Illinois Real Estate Law Blog

Monday, July 28, 2008

Condominium Assessments When Buying Foreclosures

As more and more of my clients are buying foreclosed properties, the question of who is responsible for paying unpaid condo assessments keeps coming up. Buyers feel that it should not be their problem; after all, they didn't own the property when the assessments became due. Associations, on the other hand, want their money; they don't particularly care where it comes from. Because homeowners' associations require payment of assessments by all unit owners in order to meet their budget and keep their property in good repair, the Illinois legislature has sided with them on this issue.

The Illinois Condominium Property Act states that if you buy foreclosed property from the bank, you are responsible for assessments for the six months immediately prior to when the association instituted legal action to collect the assessment, assuming that such assessment is still unpaid. Take note: if the homeowner did not pay assessment for more than six months before the association took legal action, you are still only liable for six months' assessments. If the association never took legal action, you are not responsible for the assessment at all. In fact, I've had a few clients benefit because they were purchasing a foreclosed condo in an association that never filed suit for past due assessments.

The bank that foreclosed the condo is liable for assessments from the first day of the month after the month in which the foreclosure took place, through the date you close on your purchase from the bank.

What happens if the condominium association has instituted a special assessment? Well, your attorney can negotiate with the bank's attorney and try to get you the best possible deal. Unfortunately, many lenders have form contracts they require buyers to sign, which state that the buyer shall be responsible for all special assessments. Some lenders are willing to negotiate some of the terms of the sale; others are not. When a bank does not have its own form, the buyer benefits because the buyer's offer typically is on a standard realtor form, and those forms state that the seller is responsible for special assessments.

Make sure you understand how much assessment you will owe at closing if you're purchasing foreclosed property from a bank!

91 comments:

Michael Beckerman said...

Is the third party buyer at a foerclosure sale (by the Sheriff) responsible for the Associations legal fees? If so which fees and how much?
Michael Beckerman

Naheed Amdani said...

Hi Michael,

My understanding is that a third party buyer who purchases the unit at a foreclosure sale (i.e. outbids the lender) is only responsible for up to six months' assessments, for the six months immediately preceding the association's suit to collect the assessments. Hope that helps!

Megan said...

How can you find out if the association filed an action to obtain past assessments owed? Will that show up on the title docs? Can you find out this info before seeing the title commitment? Thanks.

Naheed Amdani said...

Hi Megan,

Often even if the condominium association filed suit to obtain past due assessments, it does not appear on the title commitment.

When your lawyer obtains the Section 22.1 Disclosure for you from the seller's condo association, however, past due assessments should be stated on there!

Marc B said...

Who is responsible for paying the past-due assessments incurred from the moment the association instigates legal action up to the moment the Bank/mortgage lender takes ownership by foreclosing on the property? If it is not the new buyer of the foreclosed property, who is it?

Thanks for replying.

Marc

Naheed Amdani said...

The new buyer is only responsible for up to six months of unpaid assessments. Unfortunately, if more than that accrues before the bank forecloses and takes over, associations often end up eating the loss. It is my understanding that before the six-month rule was instituted, associations were not entitled to any past due assessments at all.

Anonymous said...

Mr. Amdani,

If you represented a condo association against a delinquent owner and sent bills to the unit owner for your legal fees, who is responsible for paying your fees if the unit goes into foreclosure.

Naheed Amdani said...

Typically, when I represent a condominium association, the condominium association is responsible for my legal fees. If the association chooses to collect the fees from an individual unit owner, that is up to them!

Karen said...

Hi Naheed,

I'm kind of on the other end of this situation and am wondering about the condo owners who foreclosure, and what the process is there. I'm in the process of filing for a deed-in-lieu, and while I'm planning to not pay my mortgage, I will certainly be paying my assessments while I'm still living in the condo. However, once I vacate, I would expect to stop payments to the association, since I would no longer be utilizing the services provided by the fees. From what I saw on your post here, it looks as though the association can come after me, but it doesn't appear they ever really get anywhere?? If the new owners have to end of paying for it (or at least 6 months of it) upon purchase down the line.

