Short Sale – Bank Approval But What About Deliquent HOA Dues?
So picture this. The owner of a condo unit who is attempting a short sale owes the home owner’s associated many months worth of dues, say around $8000. The owner’s lender has approved the short sale (where it will accept less than full payment to satisfy the mortgage). The bank has even offered to pay a portion of the delinquent HOA dues, say around $3000 to have the association release its claims.
I think there is a fundamental debate about whether or not an association has the right to compromise its claim for delinquent dues effectively excusing the unit owner from paying their share of common expenses while all other unit owners are not excused.
I would suggest though, that there is a more important judgment call to make that would permit the association to compromise its claim. It is more of a business decision. It seems fair to assume that if the association plays hard ball and refuses the banks offer and holds out, it may force the bank to go ahead with its foreclosure proceedings. This will ultimately result in additional months of unpaid assessments, which may well be less than the $3,000 that was initially offered. In contrast, the association would benefit from a quicker closing in a short sale situation so that a new unit owner can take title and be obligated for payment of all assessments going forward.
Occasionally associations successfully hold their ground and say they will only accept full payment for the delinquent dues. There are also cases where the parties to the short sale agreement may find it in their best interest to simply pay the entire past due amount, rather than let the deal fall through over a few thousand dollars. However, if they are not so inclined, and the lender does need to go through the foreclosure process, the association will likely end up on the short end of the proverbial stick.