DEFENDING CONDOMINIUM FORECLOSURES BASED ON FINES

DEFENDING CONDOMINIUM FORECLOSURES BASED ON FINES
                Because monthly common charge payments are necessary for survival of the condominium, courts have been hesitant to interfere with the foreclosure process established in the Common Interest Ownership Act (the "Act").  Without common charge payments, a condominium cannot survive. Failure to pay monthly common charges is unfair to other unit owners, who have to make up the missing income.  The Act contains a specific prohibition against a unit owner avoidance of common charge payments.
There have been almost no defenses recognized in a condominium foreclosure action for unpaid monthly common charges. Unit owners have vainly tried to withhold common charges when the condominium association has failed to maintain the common elements or has refused to casualty damage in units. Unit owner counterclaims against the association for money or a court order have been dismissed. Not only did these unit owner eventually have to pay the common charges, but also the the Association’s attorney’s fees and court costs to avoid foreclosure.  What started as a few hundred dollars in unpaid monthly common charges, easily becomes a lien on the unit for thousands of dollars.
Courts have dismissed Association foreclosures when the Association failed to complete statutory foreclosure prerequisites even if the foreclosure was for nonpayment of monthly common charges. Generally, though, it is not a good idea when unit owners withhold common charges to goad the Association.
                When the debt underlying the foreclosure consists of fines, the courts have been more lenient. Unlike common charge payments, the condominium association is not dependent upon fines for income. The courts have allowed unit owners to raise additional defenses in a foreclosure based on fines.
                The court will look at the behavior of the Board of Directors in assessing fines. Before a fine is imposed, the unit owner must be given written notice and must have a hearing. The unit owner must have the opportunity to correct the problem and defend against the Association's allegations. After the presentation of evidence at a hearing, the condominium board must vote on imposing the fine and must provide written notice to the unit owner of the board’s decision. Courts have invalidated fines when the board did not follow these simple requirements set forth in the Act. Fining a unit owner prior to or without a hearing is illegal.
                The courts have also looked at the reasonableness of the amount of the fine and how the board acted in imposing the fines.  Ordinarily, courts allow the condominium boards great discretion in rules enforcement, but the amount of the fines must be reasonable. One court negated a fine of $100 per day that continued for several months. Courts have examined the documents to see if a fine was even authorized. Even if the is authorized, the court will look to see if the rule was reasonable and whether the board acting reasonably. A condominium rule can be found to be unreasonable on its face. The court can find that the board acted unreasonably in applying a rule.
                The burden of proof is on the condominium association to prove the legality of the fine and reasonableness. A failure of the association to sustain its burden could result in a victory for the unit owner.
                This discussion is based on provisions of the Common Interest Ownership Act and condominiums created under that Act.  The actual documents of the condominium may have stricter requirements than the Act. The documents must be read carefully to see if the board followed their own procedures.  There may be limits on the amount of fines, additional notice requirements, or opportunities to correct.
                For condominiums that were created prior to the effective date of the Common Interest Ownership Act, January 1, 1984, there may be completely different requirements.  Only certain provisions of the Act apply to pre-existing condominiums. The provisions of the Act do not apply if they invalidate the existing documents of the condominiums. Prior to the Act, Condominiums were created under the Unit Ownership Act or the Condominium Act and documents created under the old acts contain many different provisions.  The board of an older condominium may have to comply with different requirements for the imposition of fines.
                An attorney can assist unit owners prior to and during hearings. Attorneys can also unit owners in removing liens and defending foreclosures.  It is important that the attorney be experienced in condominium law.