Q: I am the treasurer of our condominium association. We have a number of unit owners who are consistently late on their condominium fees, or just plain refuse to pay until we threaten to take legal action. Is there anything we can do to convince our unit owners that they must pay their condominium fee on time?
A: One of my favorite stories is about the condominium unit owner who lived on the first floor of a high-rise building. He absolutely refused to pay his share of the common-element expenses relating to the elevator because he never used it. Although the condominium association attempted to convince him that condominium living required the collective sharing of all expenses, the unit owner steadfastly refused to pay a portion of his condominium fee. It was only after the condominium association threatened foreclosure that the payments resumed.
Prompt payment of condominium assessments by unit owners is critical to the effective management of your condominium. Consequently, the condominium laws in Virginia, Maryland and the District do not allow unit owners to escape liability for nonpayment of fees merely by waving their use of the common elements or even by abandoning their units. In each jurisdiction, a condominium's board of directors may exercise a number of options to compel payment from tardy unit owners.
Initially, it is appropriate for the board to issue a notice to the unit owner demanding immediate payment of the late assessment. If there is no response, the board may file a lien for the unpaid assessments, according to the appropriate provision in the associations bylaws. Most, if not all, condominium bylaws provide for creation of such a lien, pursuant to the condominium laws in Virginia, Maryland and the District.
The statutory procedures for execution and foreclosure of the lien, however, differ somewhat.
In Virginia, the board must file in the appropriate clerk's office a verified memorandum containing a description of the unit, the name(s) of the owner(s) of that unit, the amount of unpaid assessments currently due or past due together with the date when each fell due, and the date of issuance of the memorandum. This memorandum must be filed within 90 days of the time when the assessment becomes due. The board then must bring a suit to enforce the lien within six months of the filing of the memorandum.
Under the new condominium law in Maryland, the board must file a verified statement of lien similar to the one described earlier within two years of the date the assessment becomes due. An action to enforce and foreclose the lien must be brought within three years of recordation of the statement. Additionally, a unit owner must be given 10 days' written notice prior to the commencement of a foreclosure action.
In the District, the recordation of the condominium instruments in the land records constitutes record notice of the existence of a lien. In other words, the assessment itself is an automatic lien on the individual condominium units. As a result, the board in the District has only to record a 31-day notice of foreclosure with the Recorder of Deeds Office, with a copy sent by certified mail to the unit owner. After 31 days have elapsed, the unit may be sold at a public action.
Of course, in all of the jurisdictions, the lien may be satisfied by payment of the amount specified prior to an actual foreclosure sale or proceeding. If the association has incurred expenses or legal fees in its efforts to collect the delinquent condominium fees, most condominium bylaws require the delinqent unit owner to reimburse the association for these additional expenses. This can be a very effective tool to assist the condominium association by convincing unit owners, that if they become delinquent in their fees, they will have to pay not only the delinquency, but also the cost of collection.
There remains, however, the problem of unit owners who are chronically late with their assessment, necessitating the costly and time-consuming procedures associated with filing and foreclosing a lien to induce payment. A practice has evolved in each jurisdiction to deal with these troublemakers. Most bylaws allow the board to accelerate and collect all the remaining condominium monthly assessments for the fiscal year as part of the lien, in addition to the late assessments and other fees that may be permitted.
This practice has two significant advantages. First, the board will have to deal with a late unit owner only once every fiscal year. From that, all remaining assessments will be paid either voluntarily or through a foreclosure sale. Second, the acceleration and collection of all such condominium fees against one unit owner will teach a valuable lesson to the rest that monthly assessments must be paid promptly or the unit owner will be faced with a huge one-time bill for the entire year.
Remember to check your bylaws, however, to make sure the board has the authority to accelerate the payments. And it should be pointed out further that, even if the board has such authority, it cannot use its power in an arbitrary or selective manner. The board must establish guidelines for when and how it will accelerate--and these guidelines should be disseminated to all unit owners.
There is one final word of caution concerning resale of units. In Virginia and the District, any unit owner or purchaser of a condominium unit is entitled, upon written request, to a recordable statement from the association identifying the amount of unpaid assessments levied against that unit. Failure to furnish this information within five business days from receipt of such a request extinguishes the lien. In Maryland, the unit owner is required to provide this information to a purchaser, and the association has 20 days from receipt of the unit owner's written request for it. There is no provision in the Maryland law for extinguishing the lien if the association fails to meet the 20-day requirement. Finally, none of the jurisdictions will hold the unit owner or purchaser liable for any mistakes made by the association in providing this information.