Unpaid assessments of previous owner are not always owed by the foreclosure buyer

In January, 2017, my client received title to a house he bought in December at a mortgage foreclosure sale. The mortgage had been recorded in 2005. Soon after, the homeowners association (HOA) demanded more than $19,000 from my client that it claimed was owed because the prior owner who was foreclosed did not pay assessments for years and the law passed in 2007 states that a buyer, including a purchaser at a foreclosure sale, is jointly and severally liable with the previous owner for all unpaid assessments that come due up to the time of transfer of title.  In early March, the client contacted me.  I reviewed the HOA documents written in 2003 and saw they had a typical clause from those years that said a buyer at a foreclosure sale is not liable to the Association for unpaid assessments owed up to the transfer of title.  The HOA declaration had never been amended and did not have language incorporation future changes in the law. A short time later, after a letter from me and a few phone calls explaining why the language in the Declaration controlled over the language in the statute, the Association agreed that my client did not owe any of the prior owner’s debt to the HOA.

Another person purchased a condominium at a mortgage foreclosure sale in December, 2016 and received title on December 28. In January, the condo association demanded the buyer pay more than $23,400 in unpaid assessments, interest, late fees and attorney fees owed since June 2011 by the prior owner.   In late March, the buyer came to me.  The 1979 Declaration of Condominium stated a buyer, including a purchaser at a foreclosure sale, was not liable for unpaid assessments of the former owner which became due prior to the acquisition of title. Nor did the Declaration have language incorporating future changes in the law and it was never amended. I then checked the account ledger (payment history) and noticed the condo association wrote off the debt in May, 2011. So I checked the title on the property and discovered as I suspected that the condominium association took title itself in May 2011 and was the owner until my client obtained his title on December 28.  A short time later, after a letter from me and a few phone calls, the condo agreed that my client owed no money from the prior owner; he owed only the assessments (and late fees) since the date he acquired the property in December, approximately $1,600.00.

These are actual cases I handled recently. Not every case has an outcome as favorable to the buyer as these two.  If you want to know how results like this can happen, or if you want assistance in determining what liability, if any, you may have if you buy property from a foreclosure sale, please contact me at mrehr@rehrlaw.com.

Michael E. Rehr, Esq.

April 17, 2017.