Rules Changing for Vermont Condominium Foreclosures

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New court decision sees in favor of Ober Tal in Wells Fargo Bank complaint

Said attorney Bill Meub of Meub Gallivan & Larson, This is an important decision for condominium owners throughout the State of Vermont, effectively changing the way our courts look at the collection of condominium fees during foreclosure proceedings.

Condominium associations, who have long been at the mercy of banks during foreclosure proceedings, have new reason to believe that things are looking up. Prior to the decision obtained by Bill Meub of the firm Meub, Gallivan, Carter, and Larson and handed down in Windham Superior Court (State of Vermont, Civil Division, Docket No. 193-4-10), condominium owners associations frequently found themselves on the short end of the collection stick when it came to recovering monies due to foreclosures.

Banks have been taking a legal position that they are only obligated to pay six months of condominium fees as a priority over their mortgages until the confirmation of judicial sale of a unit is completed. The decision in the complaint filed by the Ober Tal Condominium Association has significantly altered the foreclosure landscape by requiring that banks pay six months prior to a condominium filing for an enforcement of their statutory lien and then everything after that date. The Windham Court’s decision effectively changed the rules for foreclosure actions regarding condominium fees and may save other Vermont homeowners’ associations millions of dollars in lost condominium fees.

Wells Fargo Bank, N.A. had argued that the language of 27A V.S.A. §3-116 limited the Ober Tal Association, in a foreclosure action brought by a first mortgage holder, to six months of unpaid assessments at the time of the confirmation order issued after the judicial sale of a condominium unit, regardless of how long it takes to get to the confirmation order after the filing of suit (which generally takes more than a year and sometimes more than two years). The Association’s position was that it is entitled to six months of delinquencies for assessments that precede the “institution of an action to enforce the [statutory assessment] lien”, plus all assessments that accrue after the institution of an action to enforce the lien.

The Windham Superior Court, in finding in favor Ober Tal, ensures that condominium owners’ associations in Vermont can look forward to financial fairness when it comes to unit foreclosures.

Meub, Gallivan, Carter, and Larson is a full-service law firm in Rutland, Vermont with offices at 65 Grove Street and in Brandon, Vermont.

27A V.S.A. §3-116 establishes a statutory lien for condominium assessments under Vermont’s Common Interest Ownership Act (the “Act”) in subsection (a) “The association has a statutory lien on a unit for any assessment levied against that unit …” (It is noted that there are two 27A V.S.A. §3-116 – one that is effective prior to January 1, 2012 and one that is effective after January 1, 2012 but the differences are not relevant to this discussion.)

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