My main question is about the special assessment though. The special was started in May 2007, and runs in with our regular for 5 years. Clearly I've only been paying for about 2 years, with a little under the remaining 3 years to go. What happens to this remaining portion? Does it, too, get rolled into the (eventual) new owner's responsibility, or am I bound to pay at least that amount, going forward, regardless of whether or not I still reside there? Since regular assessments seem to be more for current expenses, and the special was for one-time fixes that have been done (I think) back in 2007... I don't know. I can see arguments both ways, but I don't know the LAW here. Please help!

Thanks,
Karen

Naheed Amdani said...

Hi Karen,

Special assessments that are unpaid by unit owners when the unit is foreclosed usually end up being the responsibility of the bank who owns the property after the foreclosure is complete. Whether or not it gets passed on to the new owner of the unit depends on what the new owner and the bank negotiate prior to the new owner's closing. That doesn't mean, of course, that the condominium association won't go after you for the funds!

Khalid said...

I am in the process of purchasing a condo that was foreclosed. I signed the contract and paid the $3,000.00 in earnest money. Just yesterday, I received a letter from the association stating that I would have to pay $6,000.00 in past due association fees, legal fees and damaged entry fees. In the contract is states that I am responsible for past due fees and I understand that I am liable now for 6 months of the past due fees. I did ask the association if there were any past due fees before I signed the contract and they told me they did not know. My question is since the contract was signed in early August and closing is later this month if I back out now am I entitled to receive my earnest money?

Naheed Amdani said...

Khalid,

Whether or not you can get your earnest money back depends on the terms of your contract, the status of pending contingencies, etc. The attorney that is handling your closing should be able to review your contract and advise you if you can get your earnest money back or not.

karen w. said...

Hi,
I vacated purchased a condo and never paid assessments, 2 years ago. To date no foreclosure no eviction. I filed bk 6 months ago. Still no action to take the unit. Are there any laws that will prevent the condo association from coming after me later for post bk fees? Seems like no one is trying to get paid on this condo. I filed bk but still may owe them?

Naheed Amdani said...

Hi Karen,

Oftentimes when a condominium owner stops paying assessments, the association brings a forcible action against the owner, in essence to evict the owner and temporarily take over the property. I'm surprised your association has not done this, especially since you've already vacated the unit. With respect to whether or not the association can collect assessments from you, you should consult with your bankruptcy attorney!

Anonymous said...

Does this law apply to homeowners associations? We are not for profit association comprised of single-family homes.

thanks!

Naheed Amdani said...

It is my understanding that only a small portion of the Illinois Condominium Property Act, (specifically, Sections 18.5(c) - 18.5(h) -- which sections have nothing to do with the six months' back assessments), apply to non-condominium community associations. As a homeowners' association, you are covered by the General Not-For-Profit Corporation Act, which does not make reference to back assessments either.

Anonymous said...

Hi Naheed,

What about the purchase of a condo that has not been foreclosed on, but the seller owes assessments? Who is responsible for paying the assesments owed then?

Thanks!

Naheed Amdani said...

In that situation, the past due assessments have to be paid at or prior to closing. Typically the seller pays them from his proceeds at closing, unless the buyer and the seller contract otherwise.

Anonymous said...

We are in the process of filing bankruptcy. We have offered possession to our Condo association and in return they relieve us from any post-bankruptcy fees. The rejected our offer and are starting a demand for possession with an attorney. The builing is only three units. Our fear is that after we claim bankruptcy, they will issue a huge special assessment to recover there attorney fees and lost assessments. Is there any limits on special assessments they can levy?

Naheed Amdani said...

