The Detroit Free Press recently ran an article outlining how overdue condominium association fees can hold up or derail short sales.

I have encountered this scenario on a number of occasions in my capacity as both real estate broker and real estate attorney.  What really surprised me about the article are comments to the effect that a condo association has no reason to compromise on association fees in the context of a short sale situation.  In my opinion, nothing could be further from the truth.

Section 108(1) of the Michigan Condominium Act clearly provides that association dues constitute a valid lien upon a unit, with priority over other liens except tax liens and sums unpaid on a first mortgage of record.  The association lien may have priority over a first mortgage only if a notice of lien evidencing the unpaid dues is recorded prior to the first mortgage.  MCLA 559.208.

What does this mean, you ask?  It means that if the condo association refuses to compromise on the issue of unpaid assessments in the context of short sale negotiations, it runs the risk of receiving absolutely nothing if the mortgage goes into foreclosure.  This is a huge reason for the asssociation to compromise when it comes to negotiating a short sale.  One other reason for the association to compromise is to get a new dues paying owner into the unit as soon as possible.  While foreclosure proceedings are pending, no dues are being paid, and dues cannot be collected until such time as the bank regains ownership of the property.  This could mean an additional loss of nine or more months of dues revenue to the association.

So while a condo association cannot be required to compromise its lien in the context short sale negotiations, there are valid reasons for it to do so, contrary to the information contained in the Free Press Article.

If you are in the market for a Northern Michigan condominium or other Northern Michigan property, and are interested in a foreclosure, short sale or distressed property, please feel free to contact us toll free at (877) 228-9664 or e-mail us at info@buyersbroker.biz.

If you need the assistance of a Northern Michigan Lawyer in connection with a short sale, you may contact Stefan J. Scholl, Attorney at Law, at northernmichiganlawyer@gmail.com.