I Bought (From) the Sheriff: A Solution for Delinquent Condo Owners without Assets
Nov. 1, 2012 — Numerous condominium associations that our law firm represents have experienced difficulty in collecting past-due common charges from a significant number of condo unit-owners. Even after a condo board has sued the defaulting owner and secured a personal judgment, obtained discovery regarding the location and extent of the owner’s assets through subpoenas and depositions, and conducted searches for bank accounts / jobs / motor vehicles, many owners do not appear to possess any personal assets that the board can ask the county sheriff to attach in an effort to satisfy its judgment.
With no apparent personal assets that the board can ask the county sheriff to attach, the delinquent unit-owner continues to reside in the unit, the arrears keep growing, the lender's foreclosure action is years away from conclusion and the other hard-working unit-owners in the association are saddled with making up the deficit. What can a co-op board do to collect on its judgment when the unit-owner has no personal assets?
One solution that our clients are successfully pursuing is to have the sheriff levy on the unit and sell it at public auction, with the association buying it back at a nominal amount (e.g., $100) and renting it until the lender's foreclosure action is completed. While an association must review with its attorney whether it makes sense for the association to take these steps with regard to a specific unit, doing so may be the association's best chance to recoup its losses and stop the bleeding.
Legal Lesson
Desperate times demand desperate measures. The initial reaction of almost all associations' boards is understandably the same: They've never bought a delinquent owner's unit at a sheriff's sale before and they are concerned that doing so may entangle them in ownership responsibilities. Who pays the taxes and mortgage? What about insurance? What if the tenant is a problem?
With sound guidance from the board's attorneys, however, these concerns can often be allayed, making the purchase of the unit at a sheriff's sale the best option available. A condo board should carefully review with its legal counsel whether it makes sense to send any given unit to a sheriff's sale.
Eric Frizzell is a partner at Buckalew, Frizzell & Crevina.
Photo by Jennifer Wu
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