Barnett Law Firm, Ltd. Bid at Foreclosure Sale [Board Duties]

Condominium associations are sometimes named as defendants in mortgage foreclosures and sometimes they will initiate foreclosure of their lien for unpaid common expenses. The lender will name the association as a party defendant because it seeks a court declaration that the lender's lien is prior and superior to the lien of the association, and the lender wants the unit to be sold free and clear of all liens.

In cases where there is equity in the unit, the board should seriously consider bidding at the foreclosure sale. In effect, the association pays off the mortgage and satisfies its lien by taking title to the property. It then may rent out or sell the unit in order to recover the funds owing to the association. The board has the power to bid at foreclosure sales and to hold, sell, and mortgage units subject to any requirements set forth in the declaration. It should be noted that many declarations require unit owner approval in order for the board to exercise this power. Also the Act elsewhere imposes the requirement that boards first obtain the approval of two-thirds of the votes of the unit owners before acquring a unit. It is not clear in the law whether that provision would apply to bidding at a foreclosure sale.

An association should consult an attorney before bidding at a foreclosure sale because there are a number of legal issues and title concerns that must be addressed before bidding.