Sewer Assessment Has Unit Owners Underwater!

A.J. from Hartford County writes:

Dear Mister Condo,

We live in a five unit condo and need to do a special assessment to pay for a new sewer connection.  The cost is going to be around $3,000 per unit when all is said and done.  The problem is that two of the unit owners are under water and are simply waiting for the bank to foreclose on their properties, so they refuse to pay the special assessment.  Is there any way or what would be the best way to get them to pay their share?  We can’t get a loan, so what happens if we can’t pay to fix it? Thanks.

Mister Condo replies:

A.J., I am sorry that your small community finds itself in such a dire financial predicament. Many banks refuse to loan money to small condos like yours because there just isn’t enough units to spread the risk around in the event of a loan default. That leaves a special assessment as your only tool to raise the needed capital for the project. It may sound a bit tricky but you might consider temporarily increasing the common fees versus levying a special assessment. The reason for this is that even though you are not more likely to collect the special assessment from the foreclosed upon units, the new unit owners (likely the banks) will be on the hook for the common fees, whereas they may be shielded from a special assessment. If this sounds difficult for you to orchestrate, may I recommend spending a little money on a community association attorney who can walk you down the proper path. There is a correct way to do this and you want to make sure that the courts are likely to side with you when the banks issue a challenge to the increased common fees. The bottom line is that the unit owners of record will need to pay. If the foreclosed upon unit owners don’t pay, that only leaves the unit owners in good standing to foot the bill. It would be nice if you could spread the burden to all units as all units will benefit from this new sewer connection. All the best!