Condo fees and closing: Why do we care?
If you’re buying a condo, Federal Title needs to make sure condo fees are collected and paid current by the seller at closing.
This is because a new owner is personally liable for a prior owner’s unpaid fees, and unpaid fees can even be a lien against the property. Condo associations in DC, Maryland, Virginia and Florida have the right to foreclose against these liens.
In Florida the practice is for the title company to obtain what is referred to as an “estoppel” certificate from the condo association prior to closing, setting forth all moneys owed by the unit owner. Any person (other than the owner) who relies on the certificate is protected by Florida law.
Did you know that in DC, unpaid condo fees are automatically a lien against the property? The condo association does not even have to file a lien in the property records.
In Maryland, Virginia, and Florida, a lien does need to be filed in order for it to become an encumbrance against the property.
From the new owner’s perspective, whether or not there is a lien, if any amounts were owed at closing, the new owner would be responsible for those amounts, along with the prior owner. If there were a lien, the new owner would have to take title to the property subject to the lien, which lien would not be considered a commonly accepted restriction on title under the GCAAR Regional Sales Contract.
From the lender’s perspective, a lender requires us to issue title insurance insuring that its loan is in first position. If there were a condo lien or there were amounts owed that created the risk of a lien, we could not be sure that the loan would be in first position, and we therefore could not insure the title.