I'm not sure if the association would need to issue a special assessment to claim back assessments and attorneys' fees from you. They may be able to claim those fees without any special assessment at all. On the other hand, because of the bankruptcy, they may not. However, since you are in the process of bankruptcy, you should consult your bankruptcy attorney for advice, as he or she will be more familiar with the situation.

Jeff said...

If I were representing a condominium association who already has a judgment against a unit owner for past due assessments (which has not been collected through post judgment proceedings), and a lien in the amount of that judgment is recorded on the property, and now the property is in foreclosure, is it necessary to file an appearance on behalf of the Association in the foreclosure action (as we are a named defendant)in order to protect the lien. I understand that if the sale price at auction doesn't have excess to pay the lien amount, we hold the bag so to say, but what would the Association be risking if a default judgment was entered because it failed to file an appearance? It would still be able to take advantage of collecting the six months of back assessments from the potential new buyer, correct?

Naheed Amdani said...

It is usually prudent to file an appearance in the foreclosure action, particularly if no forcible was ever filed. However, to find out whether or not it is absolutely necessary, you should contact an attorney who specializes in such litigation!

Heather said...

Naheed,

How about in a short sale? Is the buyer only responsible for 6 months of backed assessments?

Heather

Naheed Amdani said...

Hi Heather,

The statute does not refer to short sales. Short sales are treated like any other sale -- the seller is responsible for paying the association in full prior to closing. Of course, the seller can strike a deal with the purchaser, whereby the purchaser pays back assessments -- but the buyer is not statutorily required to do so.

Naheed

damon said...

Hi Naheed,

I am currently in contract on a foreclosure with back assessments of 19 months. I just spoke to my attorney and he says I'm liable for 13 months and not 6 months. From reading your blog, I am convince I, the buyer, is liable for 6 months and not 13 months. Can you shed some light on this.

Also, I went in with an offer of 6 thousand over the asking price. Do you think I have some leverage in negotiating the back assessments?

Linh

Naheed Amdani said...

Hi Linh,

According to state law, the buyer is only responsible for up to six months of unpaid assessments (for time prior to the actual foreclosure). The bank that currently owns the property is responsible for assessments from the first day of the month following the foreclosure date, through closing.

What kind of leverage you have depends on many factors! Your attorney should be able to advise you.

Naheed

Anonymous said...

I asserted the six month defense against a condo association, and their attorney came back and said that, solely because my client had not requested a Paid Assessment Letter from the bank, my client had therefore assumed the bank's full share of the association fees, not just six months worth. As best I can tell, the bank never disclosed the association fees to my client otherwise. Is this a valid defense?

Naheed Amdani said...

Hi,

Is your client in the process of purchasing? Or has the purchase already occured? The seller must provide a paid assessment letter in order to close. Title companies require it! I'm not certain I understand the context of your question.

Naheed

Anonymous said...

Can a condo association file a sheriff's eviction of an owner against whom it has obtained a judgment in a forcible action, where the owner's lender subsequently obtains a judgment of foreclosure (but has not yet sold the property to a third party)?

Also, does the lender become the "owner" once the judgment of foreclosure is entered, or only when the property is sold and the sale is confirmed by the court?

Anonymous said...

We are a small condo assoc, and have let a unit 'slide' on past-due assessments. They are now in foreclosure. Is it too late for us to take legal action to try to recoup some of our losses?
(yes I know, no good deed goes unpunished)

Naheed Amdani said...

As to the first question, why would a condominium association want to do this? If the condo has already been foreclosed, why go through the expense of an eviction?

As to the second question, once the property is deeded to the lender, the lender becomes the owner.

Naheed Amdani said...

In response to the writer who wants to know if it's too late to do something about past due assessments: No, it is not too late if the unit is not foreclosed yet.

Anonymous said...

If a special assessment hits during the month of the closing, is the purchaser responsible for a prorate share of that special?

Naheed Amdani said...

It depends on the terms of your contract!

Anonymous said...

