We have seen a few recent developments in condominium association operations.
1. The first is a change in the Condominium Act.
An amendment that went into effect in January 2014 requires condominium associations whose annual receipts exceed $20,000 to have an annual audit by a CPA.
This requirement applies to existing condominium associations, not just those formed after the date of the amendment. It can be waived on a year-to-year basis by a vote of the majority of the members.
Before automatically seeking a waiver, the board should consider if that is wise. The association may be better served by investing in a true audit and anyone considering embezzling should have to worry if this is the year when a CPA will scour the books.
2. The second development is based on the golden rule: he with the gold makes the rule. Banks are requiring condominium associations to have fidelity insurance equal to three times their monthly assessments plus the amount of the reserve fund.
No law requires this, but lenders are risk-averse. An association facing a request for proof of that level of fidelity insurance could refuse or fight it, but it may be more prudent to get the insurance. It does not cost all that much.
3. The third development is a court ruling confirming that foreclosing lenders are responsible for condominium assessments coming due after the date of the sheriff sale. They don’t get to wait until the end of the redemption period to start paying them.
This should not be a surprise. The Condominium Act says that foreclosing lenders are not responsible for assessments due before the lender obtains title but are responsible for all assessments billed after they take title.
The foreclosing lenders get title at the sheriff sale: the sheriff issues a deed to the winning bidder, usually the foreclosing lender. If the legislature meant to have their responsibility begin upon the expiration of the redemption period it could easily have said that instead.
I have long advised associations to charge the foreclosing lender for assessments beginning with the sheriff sale. Now we have a court ruling rejecting their argument to the contrary.