WATCH MAGIC WORDS: limited to the lesser of:

An Opinion By Jan Bergemann 
President, Cyber Citizens For Justice, Inc. 

Published May 10, 2010


As much as I understand that community associations would have needed legislative help to deal with the budget deficits created by unpaid dues and/or foreclosures, the community association Senate Bill 1196 is not the solution board members and owners living in these associations had hoped for.


CCFJ had submitted proposals that would have really helped associations dealing with the financial crisis.  But those proposals were killed by legislators like Ellyn Bogdanoff -- the same kind of legislators who protect special interest to the detriment of the owners and the constituents they supposedly represent. They push for bills that achieve factually nothing but create some feel-good measures to appease the masses.


I can understand that many owners and board members are hoping that the bill will really bring the help so many are desperately waiting for -- help promised by the sponsors and proponents of this bill. And I can understand that many of you don't like to hear that this bill with all it's legal mumbo-jumbo is only a smoke-screen that promises all kinds of help but doesn't live up to its promises.  Instead it adds provisions that will make association life even more expensive.


So before sending emotionally-laden letters showing that you didn't understand the meaning of the provisions of this bill, please switch on your brain and read carefully what the wording really says:

1245 718.116 Assessments; liability; lien and priority;

1246 interest; collection.— 

1247 (1) 

1248 (b) The liability of a first mortgagee or its successor or 

1249 assignees who acquire title to a unit by foreclosure or by deed

1250 in lieu of foreclosure for the unpaid assessments that became 

1251 due before prior to the mortgagee’s acquisition of title is 

1252 limited to the lesser of

1253 1. The unit’s unpaid common expenses and regular periodic 

1254 assessments which accrued or came due during the 12 6 months 1255 immediately preceding the acquisition of title and for which 

1256 payment in full has not been received by the association; or

1257 2. One percent of the original mortgage debt. The

1258 provisions of this paragraph apply only if the first mortgagee

1259 joined the association as a defendant in the foreclosure action.

1260 Joinder of the association is not required if, on the date the

1261 complaint is filed, the association was dissolved or did not

1262 maintain an office or agent for service of process at a location

1263 which was known to or reasonably discoverable by the mortgagee.


Actually, as you can see (colored) the wording of the existing statute has only changed in two places:
1.) The words prior to were replaced with before (Line 1251)

2.) The number of months was changed from 6 to 12. (Line 1254)


The words: limited to the lesser of: were not changed -- and that really are the MAGIC WORDS in this provision. 


What didn't change was the important part: One percent of the original mortgage debt. Whatever the unpaid maintenance dues amount to in 12 months prior to the acquisition of title, the bank is only responsible for up to 1% of the original mortgage debt. The number of months could have been changed to 24 -- but the association still wouldn't have gotten one dime more than before this bill was enacted.


So, let's stop praising banks/mortgage companies and the sponsors of this bill for "allowing" the change of the numbers of months in the bill. Not only didn't you get anything "extra" -- the money the association will receive after the mortgage-holder took possession of title -- you are misled on purpose, hoping will you believe the propaganda to support the bill.


Never forget: Banks and mortgage companies caused the breakdown of our real estate market, thereby causing the associations to suffer huge budget deficits. 


Just try to figure out what your association coffers will really gain if this bill is enacted.


Easy mathematics

Multiply your monthly maintenance dues by 6 and by 12. 

Take 1% of the original mortgage of the unit in foreclosure.

Compare the numbers. If the amount of 1% of the original mortgage is higher than your monthly maintenance dues for 6 months, you are a winner. But I can promise you, just very few associations will be that lucky!


Here are two examples of pretty common middle-class condominiums:

Monthly Dues Monthly Dues x6 Monthly Dues x12 Original Mortgage 1% of Original Mortgage Gained by change of wording of Statute:
$ 356.00 $ 2,136.00 $ 4,272.00 $ 200,000 $ 2,000 $ 0.00

$ 516.00

$ 3,096.00

$ 6,182.00 

$ 300,000

$ 3,000

$ 0.00

And if you live in one of the older, lower-priced condominiums, don't even try to do the math -- you are not getting a dime more than before.


In many of the foreclosure cases we have seen in the past -- with the old wording -- banks paid associations a lot less than 6 months of maintenance dues after the foreclosure took effect. In case you don't know:  Currently, bank foreclosures often take 2-3 years -- not months. And banks know full well: The longer they stall the foreclosure process, the less is their liability toward the association. Every month they succeed in stalling the foreclosure is one less month they have to pay maintenance dues.


In order for you to gain any advantage from this provision in the bill, you need to live in a very high-priced condo (where owners took out huge first mortgages to buy the unit) with very low monthly maintenance payments.


And that only happens in fairy tales or in sales advertising of desperate developers.


I know you hate to hear it: But all the promises of "relief" you heard from sponsors and proponents of Senate Bill 1196 are nothing but empty promises, spread in the hope that boards and owners wouldn't understand the real meaning of the changes created by passing S 1196.


Considering that our legislators like to give bills a fancy name, maybe this would have been the appropriate title for Senate Bill 1196: