Chisue,

It might have to do with the condominium laws in Illinois. I've lived in a community that has an over-arching homeowners association and, since it contains a mixture of single family homes and attached townhouse clusters, several condominium associations for the townhouses. I was also on both the homeowners association board and the treasurer of one of the condominium association (when we lived in a townhouse). The respective attorney for each board kept stressing that the board had to take affirmative action to ensure the bylaws can be enforced. Otherwise, it is unlikely that a court would allow a bylaw that the board did not adequately attempt to enforce to be enforced later.

So, for the situation that you described, if the condo association did not take affirmative action as the fees kept adding up, I could see where they might not get any of the back fees.

In our case, we were instructed to make sure we sent out delinquent notices on a regular basis. If someone still refused to pay, then the attorney would file a lien against the non-paying property. We always gave notice that a lien was about to be filed, and the owner had a certain number of days to pay up before the lien is filed. (This was a pretty good "carrot" that usually got those that were just being difficult to pay up, since the letter now came from the attorney). I believe this might also now be a part of state law here in PA - that the association must give adequate notice of non-payment of fees to allow the owner to pay up. We could not simply file a lien without giving the owner an opportunity to pay the fees. This way, the board would get paid once the property is sold, since there is now a legal lien that must be cleared before the property can change hands.

Again, the key is the association must stay on top of the situation and take appropriate legal action if someone disregards the written notices of late payment. This can get to be rather emotional for some board members if they know the individual, or the individual has some sort of tramatic experience causing the non-payment (death of a family member, serious illness, loss of a job). However, it is also not fair to the other members of the association who are paying their dues on time for the board to NOT take appropriate action.

I understand that the condo association can file liens, BUT in the event of foreclosure their liens are secondary to the claims of the mortgage holder(s). It's unlikely there would be any 'overage' after the condo is sold in foreclosure that could be applied to the association's *secondary* claims.

I'm at a loss to know what an association can do to FORCE payment of fees before foreclosure.

If the owner SELLS and there is a lien, that's dfferent. Then the property cannot convey until the title is clear of liens -- but it seems it is different if it is a foreclosure. ???

Chisue,

You always need to take what you find on the Internet with a grain of salt; but I found this web site from a lawyer that specifically discusses foreclosure and condominium fees. If I understand what this lawyer is saying, then condo fees are not "secondary" to the mortgage holder's claim - which seems to contradict what the "expert" stated in the Chicago Tribune. However, I'm not a lawyer, nor a banker, nor a mortgage expert.

http://www.bankruptcylawnetwork.com/2008/06/30/homeowners-or-condominium-association-fees-nondischargeable-but-maybe-its-not-a-problem/

jdm_56 -- Oh yes, that's a completely different slant on it. I had thought that a lien had to be satisfied before title could convey, but the Trib's 'expert' said not within a foreclosure.

The attorney in your link is writing from the perspective of the person declaring bankruptcy. He raises yet another question for me: If the bankrupt condo owner is not liable for association fees due between the time the property enters forclosure and the time it is sold...who IS? The mortgage holder?

Thanks for trying to help me sort this out! (FWIW, our condo is in Hawaii, not Illinois.)

chisue,

HO Association liens are regulated by State statutue. In most states, you are correct that they are subordinate liens. Some states, like New York, give these liens a priority position. State statutues will also govern procedures to perfect the lien such as providing appropriate notice.

To the best of my knowledge as a banker there's not much you can do to 'force' payment.

We are a country of 'laws' & that precludes using any type of 'force' to collect payments.

In those states where Association liens are subordinate, in the event of foreclosure you are also correct that it's unlikely the Association will recover fees although there are always exceptions. There are cases where a property goes to foreclosure with sufficient equity to cover all encumbrances.

It's a risk one assumes when purchasing into any type of condo or PUD development.

/tricia

I spent 12 years on my HOA board.

We went several paths over the years.

We quit taking deadbeats to court because the courts NEVER awarded the full claim. In one case the idiot judge awarded 33% of the HOA fees over the term in question!

How he decided that our fees (he threw out the interest and ancillary late fees completely) were 67% too high is beyond me, but he REALLY emboldened that particular owner.

So, we started assessing liens, upped the monthly delinquiency fee from $10 to $25 (as allowed by law), and started charging 12% annual interest on outstanding balances (also allowed by law).

I pushed for suspension of membership privledges, including parking in the community, but the others on the board wouldn't go for that.

It's always a calculated risk as to whether you'll eventually get your money.

But, in a risking market, you virtually alwasy will.

The owner I mentioned?

Right after we "won" our court case against him, he went back to his old ways, so we filed a lien on his property.

Every 3 months we updated the lien to reflect the new, larger balance.

About 6 years after that started, he decided to sell.

By that time, the amount he had to pay the association, off the top of his profit from the sale of his house, nearly $9,000.

Boy did he scream and moan about that, but there was absolutely nothing that he could do.

As far as the lien is concerned, I think it depends on the state laws, but I THINK in some states a foreclosure won't release the lien automatically.

When the bank or lending institution goes to resell the property they have to pay the lien off.