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What Happens if a Sheriff’s Deed is Transferred? Who Pays Association Assessments?

August 20, 2014

In a recent, unpublished opinion, the Michigan Court of Appeals held that the transfer of a purchaser’s interest in property that was acquired through a sheriff’s sale is not governed by Section 111 of the Condominium Act (MCL 559.211), and therefore, the transferee is not required to obtain a written statement of unpaid assessments to avoid liability for such assessments.

In Federal National Mortgage Association v. Lagoons Condominium Association (2014 WL 1976676), RBS Citizens Bank (“RBS”), the mortgagee of a condominium unit, foreclosed on the unit and acquired title by virtue of a sheriff’s sale. RBS then transferred the unit to the Federal National Mortgage Association (“Fannie Mae”) by quitclaim deed during the redemption period. Prior to the sheriff’s sale, the condo association had filed a lien on the unit for unpaid condominium assessments. Upon transfer of the unit from RBS to Fannie Mae, the condo association amended its lien to indicate that Fannie Mae was the owner of the property, and that it was now responsible for the unpaid assessments that were chargeable to the unit prior to the sheriff’s sale, in addition to the assessments that were chargeable to the unit after the sheriff’s sale.  The condo association argued that the transfer of the property from RBS to Fannie Mae was considered a “sale or conveyance” under MCL 559.211, and that because Fannie Mae did not request a written statement setting forth any unpaid fees at least five days before the transfer, then Fannie Mae was liable for any unpaid assessments, including those that accrued prior to the sheriff’s sale.

The Court disagreed with the condo association’s argument. The Court agreed that the transfer from RBS to Fannie Mae was a “sale or conveyance” under MCL 559.211, and that it is undisputed that Fannie Mae did not request a written statement of unpaid fees.  However, the Court held that circumstances in this case were instead governed by the more specific Section 58 of the Condominium Act (MCL 559.158), involving foreclosure sales of condo units, rather than the broader MCL 559.211, which dealt with generic sales of condo units. Under MCL 559.158, RBS and its “successors and assigns” are not liable for assessments that are chargeable to the condominium unit prior to the acquisition of title.  The Court held that in this case, Fannie Mae would be considered a “successor or assign” under MCL 559.158, and would avoid any liability for assessments that accrued prior to RBS’s acquisition of title.  As indicated in our prior blog post discussing the Court’s decision in Wells Fargo Bank v. Country Place Condominium Association, and as confirmed by the Court in this opinion, RBS, and as successor or assignee to RBS, Fannie Mae, acquired title to the condominium unit as of the date of the sheriff’s sale (as opposed to the expiration date of the redemption period), such that Fannie Mae is only liable for assessments and fees that are chargeable as of the date of the sheriff’s.

Therefore, if a mortgagee or some other purchaser acquires title to a condominium unit pursuant to a foreclosure sale and seeks to transfer the property to a third party, that third party will not be liable for the unpaid assessments that are chargeable to the unit prior to the date of the sheriff’s sale – even if that third party does not request a written statement of unpaid fees and assessments, as required under MCL 559.211.

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