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Bench & Bar of Minnesota is the official publication of the Minnesota State Bar Association.

Association Dues Following Foreclosure

Lenders commonly overpay homeowners’ association assessments when they sell foreclosed property.  Foreclosing a first mortgage terminates the association’s lien for assessments arising prior to the date of the foreclosure sale. Under Minn. Stat. §515B.3-116(b) a new association lien equal to six months of assessments is imposed on the day following the last day of the mortgagor’s redemption period.

The former owner is personally liable for unpaid association assessments arising prior to the date of the foreclosure sale.  However, the association has no lien on the property, other than the lien for six months of association assessments. Therefore, the association cannot require the payment of the prior balance in order to clear title.

A lender selling a previously foreclosed property should verify on the closing statement that it is not being overcharged for association dues.  If there are excess charges, the lender or its foreclosure counsel should contact the association or its management company to request a corrected payoff. If the association is unwilling to provide a corrected payoff, the closing can proceed with the amount in dispute escrowed with the insuring title company pending resolution, whether by agreement or declaratory action.

Mark Petersen

Petersen PLC

Stillwater

 

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