Most condominium owners think about their condo fees or dues in connection with their association bylaws. However, there are many Michigan State laws specific to condo fees that condominium owners must also follow. These laws relate to the fact that if a condo owner does not pay their fees or dues, the condominium association (sometimes called a homeowner’s association, or HOA) may put a lien on the property that cannot be removed until the back dues are paid. Even if the condominium goes into foreclosure, back dues will accrue and must be repaid to the association before a new owner can get a clear title.
So who is responsible for paying back dues? The Michigan Court of Appeals recently issued two decisions that will have a significant impact on this question as it relates to condominium associations and their rights in connection with tax liens and foreclosing mortgage lenders.
Who Pays Condo Fees after a Tax Sale?
First, in Harbor Watch Condominium Association v. Emmet County Treasurer, the issue was whether the county treasurer had to pay delinquent condo fees owed by the former condominium owner from the proceeds of a tax sale. In that case, a condominium association in Petoskey sued the County, arguing that, just like any other party that acquires title to a condominium unit, the County should be held liable for the prior owner’s past due assessments. The County argued that they were not responsible for the delinquent condominium dues.
Ultimately, the Court ruled against the condo association for two reasons. First, it held that unlike a typical purchaser of a condominium, the County was a not a voluntary buyer. It was required to enforce its lien for back taxes under the Michigan General Property Tax Act. Second, the Court held that the allocation of the proceeds from the sale were controlled by Michigan State law, which superseded the condominium association’s documents.
However, even though the County isn’t responsible for paying delinquent dues out of the proceeds of a tax sale, this doesn’t mean the assessments aren’t still owed to the condo association. They may still go after the However but because the lien is released the association’s only remedy would against the former owner individually.
Who Pays Condo Fees after a Foreclosure?
In Wells Fargo v. Country Place Condominium Association, the foreclosing bank Wells Fargo sought to have a condominium lien discharged by the Court. The major issue in the case was “when” the lender became obligated to pay assessments.
Under Michigan Condominium law, a foreclosing bank first has to hold a sheriff’s sale. Then the borrower/condo owner has, in most cases, 6 months to “redeem” the condominium property by paying the amount bid at the sale. If the property is not redeemed, the borrower/condo owner can be evicted.
In this case, like most cases, the lender – the foreclosing bank – was high bidder. The bank argued that since it could not gain title until the end of the redemption period the bank did not owe any condo fees until the end of the redemption period.
The Court decided that since Wells Fargo’s title “related back” to the sheriff’s sale, its obligation began on that earlier date as well. The effect was that the Condo Association received 6 additional months of condo fees from Wells Fargo.
Condominium law can be confusing, and it is not always obvious what your rights and responsibilities are as a condo owner. If you have questions regarding condominium law, contact Peter Mooney at 810-235-9000 or pmooney@sfplaw.com.
