Thought Leadership

Who is Responsible for Assessments when a Homeowner Passes Away?

The American population is getting older. It is an unfortunate aspect of life, however, aging is one of life’s few certainties. The United States Census Bureau estimates nearly 1 in 5 Americans will be age 65 or older by 2030. This is somewhere in the realm of 70 million people. The Foundation for Community Association Research estimates 25% of the approximately 330 or so million Americans live in a homeowner’s association. This tells us about 80 million Americans, about 16 million of which are age 65 or older, live in a homeowner’s association.

These statistics imply the number of deceased and delinquent homeowners will continue to rise. The death of a homeowner often leaves the association with a lack of options when it comes to collecting delinquent assessments. The simplest scenario is when a surviving joint tenant exists. The surviving joint retains title to the property and remains liable for delinquent assessments previously incurred as well as those assessments incurred in the future.

The situation gets trickier when there is no surviving joint tenant. Minnesota law tells us a deceased homeowner may not be sued. Minnesota law also tells us the estate of a deceased homeowner may be sued. The estate is required to address all claims filed against the estate prior to the closing of probate proceedings. This includes the association’s claim for delinquent assessments. Unfortunately, the estate’s assets are often insufficient to satisfy its creditors, meaning those creditors may end up receiving a pro rata share of their claim amount or nothing at all.

Other scenarios are when a deceased homeowner did not have a will or other estate plan and when a deceased homeowner did have a will or other estate plan but the estate is not being probated. If either of these scenarios are true, and the property is secured by a mortgage, the property may be foreclosed by the mortgage-holder. The mortgage foreclosure would likely extinguish the association’s ability to collect delinquent assessments, unless the association is able to redeem the property from the mortgage foreclosure as a junior creditor. If the association is not in a financial position to redeem the property, the association may be able to sell its lien to an investor who may then step into the association’s shoes and redeem the property in the association’s place.

The association would have the option to foreclose its lien for delinquent assessments in the absence of a mortgage and in the absence of the mortgage-holder foreclosing the mortgage. The estate would have the opportunity to redeem the property in the event of foreclosure by either a mortgage-holder or the association. If the estate fails to redeem the property, and the association ends up owning the property after the redemption period expires, the association can then sell the property and use any net proceeds to offset the amount owed by the deceased homeowner and their estate.

An association’s ability to collect assessments from its homeowners is critical to the association’s prosperity. Doing so, however, is easier said than done. The real estate and community association attorneys of Hellmuth & Johnson have the ability, knowledge, and experience to assist you with this and any other real estate and community association related issue. We would appreciate the opportunity to assist you and hope you reach out when the need for advice arises.