I was supposed to close on a condo on 12/7/10. Two hours before the closing I got the HUD statement showing that I owed $1600 in association fees and that the bank owed $500. I told them I would not pay a penny. I did not use an attorney as all seller would provide was a clear title. In my opinion, all they have done is charge me $1600 for clear title. Which to me means, it is not a clear title. Reading your statements it looks like maybe I do owe, but I would Owe 500 and the bank 1600. Is this correct? Thanks

Naheed Amdani said...

I don't exactly see the connection between the back assessments and the clear title, as oftentimes back assessments don't appear on title at all. Under Illinois law, the buyer is responsible for up to 6 months of back assessments. You will have to do the math in your situation and see what that adds up to!

Christian said...

I have my condo which is in foreclosure status with my bank. However, the bank hasn't actually foreclosed on the property. I still live there. Should I continue paying assessments?

Naheed Amdani said...

Whether or not you continue paying assessments is an individual decision, and there may be a lot of factors playing into it. However, if you don't pay assessments, your condominium association does have the option to go to court and evict you!

Anonymous said...

Good evening I live in Florida my mortgage is current but not the HOA.The HOA wants to foreclosure.They want to keep the condo because they dont let me shortsale.Is there any law that proctet the owner?

Naheed Amdani said...

Real estate law varies from state to state. My office is based in Illinois. I suggest you contact a Florida attorney specializing in real estate to assist you!

Eric said...

Thank you for continuing to answer questions about this article.
I purchased a condo at a Sheriff Sale and the Assoc wants me to pay 6 months back assessments and parking fees.
The unit was vacated by the owner several months ago and the Assoc has been renting it out.
#1- Does the fact that they are collecting rent and more than making up for the lost Assessments change the 6 month rule?
#2- I assume the parking fee would apply to the owner's car. If he had vacated, he shouldn't be being charged a parking fee right? SO I shouldn't have to reimburse it?

Thanks

Naheed Amdani said...

Hi Eric,

Typically, the association is allowed to collect back assessments (that is, if they're otherwise legally allowed to collect them) regardless of the amount of rental income they may have received from the unit. I have not personally heard of a situation where the association has been precluded from collecting assessments because they have already been "compensated", so to speak, by rents received. Of course, this doesn't meant that it hasn't happened, or that it can't happen. Parking fees, particularly if they're considered or treated as "assessments", are recoverable as back assessments.

Eric said...

Thanks, and can they add legal and late fees to the 6 months?
I have a situation now where they filed a lien against the owner in March 2009 for $1409. My assumption was that they would have filed the lien for the full amount owed by the owner plus fees. So because the statute refers to the 6 months preceeding legal action only I thought that $1409 would be the max I would owe.
Now when I buy at auction they say I owe $4400 including attorneys fees and late fees and more assessments.

Naheed Amdani said...

Hi Eric,

I understand your concerns. Unfortunately, since I don't represent you, I cannot provide specific legal advice. I strongly suggest you contact the attorney handling the transaction on your behalf for assistance!

Eric said...

Can you say if legal fees are allowed?

Naheed Amdani said...

Hi Eric,

The statute does not specifically refer to legal fees in reference to back assessments. Having said that, the statute does not preclude legal fees either. I have seen many instances where associations have demanded, and received, payment for legal fees.

Colleen said...

We are in the process of buying a condo (that was foreclosed) and are supposed to close in a couple of weeks. Our contract states that the seller is supposed to pay all back assessments. When we got the Section 22.1 disclosure we saw that there were back assessments but our lawyer assured us that the sellers would pay them.

Today we have been asked by the seller to pay $6,000 in back assessments. Apparently, the condo association told the seller that the buyer is liable for this amount of money and our lawyer is still not sure why the association made this decision. The problem is that assessments on our unit are only $362 per month. Does the condo association have the authority to tell the seller to require us to pay 6k in assessments? Does the contract trump the law that says that buyers are responsible for 6 months of assessments before the foreclosure?

Naheed Amdani said...

Hi Colleen,

Under the Condo Act, the Buyer is liable for up to six months of back assessments. However, in many instances, the Buyer and Seller reach another agreement to facilitate the transaction. Since you are represented by counsel, I suggest you discuss this with your attorney!

Adel siriano said...

HI Naheed,

I recently bought a property from court judicial sales, have no keys and the assoc. property manager service is charging us 9,000.00 in late and special assess fees. They claim this should have been taken care of in closing - but I did not have any closing and the regulas assess for this bldg. is only 229.00 per month. do I have any legal rights here or do I have to pay to received the common keys.
Thanks,

Adel S.

booksdates said...

thx for this blog as i find it to be very helpful given my current situation, naheed. i am a licensed real estate agent in illinois and a current condo owner trying to sell my place as a short sale in the hafa program. i have until mid june per my contract with the lender to do such. if i am not able to find a buyer a deed in lieu has been suggested as an alternative. there is also a special assessment in our association that has not been paid off. my lender has agreed to paying it if it is "transferable". in my condo's by-laws i see nothing that addresses a transfer. also in the illinois condo property act i know of no such clause. my question is would it be common practice for an association to have a clause stating that in a lieu that an assessment would not be transferable? thx in advance for your insight and timely response

Naheed Amdani said...

Hi Adel,

As the buyer of a foreclosure property, under state law you are responsible for up to six months of back assessments (for the six months prior to when the association filed suit). The bank is liable for the assessments from the first day of the month after the month in which it forecloses its borrower.

What, if anything, you are liable for will depend on a number of items. You may want to contact the attorney who helped you with your purchase, since he or she is familiar with the details of your file. There may be some legal recourse available to you, but without further review, it is impossible to say.

Naheed Amdani said...

Hi Booksdates,

I'm not sure what you mean by a "transferable" assessment. I would guess that your association wouldn't mind "transferring" the assessment to your bank, so long as they get paid when the bank takes over. Most associations don't care if you pay them or your bank does or Mickey Mouse does, as long as they're getting paid! Ask your bank what they mean by "transferable".

Anonymous said...

I filled a chapter 13 a year ago and foreclosed my condo here in IL. I got a notice of sale, confirmation of sale and now i just got a letter of motion of sale? now my question is how more notices should i get before the sherrifs because from what i was told by the condo association that i am still in the post petition and liable for all the monthly assessments until they have got a noticed from the sherriff's department.. which means eviction?

I am not staying on that condo anymore and cant pay these assessments fees. I even checked up on the condo and someone is already living in there.. am i still liable to pay the assessments? thanks for your help in advance..

Naheed Amdani said...

You appear to have a number of issues going on -- bankruptcy, foreclosure, and a forcible suit, Additionally, someone else appears to be living in your condominium. You should probably speak to the attorney handling your bankruptcy (or the attorney handling your foreclosure or forcible, if it's a different attorney) for advice based on your exact circumstances.

Anonymous said...

I have a question-getting a bank foreclosed listing with a self managed unit shortly which does not seem to use attys until they have to. Assessments are 141/mo. Sheriff auction was AUG 2010. I do no think there was a legal action but do not know. Have been given a demand letter of 4220-which includes all late fees, and some plumbing fees since interior pipes between units broke-common insurance for some reason is not picking up the tab for shared piping. But-asset mgmt co was not aware of the 6 month rule-thanks for the prior info on sections for them to read. My question is-if their was a legal action prior to the sheriff sale-say in Feb 2010-who pays the assessments from Feb-thru Aug 2010? All the legalese says late assessments from file date, not auction date? Is there a difference? And does the bank now have to pay these all late fees and plumbing fees? What happens if the association will not convey unit? I am trying to get this association to use an atty so they and the bank can talk. The treasurer has recently closed 2 short sales and I cannot convince her that they are 2 distinctly different closings. Thanks for your help.

Naheed Amdani said...

