Delinquent assessments accounts are an ever-present problem for community associations. The problem gets worse when a Unit is lost in mortgage limbo, abandoned by an underwater unit owner and not yet foreclosed by the bank. No one is paying assessments, and the association’s hole is only growing larger. Creative and aggressive associations have been looking for ways to fill that hole, and a recent decision from a Philadelphia judge offers new hope to do just that.
The situation is familiar to many associations. Owing more on the mortgage than the unit is worth on the open market, the owner stops paying the mortgage and the assessments and abandons the unit. Although the owner expects the bank to foreclose and take the property back in foreclosure it never does. The reasons are unknown, and could range from administrative error (lost in the cracks of a bureaucracy) to a conscious decision to delay. The bottom line is that the association is not getting assessment payments from anyone, while the unit lies vacant. If only the association could take possession of the unit, it could rent it and apply the income to pay the delinquent assessments. The question is how to do that with the time, expense and risks of a sheriff sale.
Relying on the equitable powers of the court to control a debtor’s assets after a judgment is entered, a Philadelphia condominium association asked the Court to allow it to take possession of just such a unit and to apply the rent to the delinquent assessments. The unit owner and the mortgage company were notified of the association’s requests and intentions. When neither responded to the petition, the Court agreed with the association and entered an order allowing it to take possession of the unit. The association was specifically allowed to rent the unit and apply the rent to pay the assessments for the unit.
Creative and forward thinking by this association, from which others can learn.