Condo Media - February 2011 - 14

MAINE N e w s R e g i o n a l

Protecting Condominium Homeowners
Legislation to Amend the Maine Statute
he Maine Legislative Action Committee (MELAC) of CAI has submitted a proposed bill, entitled the Condominium Homeowner Protection Act, to the Maine Legislature to enact certain amendments to the Maine Condominium Act that will implement best practices, improve a condominium association’s ability to collect assessments, clarify a condominium owner’s rights to participate in association governance and eliminate inconsistencies. The Maine Condominium Act and the Unit Ownership Act govern Maine condominiums. The date the condominium was created determines which Act applies (i.e., the Maine Condominium Act applies to all condominiums created after Dec. 31, 1982, while the Unit Ownership Act applies to those condominiums created prior to Jan. 1, 1983; however, some portions of the Maine Condominium Act apply to condominiums formed under the Unit Ownership Act). Also, because condominium unit owners’ associations are organized as nonprofit corporations, Title 13-B governs them in addition to the Condominium Act or the Unit Ownership Act. With the increase in the number of condominiums built in the state since the adoption of the Condominium Act in the early ’80s, provisions of the Condominium Act and Unit Ownership Act have been found to be inconsistent. In addition, the acts do not address the many new challenges that have evolved over the past two decades and that are now confronting condominium homeowners. The following is a summary of the anticipated effects of the proposed amendments to the Condominium Act.

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Allow associations to more easily borrow money to address association repairs, improvement and replacement projects. Currently, many Maine condominium associations are unable to borrow funds because their condominium documents do not expressly authorize the associations to grant security to the lender. Obtaining an amendment to the documents for that authority in this environment is difficult at best, and usually requires a two-thirds vote of members. The proposed amendment to the act would allow associations to grant security to lenders if approved by a majority of unit owners. Eliminate inconsistencies between the Maine Condominium Act and the Nonprofit Corporation Act related to association records, retention and review. Currently, the Condominium Act and the Nonprofit Corporation Act provide conflicting guidance on the question of recordkeeping and access to records. The amendment clearly establishes what records need to be retained by associations and for what period of time. In addition, subject to certain privacy and other legal considerations, the amendment clarifies a unit owner’s right of access to records Extend association liens from three years to five years. The amendment will extend the duration of the association’s lien from three years to five years. This will help associations protect their liens for unpaid assessments during the extended foreclosure proceedings now being witnessed in Maine, resulting from an increase in

foreclosure sales driven by a slumping economy and combined with a court backlog. Provide condominium homeowners protection from foreclosing unit owners by providing associations the ability to collect assessments for common expenses and recover foreclosure expenses. The devastation of a condominium foreclosure extends well beyond the foreclosed owner. In a condominium, all unit owners are assessed condominium fees to cover the common expenses of the property including insurance premiums, snow removal, overhead, security, common utilities, as well as maintenance and repair of the buildings and amenities. Unit owners who default on their mortgage payments generally also default on their monthly condominium fees and the shortfall is passed on to the remaining unit owners through increased monthly fees or supplemental assessments. To provide a measure of protection for remaining owners, the amendment will establish a six-month common charge priority over any first mortgages. This six-month priority has been a working compromise between associations and lenders including Fannie Mae and the secondary mortgage market, and has been adopted by states throughout the country including the New England states of Massachusetts, Rhode Island, Connecticut, Vermont and, most recently, New Hampshire. Allow associations to limit access and suspend certain privileges of unit owners that fail to pay assessments. Common interest communities

CONDO MEDIA • FEBRUARY 2011

Condo Media - February 2011

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