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Foreclosing Lender Pays Assessments


QUESTION: I own a unit in a 30-unit condominium association. The bank has foreclosed on eight units in the complex. The manager wrote a letter to all owners stating that he needs to raise the amount of the monthly assessments because he is unable to collect assessments from the units that went to foreclosure.

Can the manager raise the assessments without the approval of the board members? Some of the owners want to change management. We need your advice.

ANSWER: In times of crisis, it is important to prioritize the issues that face the association. Your concern should be focused on collecting the assessments.

Your association may have lost quite a bit of money before the foreclosures. As soon as the lender forecloses on a unit, the lending institution then owes the monthly assessments from the date that the foreclosure took place. The manager should be sending assessment billing statements to the lender.

A title company can verify ownership after the foreclosure. Sometimes it takes diligence and a lot of telephone calls to find out the name of a responsible individual at the lending institution who will process the payments.

Using California Civil Code Section 1366 as a guide, the association board should adopt lien procedures that can be used against delinquent owners. Collection of delinquent accounts should be among the duties performed by the management company. Liens can be filed against any delinquent owner, including lending institutions. Delinquencies will increase if the board does not have an aggressive procedure in place.

The association's board of directors should be checking on the manager's collection efforts and any problems with the manager. The board may have to consider changing management companies if the company's staff is unable to follow the association's collection procedures effectively. That is a board decision, so you should discuss your management concerns with the board.

With the high number of foreclosures, it is obvious that your manager's letter to the owners was meant to inform everyone of the serious financial situation.

Now it is the board's responsibility to analyze cash flow and determine if an increase in the assessments is needed. The board can adopt an increase that is 20% higher than the previous year's budget. An increase of more than 20% requires a majority vote of the entire membership.

Boards Can't Adopt Discriminatory Rules

Q: The board of directors recently adopted new pool rules that restrict the hours that children can use the pool. Children are not allowed to swim after 7 p.m. on weekdays and 2 p.m. on weekends. Adults may swim from 8 a.m. until 10 p.m.

This rule seems discriminatory to me. There are several families living here. Since there is no one supervising the pool, enforcement is based upon complaints. The violators are fined $25 per violation.

It seems that certain people are being targeted for enforcement while others are allowed to break the rule without any penalty.

Does the board have the authority to adopt a rule that discriminates against children?

A: The board should consult the association's attorney so that they can be informed about the federal fair housing laws that prohibit age discrimination.

Children are not second-class citizens. Pool rules that go beyond health and safety issues should be carefully scrutinized. Rules that cannot be enforced fairly and consistently are not good rules.

Restricting noise in the pool is reasonable and sometimes necessary because the unit owners who live in proximity to the pool deserve to have peace and quiet. All owners' and residents' rights should be considered.

When adopting rules, the choice of words is important. "Children are not allowed to run in the pool area" should be changed to "Running is not allowed in the pool area." Obviously, it is not safe for anyone to run in the pool area, so children should not be singled out.

Hickenbottom is a community association management consultant and a founding director of the California Assn. of Community Managers. She selects questions of general interest for the column and regrets that she cannot respond to all questions received. Send questions to Condo Q&A, Box 5068, Thousand Oaks, CA 91360.

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