The current economic slowdown has hit people's pocketbooks across the country. 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 short 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, however, 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 works even if the Condominium is strapped for funds. The Lender will almost always pay the Condominium fees and then add that sum to the Borrower's mortgage balance. I urge each of you to get familiar with your local statutes for common area lien collection. Getting a regularized procedure in place may be the difference between failure, or survival, for the Condominium you are living in, or trying to market units in.
Comments(4)