Condo Media - November 2012 - 18

RHODE ISLAND N e w s

by Mary-Joy Howes, Esq.

R e g i o n a l

Complex Collections
Knowing and Applying the Rhode Island Condominium Act
ften, boards and property managers are under the impression that the association may not collect delinquent assessments in certain situations, such as short sales and probate proceedings. There is also a common misconception that if a unit has been abandoned, there is no hope of collecting delinquent assessments. In fact, the reality is that the socalled “super lien” language of the Rhode Island Condominium Act protects the association in all of the aforementioned circumstances. Understanding how to apply the statute makes all of the difference.

C A I

If the association forecloses and the bank failed to pay the priority statutory lien amount, the association must notify the bank within seven days after the foreclosure. The bank will then have 30 days to tender the full amount owed to the association. This means to protect their interest in the property, the bank must pay all assessments, as well as all attorney fees and costs incurred by the association in connection with the collection and foreclosure process — not just the maximum described above.

are often acquiring the property below market value. Any resale certificate must reflect the total due, inclusive of any legal fees due the association.

Probate
The responsibility to pay assessments still exists, even when a unit owner passes away. However, it is often not immediately clear who this responsibility passes on to — especially if the unit owner was unmarried, widowed and/or estranged from family members. Probate estates can become contested and complicated. The best course of action is to start a collection proceeding as soon as the account is 60 days behind. The association’s attorney should investigate whether a probate estate has been opened (for purposes of giving notice) and notice any lender that may have an interest. Many practitioners are not aware that the R.I. super lien statute is enforced by the Rhode Island Superior Court, which is a court of higher authority than a probate court. As a result, probate court approval is not needed to enforce the association’s lien.

Short Sales
Many times, property managers and boards hold off collection proceedings because a unit owner is “doing a short sale.” A short sale is when the lender agrees to accept less for a property than what is owed on the mortgage — and the process can be very fickle. A short sale is the classic example of something that is easier said then done. Many factors can make or break a short sale. An individual needs a signed purchase and sale agreement with a price that meets the approval of all lenders. Once this is achieved, anything can transpire during the process that can cause the deal to go sour, including, but not limited to issues found in the home inspection. The association should always have their attorney involved in the short sale process to ensure that all fees are paid at closing. The proper statutory notices should always be sent so that the association is ready to protect their lien if the short sale falls through. Often times, it can be negotiated that the buyer will pay some or all of the delinquency because they

The Super Lien
Sections 34-36.1-3.16 and 3.21 of the R.I. Condominium Act outline the lien for assessments and the right of the association to foreclose. Pursuant to the statute, six months of common area assessments are ahead of the first mortgage. This priority lien also includes reasonable attorney fees, up to $2,500 incurred in the collection and all costs of foreclosure, up to $5,000 (for a total aggregate of attorney’s fees and costs of $7,500). Costs of foreclosure include, but are not limited to, the cost of advertisement, recording fees, postage, title examinations and auctioneer fees. The priority lien does not include late fees, interest, fines or special assessments. In order for the association to recover attorney fees under the super lien, it must send the first mortgagee the required statutory 60-day notice that states the account is delinquent by at least 60 days.

Abandoned Units
An empty unit does not have to equal a delinquent unit. If a unit appears abandoned, the collection process should take a more aggressive route. An empty unit is usually characteristic of a bank foreclosure that is impending, or already consummated, or a unit owner that has surrendered their property through a bankruptcy proceeding. The association’s attorney should examine

CONDO MEDIA • NOVEMBER 2012

Condo Media - November 2012

Table of Contents for the Digital Edition of Condo Media - November 2012