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Pennsylvania House of Representatives
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House of Representatives
Session of 2015 - 2016 Regular Session

MEMORANDUM

Posted: June 5, 2015 02:30 PM
From: Representative Martina A. White
To: All House members
Subject: Amendments to Title 68 Clarifying Liens for Assessments and Amendment Declarations
 
In the near future I plan to introduce legislation amending the Pennsylvania Uniform Planned Community Act (UPCA) and the Uniform Condominium Act (UCA) under Title 68 (Real and Personal Property), which governs planned communities, condominium associations and cooperative associations. An estimated one-quarter of the Commonwealth’s population lives in upwards of 12,000 such associations. My legislation will ensure that these self-governing communities are not affected negatively by a recent U.S. Court of Appeals decision and new federal mortgage underwriting guidelines.

Details of the legislation include:

Amendments to Section 3219 (d) and Section 5219 (d) of the Title 68 Acts – Amendment of Declaration

As a result of current mortgage underwriting guidelines, a condominium might be ineligible for mortgage financing if the number of rental units in the community exceed fifty (50%) percent. A community association that is declared ineligible for financing suffers dramatically from decreasing values of the units and a chilling effect on sales. Therefore, to preserve such eligibility status, many condominium associations have adopted, or are in the process of considering, amendments to their governing declarations to limit the number of rental units to below fifty (50%) percent.

Amendments to declarations governing condominiums and planned communities are authorized under the Acts upon an affirmative vote of sixty-seven (67%) percent of the unit owners. However, unanimous consent is required under the Acts if, among other things, the amendment changes the “use to which the unit is restricted.”

Most practitioners agree that an amendment limiting the number of rental units permitted in a community association does not change “the use” of a unit as the unit has been, and will remain, used for residential purposes. However, to avoid any confusion on this issue and insure that associations will be able to comply with federal underwriting standards, the Acts must be amended. These amendments would make it clear that the term “uses to which any unit is restricted” does not include the leasing of units.

Amendments to Section 3315 (d) and Section 5315 (e) of the Title 68 Acts – Lien for Assessments

Condominium and homeowner associations rely on unit owner assessments to pay for various obligations imposed on them by their governing documents and the Acts. In most cases, these obligations entail not only maintenance and repair of unit components such as roofs and siding, but also infrastructure components, including roads, storm water management and utility systems. Continued payment of assessments as well as the ability to collect them, is therefore, vital to these communities.

To assure continuous funding, the above-noted sections of the Acts impose upon each unit a “lien for assessments”. This statutory lien serves as an effective mechanism to promote the payment of assessments and as appropriate security in the event of a serious delinquency. However, most often, associations seek to recover unpaid assessments by obtaining a personal judgment against the delinquent unit owner(s) rather than foreclosing on the statutory lien as a bank or other financial institution would foreclose on a mortgage. Such a collection procedure is much less expensive than a foreclosure action and enables the homeowner to retain ownership of his or her home.

Last year, the United States Court of Appeals held that a personal judgment obtained by a community association does not preserve the statutory lien. This means that unless associations file lien foreclosure actions within three years of a delinquency, the lien for assessments is extinguished. As a result, associations will be required to resort to much more drastic, aggressive, and expensive foreclosure proceedings to assure continued financial viability. In turn, collections of unpaid assessments will become substantially more expensive and time-consuming, with the increased costs being passed on to homeowners.

The proposed amendments to Section 3315(d) of the UCA and Section 5315(e) of the UPCA will solve the serious problem caused by the decision and enable associations and their members to resolve assessment delinquencies without putting ownership of homes at risk through foreclosure proceedings intended to protect the association’s lien position. Such amendments comport with decades of practice in the community association arena and are consistent with the best interests of our community associations and their members.

If you wish to add your name as a co-sponsor to this legislation, please feel free to do so by contacting Morgan Dux via email at mdux@pahousegop.com.



Introduced as HB1340