By Altus Legal LLC
Most property managers and boards have received notice of a unit foreclosure. In this unfortunate situation, once the association’s attorney is involved, he or she generally recommends that the association get involved in the foreclosure process. There are several benefits to your association if you choose to pursue it.
A board may never recoup association money spent on a foreclosure. However, your attorney is doing his or her duty to ensure that the board protects the association’s financial interests. Getting involved in the proceedings can lead to the association putting more money into the operating account. If the board decided to ignore the foreclosure proceedings, they may be leaving association money on the table from multiple parties.
It is possible that the attorney can help the board obtain surplus funds – a portion of the extra money available beyond what the foreclosing lender is owed. Doing so requires the association to retain its right (to the extent possible) to enforce its lien for the unpaid assessments. Remember that if there is not a surplus, most liens for unpaid assessments are wiped out by virtue of the foreclosure.
An attorney can also monitor the foreclosure and make beneficial recommendations to the association. If the unit is in arrears, the association could file a motion to collect up to six (6) months of unpaid assessments from the first third-party purchaser, or recommend leasing options for the unit if the association has possession.
While boards and managers are often reluctant to incur legal fees on foreclosure issues, trust that your attorney is recommending action for good reason.