a lien on a delinquent owner’s unit that is enforceable by foreclosure. However, the current real estate climate has left many associations empty handed in spite of the fact that unpaid condominium fees remain due and are subject to a lien. This happens when the sale of a unit fails to produce sufficient proceeds to satisfy all existing obligations. This can occur when the condominium forecloses on its lien, or when the unit is subject to foreclosure by a mortgage lender. In either case, the resulting sale often produces less than the amount due under the mortgage. This deficiency means that there is nothing left from the sale to satisfy other amounts due on the unit, including unpaid fees and assessments. (more…)