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Home Foreclosures: 14.2.1.2 Interest, Fees, and Costs

Most state statutes provide that interest on past due assessments may be included in the association’s lien. While a number of laws merely state that interest is allowable, many laws are more specific about placing limitations upon the rate of interest.

Home Foreclosures: 14.2.1.3 Fines for Violations of Association Rules

Numerous state laws state that the lien may include not only unpaid assessments, but also may include fines for violation of the declaration, bylaws, rules, or regulations of the association.49 Certain states place limits upon the amount of fines that may be assessed.50 Connecticut courts have stated that, in an action by an association to recover fines from a unit owner, the association has the burden of proving that the fines were validly imposed.51 An

Home Foreclosures: 14.2.1.5 When Does the Lien Arise?

The scope of the lien necessarily depends upon the date that the lien arises. This date also has significant implications for determining the lien’s priority relative to other liens that may exist on the property at issue. In addition, the date a lien arises is significant in states where the governing statute provides that a lien expires or is extinguished after the passage of a certain time period.

Home Foreclosures: 14.2.1.6 Automatic Lien vs. Filing and/or Recordation Requirement

While some states provide that the association has an automatic lien for assessments from the time they become due, many states provide that a lien is either not effective or not perfected until the lien, a notice of lien, or a claim of lien, is recorded.76 But even in these states, a claim of lien may not be an absolute prerequisite to enforcing the lien where a first mortgage is not involved and the declaration was recorded.77 If a claim of lien is incorrect with respect to the elements specified

Home Foreclosures: 14.2.2 Expiration/Extinguishment of the Lien

A condominium association’s lien is subject to expiration if no action is taken upon it within a statutorily prescribed period of time. Time limitations upon bringing proceedings upon the lien are imposed in approximately two-thirds of the state statutes.

Home Foreclosures: 14.2.3.1 Introduction

The association’s ability to foreclose is necessarily restricted by commonly recognized limitations such as notice requirements and lien expiration provisions, which are included in numerous statutes. As discussed above, some laws affect the scope of the lien and provide that an association may not foreclose on a lien that consists solely of late fees99 or fines,100 and some provide that the lien includes only unpaid assessments.

Home Foreclosures: 14.2.4 Premature Foreclosure

When an association forecloses a lien pursuant to the rules set out in its declaration and in the state condominium act, an argument that foreclosure was invalid because it was premature may be difficult to sustain.125 However, even when an association seeks to foreclose a valid lien on a condominium unit and complies with the governing statute, a court may nevertheless deny a judgment of foreclosure if it considers the suit premature under the particular circumstances of the case.

Home Foreclosures: 14.2.6 Foreclosure Discouraged During COVID-19

The COVID-19 pandemic has made it harder for millions of homeowners to pay their mortgages. To reduce the risk of widespread foreclosures, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).138 The CARES Act gave some borrowers temporary protection from foreclosure, both by establishing a foreclosure moratorium and offering homeowners forbearance of mortgage payments. But about a third of all borrowers are not covered by either provision.

Home Foreclosures: 14.2.7 Foreclosure vs. Personal Lawsuit Against Unit Owner

An association may opt to bring an action for breach of contract against a unit owner in order to recover delinquent assessments or fines.145 In addition, the board of managers of a condominium association may be entitled to maintain a cause of action for possession against a unit owner in default under a state’s forcible entry and detainer or eviction statute.

Home Foreclosures: 14.3.1 Same Manner as a Lien on Real Property

Many state laws provide that an association may foreclose upon a unit in the same manner as a mortgage or deed of trust on real property.155 The intent of these statutes is presumably to simplify the procedural aspects of the enforcement of a lien for assessments against a condominium.156 Where laws governing the disposition of real property and civil procedure provide that a complaint must be filed prior to a foreclosure sale, an association may not, for example, pursue through writ of executio

Home Foreclosures: 14.3.2 Lien Recordation Requirements

Many states provide that a lien for assessments must be perfected prior to foreclosure through recordation of the lien, a notice of lien, or a claim of lien. In some states, recordation of the declaration may be sufficient to perfect the association’s lien, or the association may be afforded an automatic lien from the time the assessment becomes due.

Home Foreclosures: 14.3.3.1 Pre-Acceleration Notice

Most states impose notice requirements upon associations prior to foreclosure upon an owner’s unit. Notice requirements can be integral to the process of foreclosure, since in some jurisdictions the failure to adhere to certain prescribed practices can operate to extinguish the lien or void a foreclosure sale. From a timing perspective, requirements can range from pre-acceleration notice to postforeclosure sale notice, depending upon applicable law.

Home Foreclosures: 14.3.3.2 Notice or Statement of Delinquent Assessments Upon Request by Unit Owner

A number of state laws provide that a unit owner, along with other interested parties,164 may request a written statement from the association setting forth the amount of unpaid assessments or other charges.165 Some states require that this statement be in recordable form.166 In most of the states containing such provisions, a fee for the requested statement is authorized.167 All of the states with th

Home Foreclosures: 14.3.3.3 Notice Prior to Filing or Imposing a Lien

Some states require a condominium association to provide notice to the unit owner, prior to obtaining an actual lien, that it intends to impose a lien. California law requires that, thirty days prior to recording a lien, the association must notify the unit owner in writing and by certified mail.

Home Foreclosures: 14.3.3.4 Notice of Lien

A number of states require that once an association obtains a lien on the subject property, it must provide notice to the unit owner, and a certain time period must elapse between the time of notice and any foreclosure action.188 State laws vary as to the requisite time period between notice of the lien and foreclosure, with some states simply requiring “reasonable notice.”189 Some states require written notice or recordation of the lien, which serves as notice, but they do not specify the manda

Home Foreclosures: 14.3.3.5 Notice Prior to Sale

Because a foreclosure sale works a deprivation of property, most jurisdictions generally require notice as an element of due process.196 In addition, several state condominium laws specifically reference the necessity to provide notice prior to a foreclosure sale.

Home Foreclosures: 14.3.3.6 Post-Sale Notice

At least two states’ condominium laws specifically provide for postforeclosure sale notice. Rhode Island law requires that within seven days after the sale, the association must send an additional written notice to the holder of the first mortgage or deed of trust of record that identifies the name of the highest bidder and the amount of the bid.206 Virginia law requires that the trustee file an accounting of the sale with the commissioner of accounts and that it record that accounting.

Home Foreclosures: 14.3.4 Reasonable Rental Claims by Association During Foreclosure

A number of state condominium laws provide that in any foreclosure, the unit owner is obligated to pay a reasonable rental for the unit during the foreclosure process, if so provided in the association’s bylaws, and the plaintiff in such foreclosures is entitled to the appointment of a receiver to collect the rental payments.211 Where an association’s declaration, but not its bylaws, requires the payment of reasonable rental, and the statute specifically mentions bylaws but not the declaration, a court should deny an award of reasonable renta

Home Foreclosures: 14.4.1.1 Alternative Dispute Resolution

While a majority of state condominium acts do not specify the methods or procedures by which a unit owner may forestall or contest a lien or foreclosure, some states do specifically set forth such procedures.248 Note that a general alternative dispute resolution requirement relating to foreclosure may apply to condominium foreclosures.249

Home Foreclosures: 14.4.1.2 Civil Action

Some state acts expressly provide that a unit owner may initiate a civil action in order to contest the levying of an assessment or a lien.266 Ohio law contains an “appeal procedure” providing a unit owner who believes that the common expenses for which a certificate of lien has been filed by the association has been improperly assessed with the right to commence an action for the discharge of the lien in the court of common pleas where the condominium property is located.