Under Pennsylvania statute, when real estate subject to homeowner’s association assessments or condominium association assessments is sold at sheriff’s sale, the homeowner’s association or condominium association is entitled to recover delinquent assessments/charges accruing in the six (6) months prior to the sheriff’s sale. All other assessments/charges accruing prior to the sheriff’s sale are ordinarily divested through the sheriff’s sale process.
However, under the right combination of circumstances, a condo association or homeowner’s association may be able to recover not only the statutory six (6) months of pre-sheriff-sale indebtedness, but also all other pre-sheriff’s-sale assessments/charges.
First, the real estate in question must have been purchased by a third party who has bid enough at the sheriff’s sale to create a “pool” of available funds to cover (after payment of sheriff’s costs, taxes, and the foreclosing mortgagee’s judgment) both the statutory six (6) months and all other pre-sale indebtedness due the association.
Second, the association or its counsel must file “exceptions” to the proposed sheriff’s distribution of the funds bid by the third party, indicating that after payment of sheriff’s costs and taxes, the foreclosing mortgagee’s judgment, and the statutory six (6) months, there remains enough to pay the remaining pre-sale indebtedness due the association. Provisions of the statutes governing payment of delinquent condominium and homeowners association assessments provide that if enough funds are available, the association may get paid the rest of its pre-sale indebtedness after the payment of sheriff’s costs and taxes, the foreclosing mortgagee’s judgment, and the statutory six (6) months, and ahead of any leftover funds paid to lienholders junior to the foreclosing mortgagee and to the delinquent owner-defendant.
Third, the court must sustain or grant the “exceptions.” If they are uncontested, the odds increase that they are sustained, but it is possible for them to be opposed by a junior lienholder or the owner-defendant…or even the foreclosing mortgagee.
At Stark & Stark, we can help condominium and homeowner’s associations facing sheriff’s sales of real estate to see if their entire pre-sale indebtedness can be paid through the exception to sheriff’s distribution process.