Owning A Condo Means Shared Expenses

Ginny…Our condominium is located in North Carolina and needs new siding. The homeowners’ association board of directors has found a contractor to do the work.

There are four buildings in our development, with two buildings being worked on this year and two next year. The board has assessed every unit owner about $20,000 for the work. The contractor will be paid based on the work completed.

I am selling my unit in a building that won’t be worked on until next year. I plan to pass the assessment along to the new owner who will finance it with their loan. In the meantime, the board has decided to charge those of us who haven’t yet paid the assessment interest on the amount due even though work has not been done on our unit and will not be done for a year.

Since the work has not been done on my property, am I still liable for an assessment on future work? Can the association charge 12 percent interest upfront because I did not prepay the assessment?  Maryedith B., Ashville, NC

Maryedith…You seem confused about what it means to own a unit in a condominium development. As a condominium owner, you generally own the interior space of your unit. The exterior parts of the unit and building are considered common elements and are owned by all in common.

Even though you live in one building, you own an equal share in all of the buildings. So, if you are a 10 percent owner in the condominium development, you own 10 percent of the structures that are part of the development in common with everybody else. When the association fixes the roof or siding of the far side of the development, it is fixing your undivided interest in that part of the building.

Your assessments go toward the expenses that are shared in common with all other owners in the association. Just like the condominium insurance purchased by the association benefits all the owners, you pay your portion of that expense in common with everybody. In this instance, the siding project may be done in phases, but it’s being done to areas of the development that are owned in common by everybody.

That means that you are responsible for the assessments billed by the association for those costs just like all other association costs. You should pay that expense promptly. And the association is well within its rights to give the homeowners the option to finance the cost over time. Whether the finance charge is low or high is up for discussion, but if you don’t pay, then someone has to then borrow the money to pay the contractor for the work. Likewise, it would be unfair for one owner to pay the expense and not have others pay.

When one owner decides not to pay an assessment, the association has the right to place a lien on the unit that failed to pay that assessment. After the lien is filed, if the homeowner still does not pay, the association has the right to foreclose on that lien and with court approval sell the unit to satisfy the debt owed by the defaulting homeowner.

With all this hanging over your head, we’d recommend that you pay the assessment and make sure your unit remains in good standing with the association. If you sell in the future, you can negotiate to have the future homeowner pick up the balance of the cost of the assessment and, perhaps, sell the unit for more on the basis of the improvements that will be made to the building.

On a side note, in some situations, associations will bill for certain repairs as they do them on a unit-by-unit basis. This situation kicks in when you have a large association doing work on behalf of all of the unit owners and the item being repaired is a limited common element — a portion of the unit belonging to the unit owner and being his or her responsibility to repair.

Frequently, porches, decks, windows and unit doors are limited common elements. It’s probably easier for the association to replace all the windows in a development than have each individual owner negotiate the fix. In that situation, the association could bill each homeowner as the work is done and could bill each homeowner based on the number of windows replaced. It appears that, in your situation, the siding is an association responsibility and the special assessment is billed to everybody once the work starts no matter what building gets done first or last.

My advice, again, is to pay up, pronto. (And perhaps the association will withdraw the financing fee.)