I Bought (From) the Sheriff

Buckalew, Frizzell & Crevina
Eric Frizzell,
Partner

Because of the poor economy, numerous condominium associations that our law firm represents have experienced difficulty in collecting past-due common expense assessments from a significant number of condo unit-owners. Even after following all of the usual steps in the collection process that traditionally have been successful in less tumultuous financial times – such as suing the defaulting owner and securing a personal judgment for all amounts owed; obtaining discovery regarding the location and extent of the owner’s assets through information subpoenas and depositions; and conducting searches for bank accounts/jobs/motor vehicles – an increasing number of delinquent unit-owners do not appear to possess any personal assets that the association can ask the county sheriff to attach in an effort to satisfy its judgment. Yet, the delinquent unit-owner continues to reside in the unit, the arrears keep growing, the lender’s foreclosure action is years away from conclusion, and the other hard-working unit-owners in the association are saddled with making up the deficit. What can an association do to collect on its judgment when the unit-owner has no personal assets? One solution that our clients are successfully pursuing is to have the sheriff levy on the unit and sell it at public auction, with the association buying it back at a nominal amount (e.g., $100) and renting it until the lender’s foreclosure action is completed. While an association must review with its attorney whether it makes sense for the association to take these steps with regard to a specific unit, doing so may be the association’s best chance to recoup its losses and stop the bleeding.

Legal Lesson

Desperate times demand desperate measures. The initial reaction of almost all associations’ boards is very understandably the same – they’ve never bought a delinquent owner’s unit at a sheriff’s sale before and they are concerned that doing so may entangle the association in ownership responsibilities. Who pays the taxes and mortgage? What about insurance? What if the tenant is a problem?

With sound guidance from the association’s attorneys, however, these concerns can often be allayed, making the purchase of the unit at a sheriff’s sale the best option available to the association. An association should carefully review with its legal counsel whether it makes sense to send any given unit to a sheriff’s sale.