In the last couple of years, the housing industry has been in very bad shape — thanks primarily to the growing number of foreclosed properties including condo units. For this reason, many condo associations are having problems involving fee collection.
National foreclosure rate has skyrocketed to record levels ever since the subprime mortgage industry collapsed under the weight of millions of defaulted mortgages.
When a condo unit is foreclosed, it can be assumed that the condo association fees will not be paid until such time that the foreclosed property has been sold. If several condo units are foreclosed, the association will be forced to increase the fees of the other unit owners just to compensate for the loss. This obviously is not the ideal solution to this problem.
Of course, there are state laws that require the bank or the foreclosure auction winner to pay the condo association up to 6 months in back association fees once they claim ownership of the foreclosed property.
Condo associations should consult a lawyer in order to find out if there are state laws that consider condominium fees to be a primary lien. If there are such laws, then the association should inform the lender in case they are not aware.
It is only normal for condo associations to want the foreclosure sale because it will mean that they will be able to resume the collection of the association fees once the property has a new owner. Although this may sound harsh especially for the unit owner facing foreclosure, it is a reality that people have to deal with during these hard times.
Foreclosure can be prevented if troubled homeowners discuss their mortgage problems with their lenders as early as possible. Certain alternatives might be available including loan modification, special forbearance and even a short sale agreement. The important thing is for the distressed borrower to seek foreclosure help.
Cassiano Travareli has been educated in the finer points of the foreclosures market over 5 years.
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