By JACKIE NASH (Daily Reporter Staff Writer)
January 19, 2010
Legislation was introduced last week in the Ohio General Assembly to provide state condominium associations with financial flexibility - made necessary by the rising rate of condo unit abandonment when foreclosure occurs.
House Bill 408 would provide that a portion of a condominium assessment is prior to other liens on condominium units.
Rep. Brian Williams, D-Akron, one of the bill's sponsors, said he decided to work on HB 408 after he was approached by constituents about lost condo association fees. The bill simply "moves the condo fee situation up on the list of required payments" when a unit goes into foreclosure, he said.
Rep. Kenny Yuko, D-Richmond Heights, also a sponsor of HB 408, said the bill would mandate that when a condo unit goes into foreclosure, six months of community association assessments would be paid before all other liens - including the bank's first mortgage.
Condo assessments - also known as association fees - can include expenses for gas, sewer, water, electricity, lawn cutting and landscaping, snow removal, hallway cleaning and parking lot management.
"(HB 408) is a mechanism to protect the groups of people who reside together in a condo complex," Yuko said.
"Unfortunately, condominium homeowner associations have become another victim of the mortgage foreclosure crisis. When a foreclosure occurs in these communities, the remaining owners are left struggling to pay for services, maintenance and property preservation," he said.
However, HB 408 would protect community associations' solvency statewide and prevent homeowners who have not abandoned condos from being forced to operate on budgets with insufficient funds for building upkeep, Yuko added.
Assessments would not take precedence over property tax payments, under the bill, he emphasized.
Yuko said the motivation behind HB 408 came from discussing the issue with members of condo associations in his district. Due to the economy, several condo owners in his district and throughout the state have gone into foreclosure, and ceased to pay their association fees, he said.
"Whether you're living in a low-income unit or a state-of-the-art unit, you've been affected ... bottom line is, we have to protect our property values. Those property values affect the city, city services, and the programs we offer our senior citizens and our children," Yuko said.
Rep. Tom Letson, D-Warren, a co-sponsor of HB 408, agreed that a lack of association fees affects surrounding communities, and the bill would help improve neighborhood aesthetics.
"I think this is the easiest way for the neighborhood to maintain its integrity while the (foreclosure) process is working its way through," Letson said.
Kimberly Sutter, attorney at Ott & Associates Co., LPA, said she believes HB 408 would be a "victory" for Ohio community associations. However, the bill will likely receive strong opposition from the banking industry, she said.
"Many associations are experiencing an increase in delinquencies, some to the point where the association is unable to pay utility bills, or adequately maintain the common property," said Sutter.
"This kind of 'super-lien' statute has been adopted in other states across the country with great success. If nothing else, (HB 408) gives the associations a fighting chance in a system where they are often the party left at the end with unpaid debts and bills for attorney fees," she said.