Before Buying Condo, Should I Check Whether Previous Owner Was Paid Up on Dues and Assessments?
Make double sure the last owner pays off any debts to the HOA before closing, if you want to avoid a lien on your condominium or other unit!
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I found a great condominium unit that I’d like to buy for my winter getaway. I know that I will have to pay condominium dues when I own the unit, but do I need to look into whether the previous owner is all paid up? Will I be responsible if there are dues owing when I buy the unit?
Yes, it is an excellent idea to check that the previous owner paid all his or her dues before you purchase the unit. Whether you will be responsible for paying the previous owner’s dues, however, is another matter.
The reason you should be concerned with whether the dues have been paid or not is because it could affect the title to your unit. The governing documents for many condominium developments allow the condominium association to file a lien against an owner’s unit for unpaid association dues. You want to make sure you will own a unit with a clear title, not one with a lien on it.
Before you close on the property (finalize the purchase), you (or your real estate agent or the title company handling the closing) should request an assessment statement from the condominium association stating whether there are any unpaid dues for the unit.
The title insurance commitment you receive as a buyer will typically contain an exception from coverage for any liens on the unit for unpaid dues. The title company will likely remove this exception only if and when it receives an assessment statement showing no outstanding dues for the unit.
If the assessment statement shows unpaid dues, the title company will typically make sure the seller pays these off before closing (or ensure they are paid out of the seller’s proceeds at closing). However, if you don’t inquire about the dues, this could fall through the cracks, and you could end up owning a unit with a lien for unpaid dues on it; a problem the title insurance will not cover.
Practically speaking, whether the previous owner is personally liable might not matter. Even if the governing documents for the condominium project provide that a delinquent owner is personally liable (a liability that does not go away if the unit is sold), if the association placed a lien for unpaid dues on the unit prior to closing, and the dues remain unpaid, the lien will not go away upon a sale. If the owner wasn’t able or willing to pay the dues when he or she lived there, chances are that will remain true now. Regardless of the liability of the previous owner, if the dues remain unpaid, the association could have the right to foreclose on your unit to collect the amount secured by the lien.
Even if the association does not foreclose, a lien on your unit will create a problem with your title if you decide to sell your unit. Most likely, if a purchaser inquires into the matter (maybe because he or she read this Q&A!), the purchaser will find out about the unpaid dues and the lien and require you to pay off the lien before the closing.
So, definitely request the assessment statement before you buy. It’s far better to find out about any unpaid dues now than to deal with problems they may cause you as an owner later.