The House has passed legislation sponsored by Rep. Martina White (R-Philadelphia) to help those living in condominiums and cooperative associations. It now moves to the Senate.
“My legislation, House Bill 1340, will ensure that these self-governing communities are not negatively affected by a recent U.S. Court of Appeals decision and new federal mortgage underwriting guidelines,” White said.
As a result of current mortgage underwriting guidelines, a condominium might be ineligible for mortgage financing if the number of rental units in the community exceed 50 percent.
“A community association that is declared ineligible for financing suffers dramatically from decreasing values of the units and a chilling effect on sales,” White said. “To preserve such eligibility status, many condominium associations have adopted, or are in the process of considering, amendments to their governing declarations to limit the number of rental units to below 50 percent.”
Last year, the United States Court of Appeals held that a personal judgment obtained by a community association does not preserve the statutory lien.
“This means that unless associations file lien foreclosure actions within three years of a delinquency, the lien for assessments is extinguished,” White said. “As a result, associations will resort to drastic, aggressive, and expensive foreclosure proceedings to assure continued financial viability. In turn, collections of unpaid assessments will become substantially more expensive and time consuming, with the increased costs being passed on to homeowners.”
To avoid any confusion on this issue and insure that associations will be able to comply with federal underwriting standards, the law must be amended to make it clear that the term “uses to which any unit is restricted” does not include the leasing of units.
Condominium and homeowner associations rely on unit owner assessments to pay for various obligations imposed on them by their governing documents. In most cases, these obligations entail not only maintenance and repair of unit components such as roofs and siding, but also infrastructure components, including roads, storm water management and utility systems. Continued payment of assessments, as well as the ability to collect them, is vital to these communities.