The rise in delinquent association dues is resulting in many associations taking legal action to collect the dues. If association dues are unpaid, it is likely that the association will obtain a PERSONAL JUDGMENT against the owner of the unit. Association dues do NOT attach to the property taxes and water bills do.
The association then has several options available for collecting on the judgment. They may lien other assets, garnish wages, lien the property, etc. Typically the association will lien the property and then foreclose on the lien. The association foreclosure does not remove mortgage liens from the property. Mortgage liens are senior liens to the association lien and a foreclosure only erases liens that are junior to the foreclosing lien.
After the foreclosure is complete the association has the option to pay off the mortgages and sell the property in order to recover the dues that were owed. Unfortunately for the association there is usually more debt owed on the property than it is worth. If the mortgage payments are not being made, the mortgage will eventually foreclose and take ownership of the property away from the association.
So what happens to the debt owed to the association? Nothing. It is still owed and the association may attempt to collect from owner of the unit using other methods. Even after a mortgage foreclosure, the judgement will still exist and the debt to the association will still be owed.
The lesson is, remember to pay your association dues even if you are going into foreclosure! You are personally liable for the dues!
If you are losing a property to foreclosure, you may want to consider a short sale. Typically the bank will pay up to 6 months worth of association dues out of the sale proceeds. This coudl help you avoid a personal judgment.
{ 2 comments… read them below or add one }
I have gone through foreclosure on my condo, the sheriff sale was in January, and I am now receiving a summons from the condo association to appear in court due to association fees owed. I was advised to stop paying my fee when I could no longer afford the mortgage. From the look of the summons they state I owe all fees up through the month of the sheriff’s sale. Is that correct? The amount owed stated is significantly more than that however. Is it in my best interest to call for a settlement before the court date?
Thank you.
Yes, your best bet is to try and reach some sort of settlement agreement with your association. You personally owe the dues that they are suing you for. Unfortunately many homeowners are given the same bad advice from other real estate agents and even attorneys!