Government Auction Listings

F.G. (NY): “The economic news today is filled with condominium foreclosures. Will my condominium association be affected too? What can be done?”

Dear F.G.: Foreclosures on condo owners are like predators stalking their prey. They are at an all time high in over 20 years, especially in the big cities. Builders going out of business and buyers that bite off more than they can chew share equally in foreclosures. Condominium foreclosures are becoming a fact of life because people’s financial houses are in complete disarray due to general economic conditions or loss of income. This is more common than most would have you believe.

If mortgage payments are not made by the current owner, a foreclosure may occur. The bank or lending institution will sell the unit at below market value. This is devastating if it happens to you.

Banks and mortgage lenders must get some money back through foreclosure because of the lack of payment by the owner. Occasionally, a bank or mortgage lender may allow someone else to make the payments and move into the condominium.

It can be very painful for condominium associations when too many owners lose their units to foreclosure. Building maintenance, property insurance, utilities, landscaping, and other amenities that are shared in common may be reduced. This is not good news for homeowners.

Borrowing money from a bank or from the association’s reserve, reducing contributions to reserves, reassessing costs, renegotiating service contracts, and delaying capital expenditures are some of the actions that the Board of Directors can take. Obviously, these actions are not very palatable to the owners. Cutting back on amenities, increasing monthly assessments, and levying special assessments usually affect owners immediately.

The Board may offer to waive late fees and penalties to help owners catch up on delinquencies. It is not unusual for condominium associations to assess owners from $10,000 to $30,000 per unit to make up for the shortfall. The Board can offer payment plans or loans to the owners.

There are some actions an association cannot take. They cannot abandon their fiduciary responsibility just because the funds are inadequate, and they cannot abandon the effort to collect delinquencies.

When a condominium association forecloses on a unit, the payments will cease. The bank or mortgage lender may accept a deed to the property from the association in lieu of a foreclosure. This could result in a faster sale of the unit to a new owner. The top priority is to get someone into the condominium who will pay the assessments.

The time of selling condominium properties for profit to interested buyers has changed. Even great bargains do not bring the foreclosure stalkers (politely called investors) out in bunches at foreclosure auctions. The day is gone when associations recovered all their money – plus making a profit that financed the new landscaping at the front sign.