Condo Media - March 2023 - 37

In Rhode Island, an association may
foreclose on unpaid condominium assessments
without judicial intervention.
The Rhode Island Condominium Act,
34-36.1-1.01 et seq ( " The Act " ) at
Section 3.21(a)(1), provides:
" If a condominium unit owner shall
default in the payment of any assessment,
fine, or any other charge which
is a lien on the unit in favor of the association
or its assigns, then it shall be
lawful for the association or its assigns,
through its executive board, to sell the
unit of any defaulting unit owner and
the benefit and equity of redemption
of the defaulting unit owner and his or
her heirs, executors, administrators,
assigns therein, at public auction upon
the premises or at such other place, if
any, as may be designated for that purpose
by the association or its assigns. "
PRE-FORECLOSURE STEPS
Prior to foreclosure, the association
must comply with Section 3.16 of the Act,
which states that the lien enforcement
process shall begin once any portion of
the delinquency is 60 days in arrears.
Section 3.16 requires that both the unit
owner and the first mortgagee of record
receive notice of the delinquency via first
class and certified mail, return receipt
requested. This notice must state the
amount of the delinquency. The statute
requires that the notice must be sent to
the holder of the first mortgage at the
address as it appears in the land evidence
records, or any other address as the first
mortgagee may provide to the association,
in writing.
If the assessment amounts remain
unpaid after notice is given pursuant to
Section 3.16, the association may move
to foreclose on the unit pursuant to
Section 3.21, which outlines specific
notice and advertising requirements.
Specifically, Section 3.21(a)(2) states:
" The association must first mail written
notice of the time and place of sale
to the defaulting unit owner, at his or
her last known address and the holder
of the first mortgage or deed of trust
of record at the address for service required
by subdivision 34-36.1-3.16(b)
(4), both by certified mail, return
receipt requested, at least twenty (20)
days prior to publishing said notice;
second, the association must publish
the same at least once each week for
two (2) successive weeks in a public
newspaper. The time of sale shall
be at least fifteen (15) days after the
publication of the first notice in a
public newspaper. "
While it is likely a drafting error in
the statute, a literal reading of the notice
provision in the foreclosure statute
does not require that the foreclosure
notice also be sent via first class mail to
the unit owner. This should always be
done in practice to help make sure that
the unit owner is in fact aware of the
proceedings. Boards and management
must diligently keep unit owner contact
information up to date. There should be
a good faith effort to give notice of any
foreclosure sale before it occurs. For
example, if the owner lives in the unit,
notice could be hand delivered to the
unit, or if the unit owner communicates
by email, the notice could be emailed in
addition to the mailing requirements.
These extra steps show an exercise of
good faith, which is required by the Section
1.11 of the Act.
Section 3.21(a)(2) goes on to list instructions
for publication of the notice
of foreclosure in the various towns,
cities, and counties of Rhode Island.
A public auction will occur if the arrearage
remains unpaid. Within seven days
after the sale, the association is required
to give notice to the first mortgagee
of record (if any) of the name of the
highest bidder at auction and the
amount of the bid. There is a 30-day
redemption period starting from the
date of this notice whereby the first
mortgagee may pay the full amount of
the lien. There is, however, no right of
redemption for the unit owner, who loses
all rights and interest in the property
after the unit is foreclosed on. The exception
to this, however, would be if the sale
is deemed invalid.
CHALLENGES TO FORECLOSURE
While the foreclosure procedure is
non-judicial, it still may be challenged.
If challenged, it will likely be reviewed
by a judge. If there is a faulty foreclosure,
the association could be liable to the unit
owner and/or the auction purchaser.
For this reason, outside of a courtesy
" late letter, " lien enforcement should be
handled by attorneys with experience in
Rhode Island association lien collections.
As far as the accounting is concerned, the
initial notice of the 60-day delinquency
must always state the exact amount
owed, with all amounts able to be verified.
If a unit owner makes a payment
during a lien enforcement proceeding,
the attorney must be notified immediately
prior to posting or otherwise accepting
the payment to ensure accurate accounting
at all steps in the process.
Associations must be in a position
to defend any foreclosure proceeding
in that the procedure was followed
properly, the amount foreclosed on was
correct, and that the process was conducted
in good faith. If the foreclosure
was intended in bad faith, the association
(and board) may also face punitive damages
pursuant to Section 4.17 of the Act.
The objective should always be to
ensure timely and accurate notice of lien
enforcement proceedings - not to try and
sneak a sale through. The goal is to have
the delinquency satisfied, not to take
away the owner's unit. All unit owners
must be treated equally (for example, it is
not acceptable to only foreclose on units
belonging to people board members
don't like while giving leniency to others).
The foreclosure statute is strong
and it is a remedy that must be used
responsibly and in good faith - it should
not be rushed to or used punitively.
At the end of the day, the association,
through its board, has the power to take
someone's property away - and with this
power comes great responsibility.
n MARY-JOY HOWES, ESQ.
IS A PARTNER WITH
LOMBARDI LAW GROUP.
March 2023 CONDOMEDIA 37
Condo Media - March 2023

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