Condominium associations in Alabama have faced considerable confusion regarding the proper procedure for foreclosing on residential units for unpaid assessments. That confusion stemmed from the existence of two separate statutory foreclosure procedures under the Alabama Code.
Alabama Code Section 35-8-17 provides that a condominium association shall have a lien on each unit for unpaid assessments duly made by the association, and that the lien shall be effective from and after the time the lien is recorded in the public records of the county where the unit is located. The section then grants condominium associations the power to foreclose on those recorded liens “by an action brought in the name of the association in the same manner as a foreclosure of a mortgage on a real property.”
Alabama Code Section 35-8A-316 likewise grants condominium associations liens against the subject units for unpaid assessments. It provides that the lien “may be foreclosed in like manner as a mortgage on real estate but the association shall give reasonable advance notice of its proposed action to the unit owner and all lienholders of record of the unit.”
In Ex parte Howard Ross, Case No. 1120636 (Ala. April 4, 2014), the Alabama Supreme Court addressed the relationship between these two statutes. In Ross, the association conducted a power of sale foreclosure on several units owned by Ross for unpaid assessments. Ross challenged that foreclosure, arguing that the association had failed to give him adequate notice under as required by Ala. Code 35-8A-316. The Association responded that it had filed liens against the units with the probate court and published notice in the newspaper, and so it had satisfied the requirements to foreclose under Ala. Code 35-8-17. Based on this argument, the trial court granted summary judgment for the Association.
In a matter of first impression, the Alabama Supreme Court rejected the Association’s argument that it satisfied the notice requirement for foreclosure under 35-8A-316 by filing a lien in the probate court records as required by 35-8-17. Instead, the Court concluded that 35-8A-316 and 35-8-17 constitute two wholly separate methods for foreclosing on condominium units with different requirements.
Under 35-8A-316, a condominium association may foreclose on a unit for an unpaid assessment if it has provided “reasonable advance notice” to the “unit owner.” Where such notice has been provided, the foreclosure can be through the exercise of a non-judicial power of sale clause. In contrast, Section 35-8-17 only requires the filing of a lien in the public records of the county and do not require advance notice to the unit owner. However, the Association must pursue a judicial foreclosure and cannot foreclose simply by exercising a power of sale provision.
The Ross decision provides clarity on the procedures a condomium association must follow if it seeks to foreclose on a unit for unpaid assessments. Whether the Association selects to foreclose through 35-8A-316 or 35-8-17 will depend on the circumstances. If the Association has contact with the owner and believes it can establish notice to him, it may want to foreclose through the expedited procedures generally applicable under a power of sale provision. If the Association has lost contact with the owner, or does not have a power of sale clause with the unit owner, however, it will want to use the judicial foreclosure procedures provided by 35-8-17.