Effective October 1, 2011, a new law (HB 1246/SB 946) in Maryland establishes that condo and homeowner associations can place a limited priority lien on the unit with dues in arrears. The lien is limited to 4 months of unpaid regular assessments for the common expenses or a maximum of $1,200. The lien total can not include late fees, interest, attorney’s fees, and other charges. The lien will take priority over all other liens except those imposed by government agencies.
This legislation will have an effect on short sales.
Although it is unlikely that all condo and homeowner associations will rush out to record these priority liens given the limitation on what can be included and a ceiling of how much, we will see some of them, and most likely condo associations, take advantage of this new law.
As a short sale specialist in Maryland, I plan to use this new law to my clients’ advantage. In a short sale situation, all liens, regardless of position, must be satisfied for clear title to transfer to the short sale buyer. However, many lenders do not authorize payments for late fees from the proceeds of the short sale. This may force the buyer or seller to cough up additional funds to make the transaction work. The new law should help with our ability to persuade the lenders with paying at least some late condo and HOA dues. At the end of the day, if they do not agree and foreclose on the property, the limited priority lien will need to be satisfied during the foreclosure process.
All short sale realtors in Maryland need to be aware of this new law and be ready to provide the information to both their clients and the lenders.
- Brought to you by Vlad Kats – a top Short Sale Expert in Maryland.