Buyers of Condominiums Should be Aware of Past Unpaid Assessments
Imagine that you buy a condominium which is subject to regular association dues on a periodic basis. You know about the dues, can pay them, and you do pay them. However, you get a notice from the association that you owe unpaid dues that were not paid by the person who owned the condominium before you did. Do you owe association dues for a period of time that you did not live in nor even own the condominium?
Statute Makes New Owner Liable
In a gift to the powerful condominium association lobby, the answer to this question is yes. Homeowners are jointly and severally liable for all dues that are owed by the previous owner. In other words, once you buy a condominium, any unpaid association dues–even those that accrued before you owned the property–becomes your obligation, and the association can foreclose on you if they are not paid.
Not only are you responsible for the previous owner’s unpaid condominium association dues, but you’re responsible for what the owner before the last owner owed. Basically, whenever the dues became unpaid, no matter when it was and no matter who owned it at the time, you as the new owner now are responsible for paying off all of the unpaid dues.
Closings and Foreclosures
In a normal real estate closing this normally is not an issue because most competent real estate closing companies or attorneys will get estoppel letters from associations, declaring what is owed by the seller (or the owner before the seller). The potential buyer can then choose whether to buy the property, knowing that if it is purchased, the back owed dues must be paid.
However, when people purchase properties at foreclosure, this becomes a problem. Normally, so long as the bank names all of the potential parties with an interest in the property, their liens or obligations are wiped out.
For example, if the prior owner had a second mortgage, and the second mortgage was not paid off from the proceeds of the foreclosure sale, the new owner does not have to pay off what is owed, and the second mortgagee can’t foreclose on the new owner.
But because of the special carve-out in the law for condominium associations, their liens for unpaid dues survive a foreclosure. Many people aren’t aware of this, and will purchase property at foreclosure, believing they are getting the property free of any liens.
When the Association is the Prior Owner
Making matters more complex is that sometimes the condominium association is the prior owner of the condominium. In these cases, the new buyer is only responsible for the dues that accrued while the previous owner owned the property, but is not responsible for dues that accrued while the association was the owner of the property.
The bottom line is to be very careful when purchasing property at foreclosures. Make sure you know if there are unpaid assessments, or you could find yourself in foreclosure for dues that accrued long before you owned the property.
Contact Jacobs Legal to speak with one of our Miami consumer rights attorneys today if you have a question about foreclosures.