Your legal counsel has obtained a title report for the delinquent unit which reveals a significant amount of equity in the property. As a result of the property's considerable equity, the Association can proceed with a foreclosure action. Problem solved. The Board approves the foreclosure action and your legal counsel moves forward to secure a judgment and schedule the unit for a Sheriff's Sale. On the eve of the Sheriff's Sale, the Board instructs you to go through with the sale, but under no circumstances does the Board want to take ownership of the unit. Herein lies the problem, as these instructions are incompatible.
As legal counsel to over 200 community associations, we go to great lengths to assure that our clients have a clear understanding of the foreclosure process and the possible outcome of a Sheriff's Sale. One such outcome is that the Association takes title to the unit and recovers the delinquent assessments through resale of the unit.
Ideally, the foreclosure of the property will result in the unit owner's payment of the past due assessments or a third party will purchase the property at the Sheriff's Sale for an amount sufficient for the Association to recover all past due assessments. However, in the event that the unit owner does not pay and the matter proceeds to Sheriff's Sale, there is a real possibility that a third party may not purchase the property. So what happens?
To the extent that there is no willing third party buyer at the Sheriff's Sale, the property is "sold" to the Association by the Sheriff for "costs." The "costs" of the Sheriff's Sale vary widely from county to county, as does the timing and method of payment required from the Association. However, the Association may then proceed to recover the past due assessments and costs incurred with respect to the Sheriff's Sale of the property by cashing in on the Unit's equity through the resale of the property. This is why it is critical that the Association confirm that there is sufficient equity in the property prior to commencing a foreclosure action. Legal counsel should be consulted in order to evaluate the priority of the Association's lien for unpaid assessments and to determine if the extreme measure of foreclosure is appropriate on a case by case basis. Finally, the Board must have a clear understanding of the possible outcome of the Sheriff's Sale and be committed to seeing the process through to conclusion.