Can an owner avoid paying assessment if they sell their unit before they pay?

Started by RonW7 • 13 replies • 1630 views

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RonW7 (Ohio)
Posts: 122

Posted:

We have an assessment pending for a unit owner due to excessive use of common facilities (excess water use). They are closing on their unit in a few days. Can they somehow find a way out of paying the assessment? Would we end up having to assess the buyer after the closing? The current owner is paid in full for the year. Will we be able to withhold the assessment from the refund that they will be due? How do we go about this?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By RonW7 on 07/01/2014 3:00 PM
We have an assessment pending for a unit owner due to excessive use of common facilities (excess water use). They are closing on their unit in a few days. Can they somehow find a way out of paying the assessment? Would we end up having to assess the buyer after the closing? The current owner is paid in full for the year. Will we be able to withhold the assessment from the refund that they will be due? How do we go about this?

Why have I never heard of an assessment against a specific unit?

I am not nor do I play a lawyer.

To me, something "pending" has not happened thus it is not something that needs addressing like paying it.

GlenL (Ohio)
Posts: 5,491

Posted:

Ron first do your documents give you the right to fine homeowners for excess water use. Second did you follow the steps under ORC to have a hearing whether or not the homeowner appeared to fight it. Third is the assessment against the unit or the owner, if the owner then I would assume you would need to sue the owner in small claims and hope to get a judgement or I suppose you could lien them. If it is to the unit then I suppose if you can get the lien filed before the closing you might get the money at closing or you will have to seek it from the new owner. I can think of nothing that says welcome to the community as an unexpected assessment.

I'm sure the HOA had to fill out a form for the sale listing whether there were any pending assessments etc. If this wasn't included, then I would say write it off as bad debt unless we're talking thousands of dollars.

Studies show that 5 out of 4 people have problems with fractions

GlenL (Ohio)
Posts: 5,491

Posted:

Quote:

Posted By JohnC46 on 07/01/2014 3:24 PM
Why have I never heard of an assessment against a specific unit?

I am not nor do I play a lawyer.

To me, something "pending" has not happened thus it is not something that needs addressing like paying it.

John, I don't know if it is an Ohio thing or not but our CC&R's written in the early 90's gave the Board the power to special assess homeowners to cure violations including excessive utility use. To my knowledge it was only used against a couple of homeowners one who kept washing his car as in multiple times a week and one who had some psychological need to wash the walkways every day. Then in 2005 Ohio gave Boards the power to fine rendering the power to SA moot.

Studies show that 5 out of 4 people have problems with fractions

TimB4 (Tennessee)
Posts: 21,059

Posted:

Ron,

I'm not sure why the Association would be refunding any monies.

Typically, at closing, the buyer will pay the seller for any prepaid expenses that they were getting as part of the closing costs. This is calculated by the closing company contacting the Association and asking what the assessments are, how are they paid (monthly/quarterly/etc.) and what is the balance due. At least, this is how it's done in VA.

The only State I am aware of that the buyer assumes the Association debt of the seller is FL. Typically, the buyer starts over on the day the paperwork is finalized.

My suggestion, which may or may not be able to be accomplished based on your governing documents and applicable State laws, is to apply all charges to the credit balance of the account (expecting that assessments are paid monthly).

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I am not nor do I play a lawyer.

I do not see an assessment and a fine as the same thing.

As an example. In some states one can not lien, foreclose, etc. based on a fine yet they can based on unpaid dues and/or assessments.

I also have issues if whatever is capricious like excess water usage but nor defined how much is excess and what is the penalty.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By RonW7 on 07/01/2014 3:00 PM
Will we be able to withhold the assessment from the refund that they will be due?

What refund do they have due?

Escaped former treasurer and director of a self managed association.

GlenL (Ohio)
Posts: 5,491

Posted:

Ron typically pre-payment of dues is included in the sales contract so if I bought the unit from Tim, Tim would include the prepaid assessments as part of the deal.

But before everyone gets their panties in a twist, just how much is the fine that you're afraid the scofflaw is going to get away with?

Studies show that 5 out of 4 people have problems with fractions

RonW7 (Ohio)
Posts: 122

Posted:

Quote:

Posted By GlenL on 07/01/2014 4:25 PM
Ron first do your documents give you the right to fine homeowners for excess water use. Second did you follow the steps under ORC to have a hearing whether or not the homeowner appeared to fight it. Third is the assessment against the unit or the owner, if the owner then I would assume you would need to sue the owner in small claims and hope to get a judgement or I suppose you could lien them. If it is to the unit then I suppose if you can get the lien filed before the closing you might get the money at closing or you will have to seek it from the new owner. I can think of nothing that says welcome to the community as an unexpected assessment.

I'm sure the HOA had to fill out a form for the sale listing whether there were any pending assessments etc. If this wasn't included, then I would say write it off as bad debt unless we're talking thousands of dollars.

Yes, it does give use the right to levy enforcement for excessive use of any utility paid for by the association. I also did indeed inform the owner of their right to a hearing as required by 5311.081 of the ORC.

The owner is paid in full, so we will apply the excessive use charge to the paid balance. I am assuming the buyer would still owe for that unpaid portion of the dues. I also don't know if it's to the unit vs. to the owner. I guess I was just making assumptions. I also did fill out a form for the lender just today advising of the assessment. We'll see how this plays out.

RonW7 (Ohio)
Posts: 122

Posted:

Quote:

Posted By GlenL on 07/01/2014 5:42 PM
Ron typically pre-payment of dues is included in the sales contract so if I bought the unit from Tim, Tim would include the prepaid assessments as part of the deal.

But before everyone gets their panties in a twist, just how much is the fine that you're afraid the scofflaw is going to get away with?

It's $612.30. That's not really a pantie-twisting amount (and typing out "pantie" made me cringe, btw), but it's not a small amount, either. We're an HOA with very little money, so that's about an extra $2.55 that we'll have to tack on to everyone's monthly fee for all of 2015. Doesn't sound like much, but our residents don't take kindly to increases period, so it's something I'd like to avoid.

RonW7 (Ohio)
Posts: 122

Posted:

Quote:

BTW, as I mentioned in an earlier post, we'd most likely end up taking the assessment from the prepaid balance which would mean the buyer would still owe for the remaining months of the year. We technically wouldn't be special-assessing the new owner so much as normal-assessing him.

RichardP13 (California)
Posts: 1,767

Posted:

Ron

The assessment that is levied is against the property, not the owner, much as placing a lien against the PROPERTY, not the owner.

If the assessments are paid through the end of the year, then through escrow the amounts should be credit. It should be debit and credit to the HUD-1 settlement statement.

If there is a fine against the seller, that is a separate issue that must be worked out between the seller and the association.

GlenL (Ohio)
Posts: 5,491

Posted:

Well then you might just luck out because Ohio law provides that unless your documents prohibit it the monies he paid can be applied to fines:

5311.18 Lien for common expenses.

(2) Unless otherwise provided by the declaration, the bylaws, or the rules of the unit owners association, the association shall credit payments made by a unit owner for the expenses described in divisions (A)(1)(a) and (b) of this section in the following order of priority:

(a) First, to interest owed to the association;

(b) Second, to administrative late fees owed to the association;

(c) Third, to collection costs, attorney's fees, and paralegal fees incurred by the association;

(d) Fourth, to the principal amounts the unit owner owes to the association for the common expenses or penalty assessments chargeable against the unit.

Studies show that 5 out of 4 people have problems with fractions

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Personally, I would call the realtor and tell them about the assessment and be prepared to provide an invoice immediately. Chances are it will be deducted from the closing costs. No one wants to deal with lawsuits after a sale.

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