Condo association has options for non-payment of fees

Q:

I am the treasurer of a 20-unit condominium association. One of the owners in the building has been renting his unit for the last year and has not been paying his common area charges. We want to impose a lien against his property. Can you outline the steps?

A:

Condo associations have significant leverage against delinquent owners who fail to pay their common area charges.

Under state law condo associations can impose a limited priority lien, which means that if the condo unit is sold, the association stands first in line, ahead of the first mortgage lender, to collect the delinquent condo fees, plus attorney’s fees and other expenses involved in enforcing its lien.

Also, if the condo association exercises its right to institute foreclosure proceedings and the unpaid condo fees and related expenses covered by its priority lien are not paid by the date of the foreclosure sale, then the unit will be sold free of the mortgage.

In other words the lender’s first mortgage lien on the property will be wiped out. That creates a powerful incentive for lenders to ensure that condo owners do not fall behind in their monthly payments and, that if delinquencies do occur, they are satisfied promptly, before an association moves to foreclose.

There are some limitations on the scope of the condo association's priority lien, depending on when the delinquency occurs. If the delinquency is assessed after the first mortgage is already in place, the priority portion of the association's lien will cover only six months of unpaid condo fees.

If the mortgage was recorded after the assessment became delinquent, all unpaid condo fees are subject to the priority lien.

In both cases, the lien applies only to common area charges. It does not extend to late charges, penalties or interest assessed on the unpaid balance. It also does not cover special assessments.

Only regular monthly common area fees are included. (Condo associations are free to try to recover these other expenses from the owner, but they are not included under its priority lien.)

The law also entitles condo associations to recover reasonable attorney’s fees associated with the priority lien.

There is a very detailed process that condo associations must follow in order to exercise their right to impose a priority lien.

First, if the condo owner is delinquent for at least 60 days, the association must send notice of the delinquency to both the owner and the first mortgage holder by certified, first class mail.

Then, 30 days before instituting steps to enforce the lien, the association must notify the lender by first class mail that it intends to commence foreclosure proceedings.

It would be wise for any association contemplating such a serious step against an owner to consult with an attorney to make sure it is following proper procedures.