What happens if condominium association goes bankrupt?
Richard White—Condominium property manager
08 February 2009
Q. If our condominium were to go into bankruptcy, what would happen to
the condominium owners who are current on all assessments and repairs
and own our condominiums in full with no mortgage? Would we still be
able to live in our condominiums?
A. Usually the bankruptcy courts will not accept an association
bankruptcy. Their feeling is that all the board needs to do is raise
the fees. But consider a worst-case scenario.
Say more than half of your homes went into foreclosure and the fees
were just overwhelming for the remaining owners. It means that none or
few of your association services would be provided, no insurance, no
repairs and no operations.
You could not sell your home for a fair-market value, and most banks
would not provide the buyer with a mortgage if you could find a buyer.
In my many years of management, I have known of only one condominium
that successfully declared bankruptcy. There maybe others, but very few
have been successful. It is not really an option and you would not want
to own in such a community. You need to get out and try to persuade
your neighbors to help the board to solve the problem.
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