Q&A: Dealing with a Bank-Foreclosed Unit

Q If the HOA has title to a unit and a bank holds the mortgage and takes it back from the HOA is the bank responsible for all expenses?—i.e., maintenance, taxes, water and electric. The bank has allowed one unit to become uninhabitable and it has become a burden and blight to the community. What recourse do we have?

—Concerned in Clifton

A “If title to a condominium unit is transferred to a bank, the bank has all the obligations of any other unit owner under the New Jersey Condominium Act, 46:8B-1, et seq. (“the Act”),” according to Anne P. Ward, Esq., an attorney at the Newark law firm of Ehrlich, Petriello, Gudin & Plaza. “The bank will be responsible for all expenses once it takes title to a unit whether through foreclosure or any other means. Under the Act, every owner must absolutely pay its condominium obligations and cannot under any circumstances avoid its responsibility. These responsibilities obviously include monthly maintenance fees, special assessments, and any other expenses which accrue to a unit owner by virtue of condominium ownership. Given that fact, a condominium may avail itself of any and all remedies which are available to it under state law, the Act, and the condominium’s governing documents to collect fees from the foreclosing bank. Its remedies are the same as they would be against any other delinquent owner. These include: recording a lien on the unit, filing a complaint for damages against the bank, and assessing the bank with fines and late fees for overdue payments.

“You state that the unit has become uninhabitable by virtue of the bank’s neglect.

“The Act provides that:

The association shall have access to each unit from time to time during reasonable hours as may be necessary for the maintenance, repair or replacement of any common elements therein or accessible therefrom or for making emergency repairs necessary to prevent damage to common elements or to any other unit or units. The association may charge the unit owner for the repair of any common element damaged by the unit owner or his tenant.

So the Act authorizes an association to access a unit in the event of an emergency in order to prevent further damage to units or common elements. Despite the clear language authorizing access, I counsel the association not to use self-help in this situation unless the condition of the unit poses an absolutely immediate hazard to property or persons. Rather, and if the facts warrant, an association should apply to a court for an order granting it permission to enter, inspect, and remediate any situation in a unit which poses a threat. Prior court authorization will relieve an association of any liability for entry and protect the association’s interests in the long term.

“It may be that the condominium has sufficient grounds to file an application requesting a court to appoint a rent receiver for the unit. A rent receiver is empowered to administer and manage the unit properly. Your question does not contain sufficient facts to allow me to offer you an informed opinion as to the likelihood of success on this however. I recommend that the Board of Trustees consult an attorney well versed in condominium law who can advise the board on the options available to it and advise it on how it should proceed to remedy what appears to be dire situation.”     

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