You have a number of very specific questions related to your client, for which I cannot provide answers in this forum. What I can tell you is that once a lender takes over the property, it is responsible for all assessments from the first day of the month following the month in which it took over, up through the date it sells the property. If you need specific legal advice, you will have to schedule a consultation.

Anonymous said...

Hi Naheed - great blog. Very informative.

I am considering buying a single unit at an auction. I understand that I may be liable for 6 months of assessments if the association filed suit to collect them. However, 75% of the units still appear to be owned by the developer, and its lender has filed a foreclosure action against the developer.

A receiver is in place for the building and all is functioning appropriately. I am concerned about future special assessments. If only 25% of the building is owned by actual individuals (and not the developer or mortgage in possession lender), is there a way that I could prospectively get hit with massive special assessments disproportionate to my pro rata share (i.e., if the mortgagee in possession stops paying or caring for the property)? Is the developer's lender on the hook for the assessments for the units it is in MIP status over?

Thanks!

Naheed Amdani said...

It sounds like the developer's lender doesn't even own the property yet! And in the future, if the lender owns 75% of the property, how are you going to get a special assessment passed anyway?

Brad C. said...

Who is responsible for back assessments in the time period after the date of an association's judgment for possession/money and the 1st day in the month after the month in which a bank forecloses? I guess the Assn eats if the bank doesn't own yet?

Naheed Amdani said...

Technically, the association has to eat it. But in practice, I've seen associations bill the whole thing to the seller (the lender) when the unit is being sold, and lenders usually pay it. I have also seen associations that actually don't bill that time frame to anyone, and just eat the cost.

E. Michaels said...

As a property buyer at Auctions, I am seeing condo associations abuse this law regarding the 6 months unpaid assessments pretty badly.
Are you aware of anyone challenging condo associations in court on this and would you like to try on my behalf?

Naheed Amdani said...

Hi E. Michaels,

I am not personally aware of anyone challenging a condo association on this matter, although I agree that some associations do abuse the law. I don't practice this sort of litigation though.

Anonymous said...

Hi -

I'm on a condo board and past-due assessments are owed on a unit. The unit owner transfered the title to the bank pursuant to a deed-in-lieu. Is the bank now responsible for the past-due assessments?

Thanks,

Lauren

Naheed Amdani said...

Hi Lauren,

Unfortunately, no. But when the bank sells the unit to someone else, that new buyer could be liable for up to six months of past due assessments (for the period before the bank took ownership).

Anonymous said...

If the property is owned by Freddie Mac/HomeSteps, is the buyer still responsible for any unpaid assessments? Seller is trying to force us to pay 6 months assessments and legal fees.
Thank you.

Naheed Amdani said...

If the property is a condominium owned by Freddie Mac, it has probably been foreclosed, so the back assessment provision of the Illinois Condominium Property Act would apply.

Steve said...

If a person is about to go into foreclosure can that person continue to pay the association dues, or will the bank require the person to pay that money to the bank instead?

Naheed Amdani said...

Hi Steve,

It is actually quite common for a person facing foreclosure to continue paying their condominium assessments. In most cases, a condominium association can have a non-paying owner evicted a lot faster than a bank can foreclose. Usually the bank doesn't really know what the homeowner is paying or not paying besides the mortgage, taxes and insurance.

Anonymous said...

Very good information here but I have a question. I know it has been a while since you wrote the post, but you wrote "If the association never took legal action, you are not responsible for the assessment at all. In fact, I've had a few clients benefit because they were purchasing a foreclosed condo in an association that never filed suit for past due assessments."
I have just this case now and my attorney tells me that despite what the law clearly says, court decisions have been that no collection action must be filed and they are simply charging previous 6 months plus fees for the 6 months prior to sheriff sale. Are you seeing those cases?
THanks

Naheed Amdani said...

Yes, I think it's been a few years since I wrote this post. I have, in fact, noticed more and more associations get away with charging six months worth of assessments to the new buyer at closing, even if they never filed suit. However, I do still come across associations that stick to the rule, too.

