Unfortunately, mortgage foreclosure actions are a regular occurrence in many of our communities. You may receive a notice of mortgage foreclosure on behalf of the Association or learn that a bank is and/or has foreclosed against a unit in your community. Generally speaking, a mortgage foreclosure sale extinguishes all liens which are second and/or junior to the foreclosing party's lien unless specifically preserved by statute. Fortunately, the Pennsylvania Uniform Condominium Act and the Uniform Planned Community Act are two of those statutes.
The Pennsylvania Uniform Condominium Act and the Uniform Planned Community Act each contain provisions which protect at least a portion of the Association's lien against a unit when the unit is the subject of a mortgage foreclosure action. The assessments which come due during the six-month period immediately preceding the date of the mortgage foreclosure sale are not extinguished and continue as a lien against the property unless such assessments are paid out of the proceeds of the foreclosure sale. Accordingly, the Association is entitled to the collection of those amounts incurred during such six-month period despite the Sheriff's Sale of the property.
As part of the collection of the Association's lien against the unit, we typically prepare appropriate notices to the Sheriff and the foreclosing attorney prior to the scheduled sale putting such parties on notice of the Association's potential lien against the unit being foreclosed upon. Once the foreclosure sale has been completed, the Association needs to reconcile the account history and determine the amount of the outstanding lien against the unit. Reconciliation of the account history can be complicated and requires careful attention to make certain that the Association is not misrepresenting the amount owed to it.
The collection of the outstanding lien depends upon whether the property was sold to a third party or taken back by the bank. Careful attention should be given in determining the new owner of record after the Sheriff's Sale to ensure that the Association is communicating with the proper party in connection with the collection of the outstanding lien against the unit. To the extent the property is sold to a third party, the Association may look to the Sheriff's office to collect the lien through the distribution process. To the extent the property is taken back by the bank, the Association may pursue the collection of the lien via the foreclosing attorney and/or directly against the bank as the new owner of the unit.
With respect to the balance of an Association's lien which is not protected by statute, such lien is extinguished against the unit only. However, the prior unit owner remains personally liable for such amount. This means that the Association may be entitled to pursue an action against the prior unit owner for the balance of the lien (i.e., the difference between the total outstanding delinquency and the six-month portion of the lien). At the very least, the Association should consider securing a judgment against such former unit owner for the balance to preserve its right to collect the same in the future.
The Pennsylvania Uniform Condominium Act and the Uniform Planned Community Act each contain provisions which protect at least a portion of the Association's lien against a unit when the unit is the subject of a mortgage foreclosure action. The assessments which come due during the six-month period immediately preceding the date of the mortgage foreclosure sale are not extinguished and continue as a lien against the property unless such assessments are paid out of the proceeds of the foreclosure sale. Accordingly, the Association is entitled to the collection of those amounts incurred during such six-month period despite the Sheriff's Sale of the property.
As part of the collection of the Association's lien against the unit, we typically prepare appropriate notices to the Sheriff and the foreclosing attorney prior to the scheduled sale putting such parties on notice of the Association's potential lien against the unit being foreclosed upon. Once the foreclosure sale has been completed, the Association needs to reconcile the account history and determine the amount of the outstanding lien against the unit. Reconciliation of the account history can be complicated and requires careful attention to make certain that the Association is not misrepresenting the amount owed to it.
The collection of the outstanding lien depends upon whether the property was sold to a third party or taken back by the bank. Careful attention should be given in determining the new owner of record after the Sheriff's Sale to ensure that the Association is communicating with the proper party in connection with the collection of the outstanding lien against the unit. To the extent the property is sold to a third party, the Association may look to the Sheriff's office to collect the lien through the distribution process. To the extent the property is taken back by the bank, the Association may pursue the collection of the lien via the foreclosing attorney and/or directly against the bank as the new owner of the unit.
With respect to the balance of an Association's lien which is not protected by statute, such lien is extinguished against the unit only. However, the prior unit owner remains personally liable for such amount. This means that the Association may be entitled to pursue an action against the prior unit owner for the balance of the lien (i.e., the difference between the total outstanding delinquency and the six-month portion of the lien). At the very least, the Association should consider securing a judgment against such former unit owner for the balance to preserve its right to collect the same in the future.
