Dues and Don’ts
Condo owners who get behind on homeowner dues could be in for a nasty surprise.
YOU GET A LOT of paperwork when you buy a condo. There’s the resale certificate, the bylaws, and the rules and regulations, and, unless you’re into legalese, it’s the kind of reading material that can cure insomnia. But there is one document that can keep you up nights if you bother to read it. Dig deep enough into what’s called the declaration of condominium and you’ll find that your condo association has the authority to foreclose on your unit if you simply fall behind on your monthly homeowner dues. “People always assume that the only person that can foreclose is the bank,” says Valerie Farris Oman, an associate attorney at the Condominium Law Group. “And that’s simply not true.”
Farris Oman says the firm, which represents condo boards in delinquent-payment cases, has watched its caseload triple in the last three years. And just as with bank-initiated actions, the economy is driving the increase. In some cases, owners have lost a job and can’t pay the monthly dues as they struggle to cover the mortgage. In others, underwater owners are walking away, forcing associations to raise dues to unaffordable levels for those who remain.
“The question, though, is, ‘Would they foreclose on you?’ ” asks Rory O’Sullivan, an attorney at the Northwest Justice Project. A number of factors can inform a condo board’s decision to give an owner the boot—including whether it can foreclose without filing a lawsuit first, and whether or not the owner is underwater—so O’Sullivan suggests reading your declaration of condominium closely.
People always assume the only person who can foreclose on a condo is the bank.
That said, Farris Oman is quick to point out that an association has much more to gain by working with a delinquent owner to establish a payment plan, because in most cases the association can recover at least some of the money it’s owed. Earlier this winter she helped broker a deal in which an owner who was more than $2,000 behind agreed to begin paying her condo dues as long as the association would waive late fees for three months. “In general, my loose recommendation to boards is, if there’s a payment plan that allows the owner to get caught up in, say, 12 months, take it,” she says.
That may not be an option for all down-and-out owners. For them, Erin Rearden, a mortgage counselor at Solid Ground, has one piece of—strangely counterintuitive—advice: “It seems like mortgage companies have more payment plans that they’re willing to provide,” she says. “So when people say, ‘I have a limited amount of money; do I pay the condo association, or do I pay the mortgage?’ I tell them to pay the condo association.”
Published: February 2011
So many challenges with condo sales right now! I think most associations would rather work things out with the owners. As an active real estate broker I have not been exempt from the opportunity to learn what some of the associations and owners are facing. I have learned that many communities/complexes have the right to order the shut-off of electric utility services in order to get owners who are delinquent to come in and at least workout a dues payment plan. This is usually effective, but does not get that owner out of delinquency status until they are truly caught up. In other words it does not improve the status of the community right away. I am amazed with how little condo owners actually understand about the power of their association, so your post is greatly appreciated!
In WA, if the HOA forecloses, the existing mortgage remains in first position.
The foreclosed owner also has a one year right of redemption. I can’t see this as being in the community’s best interest in most cases.
Article about late HOA dues
But what is the benefit to the HOA if the the condo reverts back to the HOA at the auction and they end up having to pay off the first lien? Then they have an asset they can’t sell for what they paid for it. Or is the HOA in 1st position?