Condo Media - May 2012 - 19

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lender nor estate administrator cooperates, the association may seek to foreclose on the lien and would not need probate court permission. There is no specific case law on this in Rhode Island, but when I raised the issue with two different probate judges, each said that their respective courts could not stop the foreclosure if push came to shove. Keep in mind though that the legal representative is, in effect, the unit owner, and I would submit is due any notices of foreclosure under the statute.

Tax Sales
The Rhode Island Super Lien statute indicates that the association has a lien that is primary to the first mortgage on the unit, to the extent of six months’ assessments, $2,500 of attorney’s fees and up to $5,000 of collection costs. However, the assessment lien is also subordinate to tax liens by municipalities, such as property taxes. If assessments are not being paid, and the mortgage is not being paid, then chances are the taxes aren’t being paid either. What remedy does the city or town have to ensure payment? The tax man cometh in the form of a tax sale, which is similar to a bank foreclosure in some respects — to the degree that a third party comes in to pay the amount owed and gets title to the property. In the case of a bank foreclosure, the buyer gets title and there is little a unit owner may do. In the case of a tax sale, the buyer gets title to the unit by paying the amount of taxes owed. However, the buyer gets a tax sale deed from the city treasurer, in exchange for payment of the taxes. The unit owner will have one year in which to pay the taxes and get the unit back, which is called an automatic right of redemption. After one year from the date of the sale, the buyer would be able to file a petition in superior court to foreclose the original unit owner’s right to redeem the property by simply paying

the taxes back. If the taxpayer still does not pay it back, then the court will issue an order essentially giving the property to the tax sale buyer. Since the amount of taxes could be $1,000 to $10,000, you can see how this might be a very lucrative investment. Also, since the tax sale could wipe out the mortgage, very often the banks will pay the taxes on behalf of its mortgagor unit, but since that is not always the case, it makes sense to follow the proceedings closely to protect the association’s interests. Since, under the statute, the association lien for assessments is not prior to the city or town’s lien, the tax sale could also affect the assessment lien. A successful argument could be made that the petition for foreclosure or right of redemption wipes out, not only the mortgage, but the association’s lien as well. What to do? Our office has taken the position that, from the date of the tax sale, the buyer, in effect,

becomes the owner (granted, subject to right of redemption, but still the owner). So then, I have sent notices to the tax sale buyer, owner and, of course, the bank. If there is no positive response, I then initiate foreclose and have the third-party buyer at auction pay the assessments. The point is, do not wait the year and be competing with the third-party tax sale buyer to pay the assessments. I would recommend taking steps to foreclose as soon as the association receives notice of a tax sale. Again, treat the tax sale purchaser as a new, albeit conditional, owner of the property for notice and association lien foreclosure purposes. CM Frank A. Lombardi, Esq., is a partner in the law firm Goodman, Shapiro and Lombardi, LLC. Co-chair of the Rhode Island Legislative Action Committee (RILAC), he is also a member of the Rhode Island Regional Committee.

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CONDO MEDIA • MAY 2012

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Condo Media - May 2012

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