THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, April 29, 1995 TAG: 9504270258
SECTION: REAL ESTATE WEEKLY PAGE: 14 EDITION: FINAL
COLUMN: Common Ground
SOURCE: G. Robert Kirkland and Michael A. Inman
LENGTH: Medium: 67 lines
Our 60-unit condominium has been plagued by three derelict owners who simply will not pay their dues. This has been going on for almost two years in one case and over a year in the other two cases.
We think a couple of the cases involve job problems and one or two of the units may be close to foreclosure, but it is difficult to get in contact with the unit owners to get them to tell us anything. We have obtained judgments against them but it has had no effect.
We realize that we have a lien on their units in the event that they sell, but we also know that if they are foreclosed on, our lien will be wiped out and we will never get the money. One of the units is now up to $1,800 and the other two are about $1,200 each.
The association seriously needs this money. It has come before the board that we have the right to force the sale of these units to get the money. That sounds like a good idea. Is it?
Forcing the sale of a unit to satisfy a judgment is no small undertaking. First, while your association has already obtained judgments, if you do not have a judgment, you must first obtain one in order to ``enforce the judgment'' by virtue of a creditor's sale.
You would most certainly have to employ legal counsel in order to pursue this remedy. A special commissioner would be appointed by the court to oversee the sale and a bond must be posted in order to protect the special commissioner from liability.
The sale must be advertised in the newspaper and that will cost at least $750. If there is not substantial equity in the property, you will probably not see any other bidders present at the sale other than your association representative.
All prior lien holders would have to be notified. Therefore, you must be prepared to become the owner of the unit. At that point, the association would have the right to rent or sell the unit, but would have to pay dues out of the rent received.
The mortgage company may not be agreeable to the association's taking over the loan and, therefore, you must be prepared to have the property foreclosed on by the mortgage company. That may be the best result.
In fact, prior to beginning the process of the creditor's sale, you should approach the mortgage company to indicate that you intend to take that action.
In order to protect its interest, the mortgage company may pay the dues and add the balance to the outstanding mortgage balance, which generally it is entitled to do under the terms of the mortgage instruments.
This would be more likely to happen if the mortgage payments are current because lenders do not like to engage in foreclosures; they simply like to collect the interest for which they originally bargained.
In conclusion, the creditor's sale solution is not usually the best one, but it can be a very valuable tool. It requires careful planning and advice from legal counsel in order to carry it off effectively. MEMO: G. Robert Kirkland, president of a Virginia Beach property management
consulting firm, and attorney Michael A. Inman specialize in Virginia
community association issues and are affiliated with the Southeastern
Virginia chapter of the Community Associations Institute. Send comments
and questions to them at Real Estate Weekly, 150 W. Brambleton Ave.,
Norfolk, Va. 23510. To submit questions by phone, call 446-2033; fax:
446-2531. by CNB