When most people think of special assessments for condos they think major common area improvements. In the Northern Virginia area condo owners often see them when it is time to repair the balconies, upgrade the amenities or redo the lobbies but in today’s real estate market we also see special assessments for another reason.
Delinquencies and foreclosures are sapping associations of much needed income to keep current on the everyday bills. A few years ago condos in Arlington and Alexandria were flying off the market faster than they could be built. Unfortunately among the buyers who were excited about a new home close to the metro there was a large group of investors out to make a few dollars with a quick flip.
When the market made its dramatic turn the first properties to be hit were condos. Hundreds of flippers suddenly found themselves with units worth less than the paid for them even at pre-construction prices. So what is the first thing they stop paying? They stopped paying the condo dues resulting in large deficits for the associations. Associations in desperation to try and collect some of the dues hire attorneys to put liens on the condo in hopes of collecting some of the past due funds.
However this just adds to the money worries by larger legal bills. Putting a lien on the property isn’t going to do the association any good. When the property goes to foreclosure there isn’t any money to pay the back dues and the lender isn’t responsible for any past dues. When the property is sold the lender will pay the dues from when they owned the property but while it sits on the market the debt continues to rise.
For a buyer today looking at a condo purchase they need to pay careful attention to the association budget. They need to make sure that the see the latest budget that shows the real numbers. Most lenders will not pay a special assessment and a buyer could get a surprise after closing to find themselves with fees to be paid that they weren’t expecting. Today’s market is full of twists and turns. A special assessment because your neighbors aren’t paying their bills is a new one to watch out for.