Anonymous said...

Great info here! I am in foreclosure and noticed on an Illinois foreclosure website that my property was recently sold at auction. All assessment payments are current. Who is now responsible for paying the assessments? I haven't received word from the bank's attorney or the bank that it was sold - just found it myself online.

Anonymous said...

Hello Naheed! Your site is very informative. Thank you for sharing your knowledge! My question is this: my condo is in foreclosure and it was sold this month (May 2012) at auction, but I have yet to receive the legal paperwork showing a confirmation of sale (I found the auction/sale date info on my own at ilfls.com). Who is now responsible for paying the monthly assessments? All assessment payments are up to date. Thank you so much!

Naheed Amdani said...

If you have been foreclosed, the bank is responsible for paying assessments from the first of the month following the date of foreclosure. If the bank sells the property (at auction or otherwise), the new buyer becomes liable for assessments after the purchase is complete. Since you stated that assessments are paid and current, the new buyer would not be liable for six months' of back assessments. Please note, however, often the bank itself buys the property at auction.

me said...

Naheed,
what exactly is a "processing fee"? I have been completing 22.1 disclosures, HOA assessment statements etc for units in my building that have foreclosed and are now under contract. This past request that I received asked us to include on the invoice a processing fee if there is one. Is it legal for our Association to charge a processing fee? If yes, how much are we allowed to charge?
Thanks so much!

Naheed Amdani said...

Yes, associations can charge processing fees for preparing the Section 22.1 disclosure and paid assessment letter. However, in practice, most self-managed associations don't charge fees. Management companies usually do.

Anonymous said...

I am currently surrendering my condo in Chapter 13. I plan on staying here and paying all assessments and other fees until sale. However, I am told when my insurance company finds out about foreclosure they will cancel my homeowner's insurance. This does not seem fair. Will my condo then be able to evict me if I cannot find other insurance? Will this affect my bankruptcy?

Anonymous said...

Hi Naheed,
Thank you for all of your helpful information! We are a part of a very small self-managed condo association. We just received the public notice from the county clerk that one of the units is entering foreclosure. The unit owners are current on assessments at this time. Can you explain why it is important for a condo association to file an appearance?
Thank you!

Naheed Amdani said...

In response to the person asking about canceled insurance and bankruptcy, I am not quite sure why your insurance company will cancel your insurance (I assume you are talking about homeowner's insurance). As long as you are paying them, they should not cancel your insurance. In terms of whether or not your bankruptcy might be affected, you should pose this question to your bankruptcy attorney.

Naheed Amdani said...

In response to the small, self-managed condominium association, I would highly recommend you file an answer and appearance. While the bank's lien is superior to any lien you may have for unpaid assessments, by appearing in the case you can make sure any lien you may incur as a result of unpaid assessments is included in the judgment of foreclosure. If the unit subsequently sells for more than the bank is owed, you may be able to collect back assessments and fees owed (above and beyond the six months covered in this article). Moreover, you are more likely to receive copies of any paperwork filed in the foreclosure matter if you have filed an appearance.

Anonymous said...

I am in the process of purchasing a Fannie Mae foreclosure. They are asking for the 6 months dues plus other misc fees. My question is, do the banks typically pay ANYTHING towards closing on a forclusure? Right now it looks like I'm footing the bill on everything including these 6months of past due assesments.

Naheed Amdani said...

Actually, sometimes you get lucky and the banks will pay some of the back assessment or some of the other costs that a non-bank seller would pay. Other times they won't pay anything. There is no right answer to this. The attorney who is handling your closing should try to negotiate for you. However, unfortunately sometimes the answer is just no.

Anonymous said...

