Short Sale – Payment of Assessments

Question received: “We had a deal with our lender and a buyer for a short sale. We planned to pay the assessment account ourselves. No one would sign off until the Association certified the assessments were paid. When we asked for the bill we found out that the association had tacked on all kinds of fees and charges, late fees, interest, collection charges, letters, etc. and we could not afford to pay the bill. The Association would not write off the extra costs, so we couldn’t close. Do we or any of the other parties have a case against the association for invalidating the sale?”

My answer would be “probably not”. Boards have the right to charge reasonable collection costs and late fees and interest on overdue assessments. (See Civil Code Section 1366 in California.) They do not generally suspend collection efforts while an owner is negotiating a short sale. And some are less inclined than others to write off any costs. Some will consider writing off the “soft costs” – those are the costs that do not result in a charge to the HOA, but are more hesitant to write off actual costs such as charges of the collection agent, and actual losses such as assessments.

Association boards are not required to write off any of the delinquent assessments or costs that have accrued, unless the board made a mistake about the accounting. However, in some cases it is in the best interests of the HOA to do what it can to “effect” the transfer of the property. Without knowing more of the facts, I would not render an opinion of course, but the above signifies the basics. For more on collections, visit the website and checkut the Assessment Primers.

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