Q: I have just taken over as president of a 35-unit condominium association. Along with other problems, I found that several owners are seriously delinquent in paying their monthly condominium assessments. What should we do about these delinquencies? We need the money to keep our cash flow positive.
A: Regardless of where your condominium is located, the laws of your state and the condominium documents for your project require each and every condominium unit owner to pay his or her fair share of the condominium budget. The condominium fee is usually paid on a monthly basis, and the budget should be reviewed at least yearly by the management company, the board of directors of the condominium association and the entire owners association.
In addition to the legal requirement obligating each condominium unit owner to pay the condominium fee, I am sure that you will find in your documents a provision indicating that the nonpayment of this condominium fee is a lien on the unit owners' property. However the procedures for filing and enforcing the lien vary between the District, Virginia and Maryland.
Furthermore, if you read your documents carefully, I am sure you will find a provision for collecting these delinquent fees. Basically, you have two choices. You can sue the unit owner and collect the outstanding delinquency, or you can institute foreclosure proceedings whereby the unit will be sold at a public sale, the outstanding delinquency paid out of the proceeds to the condominium association, the outstanding proceeds, if any, will be paid to the unit owner -- after deducting legal, advertising, and auctioneer fees.
I recommend the foreclosure procedure. It is faster than filing suit, and much more effective.
Review your documents carefully to determine whether you can collect legal fees from the delinquent unit owner. Most modern documents provide for this collection.
My own position is that condominium associations should not permit unit owners to fall behind in their condominium fees. If one unit owner gets away with it for a couple of months, other unit owners will legitimately claim that they too should be able to let a few months slip before the condo fee is paid.
Thus, I suggest that you work out a formal procedure with your management company and with your attorney. Friendly notices should be sent out if the unit owner is 15 to 20 days delinquent, and if the delinquency continues for another 10 days, a firm and final letter should be sent by the management company. If the delinquency continues your attorney should send a final notice, indicating that the unit will be sold at a foreclosure sale if the payment is not made.
If there are legitimate hardships, the board of directors of your condominium should establish a hardship committee to review each case. You don't want to be too hard on individuals, but the board of directors has a fiduciary duty to all of the unit owners. Thus, your procedures for collection and your hardship review formula should be fully disclosed to all unit owners in your periodic newsletters.
Incidentally, it should be pointed out that the lien for nonpayment of the condominium fee in most cases can be accelerated to include the unpaid assessment for the balance of the fiscal year. Additionally, the lien and foreclosure proceeding is applicable to collecting special assessments as well as monthly condominium fees, providing, of course, that the special assessment was proper and that sufficient notice was given of the assessment to the individual unit owner.
After all, when the unit owner first signed up to move into the condominium, he or she agreed to be bound by the rules of your association. Rules in a condominium must be strictly adhered to, if your condominium is to survive.