What about this situation: Legal action was taken, a payment plan was entered into and followed by the delinquent owner for 10 months. Then the Owner stopped paying again, still quite delinquent in assessments. So the association took legal action again and took possession of the unit. The unit could not be rented out as it was completely full of Owner's items, which Owner never picked up. Assessments therefore accumulated for over a year, and now the foreclosure is nearly final. The "six month" rule I've read about -- how does it apply in this situation? 6 months from before the first legal action was taken? The second? And does that 6 month time continue to run after the legal action --- meaning that the assessments would be from six months prior to the legal action all the way through the date of foreclosure a year later (so 18 months total?)? Any insights here would be appreciated.

Naheed Amdani said...

Regardless of which case was filed when, I think the practical answer is that the new buyer will probably be liable for a total of six months' back assessments, plus possibly legal fees and other such charges. It sounds like there is so much past due assessment owed that it won't be hard to accumulate six months' worth for the new buyer.

Anonymous said...

Hi Naheed, Where do you get your opinion that a buyer from a bank that foreclosed, and subsequently took title, is responsible for the six months. Reading the statute.. paragraph (4) only says,

"...or a purchaser who acquires title from a mortgagee shall have the duty to pay..."

Once the mortgagee forecloses, and is deeded title.. they are no longer a mortgagee, but rather, are the owner. Thus, it would not seem that a third party purchasing from "an owner" who was once a mortgagee prior to foreclosure, should have to pay.

thoughts?

Naheed Amdani said...

I understand that when the mortgagee takes title, they are then the "owner". But for the purposes of this statute, and in practice, they are considered the mortgagee, albeit the mortgagee who ended up in title. It's not my own opinion per se, rather, it's just the way the statute is generally interpreted.

Anonymous said...

Thanks for all the info. I'm the new treasurer for our condo association. We had a foreclosure sale in September 2013 and have not collected any assessments from the unit since the previous owner paid a half month in September. I sent an invoice to the loan servicer, however I am concerned it will only get paid at sale or not paid at all. Do I need to take legal action, such as filing a lien, or is attempting to collect enough? We're a small association and may have difficulty continuing to operate at our current assessment levels if we can't collect until a sale.
Thanks!

Naheed Amdani said...

Since the loan servicer appears to have taken over the property in mid-September, they should be responsible for assessments from October 1 onwards. If the property is listed, try the listing agent -- they often know how to get hold of the right person at the bank. Unfortunately I cannot give specific legal advice in this forum, but I do recommend you continue your collection efforts.

Anonymous said...

Greetings. A unit in our bldg was foreclosed and taken back by the bank. Since then, the bank owner has not paid any assessments. We eventually filed a FED action and just got an Agreed Judgment and Order of Possession. If, while we the assoc are in possession, cleaning it up and renting it out, the bank owner decides to sell the unit, is the bank owner still liable for the full judgment amt or just 6 months past due assessments? Thanks.

Naheed Amdani said...

Hi,

Banks are typically responsible for the assessment from the first day of the month following the month in which they foreclose, through the date they sell the property to a new owner. The new owner is responsible for up to 6 months of back assessments from the time period before the association filed suit against the original owner (the person who owned it before the bank did). I hope that helps!

Anonymous said...

I agree with your responses regarding the 6 month "super lien". Yet, these COA's & HOA's, still claim 6 months PLUS atty fees etc... With no knowledge to use diligent purchasers (title search & court records etc). They claim they simply sent a 30 day demand letter to previous owner constitutes "institution of an action". How successful are you to MAKE them act according to law? Thanks.

Naheed Amdani said...

Usually in the buy-sell situation, the client either wants the home or he doesn't. Most clients aren't willing to engage in a long and potentially expensive battle with an association where they do not even own a home yet. Typically, at most, the buyer requests a detailed itemization of the charges. Sometimes this takes care of the problem; as the condominium association breaks down what they are charging, they realize they cannot charge it all to the buyer after all. If that doesn't work, the buyer may negotiate with the seller (the bank) to try to get the bank to pay some of the back assessments up front to reduce the burden. And if they do not get anywhere and cannot afford the back fees, they might just cancel. I've never had a buyer sue in this situation.