ABA Family Legal Guide

Home Ownership

Shared Ownership: Condos and Condominiums

The Board of Directors

What can the board do if I can't pay the assessment?

When unit owners are doing well, they may grouse about the assessment but chances are they'll pay it. But what if a unit owner is in serious financial trouble, with several thousand dollars worth of assessments unpaid? If the owner goes bankrupt, creditors line up for their share of what's left--and the community association is normally far down the line, well behind the bank that holds the mortgage. If the association cannot obtain payment of the bankrupt owner's assessment, all the other property owners in the community will have to cover it.

One provision of the Uniform Common Interest Ownership Act, in effect in Connecticut, Alaska, and several other states, gives community associations a super-priority lien, putting them first in line ahead of the mortgage lenders for the bankrupt unit owner's share of the past six months' assessments. Numerous states are considering this provision, although in a few states the banking lobby opposes it. The Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the VA, and the FHA have all endorsed the concept as it strengthens the association's ability to pay its bills and strengthens the whole community.