Habitat Magazine's Legal Talk: Michelle P. Quinn on Understanding Condominium Common Charges
Habitat Magazine Interview with Michelle P. Quinn, Partner at Gallet Dreyer & Berkey, LLP
Get in line. In a condominium, a unit owner is actually the owner of their unit and gets a mortgage from a bank to help with the purchase price. The condominium is paid common charges. When a unit owner becomes delinquent, typically, the board files a common charge lien with the city register and basically holds the place in line as a creditor.
Condos can also file a lien foreclosure action, if it becomes obvious that the unit owner cannot become current. And a lot of times, especially if there are old common charges they're just not paying, it's likely that that unit owner is also not paying their mortgage to their bank. And that's really where the condominium association needs to pay attention.
Typically, common charges are a lot lower than, say, a monthly maintenance charge in a cooperative, so it can be cost-prohibitive to bring a common charge lien foreclosure. Additionally, the bank that gave the mortgage to the unit owner has priority over any of the proceeds or any of the equity in that sale.
What about us? There are a couple of remedies, especially where it appears that a bank has not actively pursued a case. If a unit owner is in arrears and you've gotten to the point where the condominium association files a common charge lien, that should now be on their radar that they should be checking to see if an action has been commenced by the bank against the unit owner. Because then the condominium association can take an active role in that foreclosure, to make sure that the bank is actively pursuing it.
Don't wait. If years and years go by and nothing has happened, the condominium association could then file a motion with the court. The bank shouldn't be allowed to accrue the interest for that period of time. Because what happens is, if you add the principal plus the interest, plus this added time delay and interest accruing for that, then there's less and less chance that the condominium's common charge lien is going to be paid. The condominium will end up with a whole lot of nothing because the bank has not actively pursued the action.
The bottom line is there are strategies that boards can use; they don't have to just get stuck in a foreclosure procedure that is just dragging on and on.