IMPRESSION: A recent Minnesota Court of Appeals ruling served as a stiff reminder to investor-purchasers of condominium units: request of association resale disclosure certificates should be undertaken as a matter of course (in Wisconsin this is essentially the Section 703.165(4) Wis. Stat. statement of the amount of unpaid assessments).

DETAILS: In Bridge Investments, LLC v. Lowry Ridge Townhomes Assoc., LLP, A17-1221 (Minn. Ct. App. 2018) the owner of a condo unit in the Lowry Ridge Townhomes community defaulted on association payments owing over $3,500.00 in assessments.  After foreclosure proceedings, the condo was purchased by the owner’s bank at a sheriff’s sale.  Later, the defaulting owner reacquired the condo via redemption and on the same day sold the unit to Bridge Investments (“Bridge”)—a venture capital and private equity firm.  Bridge recorded its purchase with no knowledge of Lowry Ridge’s assessment lien; which was junior to the bank’s mortgage, but not eliminated by the redemption, and remained attached to the condo when sold. By this time, the outstanding balance reached over $9,000.00 prompting Lowry Ridge to record a lien for the unpaid balance, late fees, attorney’s fees, and costs.  Lowry Ridge attempted to amicably collect its debt rather than foreclose on the unit; however, Bridge felt it was not responsible for payment since it had no notice of the preexisting lien prior to purchasing the condo.
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When a mortgage company faces having its mortgage interest swept away in a quiet title action following an HOA lien foreclosure, the mortgage company comes up with all sorts of arguments as to why its mortgage should remain intact. This time, the arguments did not carry the day.

Facts.  In a 2017 Nevada case, a successful purchaser at an HOA lien foreclosure sale bought the condo for $35,000.  The fair market value of the condo at the time was $335,000. The unit purchaser filed a quiet title action against Nationstar, who held the first mortgage on the unit, seeking to extinguish Nationstar’s mortgage so the purchaser could have clear title to the unit.
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This issue arises more than one might suspect. Because of association apathy, many committees go unfilled and often even boards don’t have members.  The results of this apathy could be much different than you would expect.

Facts.  In a 2017 case, the relevant property “was subject to a 1996 restrictive covenant that required the approval by an architectural control committee [‘ACC’] before any building … could be erected.”  The ACC consisted of two named persons within the documents, one of which was dead and the other refused to act.  The owner of the property filed a declaratory judgment action seeking to have the court declare the covenant unenforceable based on impossibility of performance.  Other property owners objected, claiming the covenant could be made enforceable by modification.  The documents did not provide a means by which new members could be added to the ACC.
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A condominium association in the Milwaukee area was owed more than $2,000 in fines by one unit owner. For more than a year, the unit owner had been fined numerous times due to the same violations of the bylaws which the unit owner refused to correct.  While the unit owner paid assessments monthly, the unit owner ignored the fines and the association’s attempts to demand that the unit owner correct the violations.
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A condominium association had an owner that was uncooperative, didn’t like following rules and paid assessments on her own timeframe for more than 10 years. In the spring of 2009, another law firm started collection against the unit owner for unpaid assessments by filing a lien on the property.  During the next year and a half, the lien was foreclosed and judgment entered.  In November 2011, the property went to sheriff’s sale. At the sheriff’s sale the attorney for the association opened the bidding at $1 and the property was purchased by a third party for $2.  When the third party spoke with the unit owner, he felt sorry for her and sold the property back to her. Although the association’s attorney sought and was granted a deficiency judgment, the judgment was not collectible because the unit owner was retired and had no assets.  As a result, the association’s debt had increased to more than $22,000, which the association lost due to the purchase of the unit by the third party for $2. 
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A Wisconsin condominium association had a unit owner who was habitually delinquent in the payment of assessments. Neither the association or the property manager had ever spoken to the unit owner.  The association hired an attorney who filed one small claims action after another against the unit owner every time she became delinquent.  The association was awarded judgment each time, and was paid on the judgment debt each time through numerous garnishments  However, the attorney fees were awarded at the time of judgment, so the association was not able to recover the additional attorney fees it incurred for each garnishment.  After each garnishment the debt would again accumulate and the collection process would start over.  The unit owner was not paying assessments outside of garnishment.
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