Foreclosures: The Effect of Foreclosures on Condominium Owners

Over the past decade, many Boston neighborhoods have seen a dramatic increase in the number of properties that have been converted from multi-family rental properties to condominiums.  This trend is particularly strong in neighborhoods like the South End, South Boston and Charlestown, and also has spread to neighboring Cambridge, Somerville and Arlington, among other Greater Boston communities.  This has proven, at least until very recently, to be a very lucrative development option for owners and property developers, while at the same time continuing to provide a great source of available housing to buyers, particularly first-time buyers, who wish to live in or close to downtown Boston.

In many of the smaller condominiums created from multi-family housing, typically consisting of two to six units, management of the affairs of the association, particularly the budget and monthly common area dues, falls to the individual unit owners rather than an outside management company.  A recent Boston Globe article points out some of the consequences that befall smaller condominium associations when owners fall behind on their monthly obligations, or more dramatically, fall behind on their mortgages and face foreclosure.  The article also points out the signs of danger, and the protection that Massachusetts law affords condominium associations when a unit owner defaults on their mortgage and is foreclosed. Delinquencies can cost neighbors

When representing buyers of condominiums, particularly in small condo associations, we caution our clients to take a careful look at the financial health of the association before moving forward.  It is equally important for owners to take an active role in the day to day operation of the condominium association, in order to be aware of issues that could affect the financial health of the association, and plan accordingly before it's too late.

Robert D. Stewart, Esq.