Tag Archives: collection of common area fees

Having Trouble with Unit Owners in Massachusetts who are behind in their Monthly Common Area Fees?–There is a Simple Way Out, and We can Help

Condominium, Short Sales & Foreclosures,

The current economic slowdown has hit people’s pocketbooks across the board. People are behind on their mortgage payments, and people are behind on their taxes, and people are behind on their monthly common area fees.

Lenders are dragging their feet on starting, and completing, foreclosures. Their data may indicate that things are slowly getting better, and if they can hold on a little, they will start to get higher prices at auction. In my opinion, this is the reason that approval of shirt sales has slowed to a trickle.

The procedures for tax sales in Massachusetts are cumbrous, and many short-staffed municipalities just do not have the person-power or the resources, to engage in a wholesale campaign to collect overdue taxes. There are political and social ramifications involved in tax sales, as well, so that the area of tax collection for overdue payments seems to be meandering along, at best.

Delinquent common area fees in Massachusetts, howvever, are a much different story. They can be collected, rather inexpensively, even if the Unit Owner is in the throes of a foreclosure. The reason for this is a 1995 change in the Massachusetts Condominium Statute, which permits unpaid common area fees to be classified as a “super lien”, so that an execution-type sale for same can remove mortgagee entirely as secured creditors.

The procedure is simple. A letter is sent to the Unit Owner demanding payment. If this is ignored, a letter is sent to the mortgage lender(s) explaining that if the arrearage is not paid, including late fees and accrued attorney fees, the condominium will hold an execution sale and sell the Unit, free of the mortgage(s) on the property. It is amazing to me how quickly Lenders respond when they are apprised of these facts.

The best part of the “super lien” process is that it costs the Condominium virtually no money. Most law firms who are knowledgeable in this area (mine included) will take on an engagement like this without even asking for a retainer for out of pocket expenses. The reason for this is that all legal fees and expenses will be paid by the Lender when they realize the consequences of inaction and settle the “super lien” with the Condominium.

If you live in a Massachusetts condominium, or have clients or customers who do, please forward this post to them.  As I have indicated, this “super lien” approach has even worked for condominiums we have represented when the Unit in question is in foreclosure status.

The Collection of Unpaid Common Area Fees–A Success Story with Legs

Condominium, ,

Recently, a client of mine contacted me with a problem. He was the sole Trustee of a six unit condominium in Massachusetts, where I practice as a title attorney with over 40 years of experience. It seems that one Unit Owner had not paid common area fees for more than a year (believe it or not) and the Condominium was starting to feel the effects of the delinquency.

After chastising my client for waiting so long to get in touch with me, I went to work. Initially i sent a demand to the Unit Owner. As expected, this was ignored. My next course of action was a title search to determine the name of the Unit Owner’s mortgage lender. Once this was determined, I notified the lender of the large delinquency, including penalties, late fees and my fees, again to no avail. Finally, i pulled the trigger with the “silver bullet”–a complaint against the Unit Owner with notice that a foreclosure sale would soon take place to obtain funds to liquidate the outstanding indebtedness.

In Massachusetts, as well as most other jurisdictions, the amount owed for common area fees, when properly handled, constitutes a “super lien”, ahead even of the first mortgage. When the lender was notified of the fact that our law firm was taking the “super lien” step, they contacted me, asked how much the total outstanding indebtedness was and sent us a check for the total amount due, plus attorneys fees.

There are some great results which were realized by this exercise:

     1. The Condominium got every penny that was due.

     2. The Condominium did not have to pay our law firm any fees for services. These were paid by the lender, as part of their steps to remove the “super lien”.

     3. In future Questionnaires from othr lenders, the Condominium does not have to indicate a large receivable from a delinquent Unit Owner. Such disclosure often impeads getting a Condominium cleared for future mortgage loans.

There are some holes here, too. If the Unit Owner continues not to pay, future actions will need to be commenced. That will leave the Condominium with a 60 day or so shortfall on common area fees. On balance, however, the Condominium’s financial position has been much enhanced by the actions we have taken, and I would urge any of you who have this type of problem in buildings you manage, or are attempting to complete sales transactions, to contact knowledgeable counsel immediately to get the Condominium on this sure-fire collection course.