Act 21 of 2016 (House Bill 1340) amends the Pennsylvania Uniform Planned Community Act (UPCA) and the Uniform Condominium Act (UCA) to ensure that planned communities, condominium associations, and cooperative associations are not negatively impacted by both a recent U.S. Court of Appeals decision and new federal mortgage underwriting guidelines.
Amendment of Declaration
As a result of shifts in federal mortgage underwriting guidelines, condominiums may be barred from mortgage financing if 50% or more of the available units are for rental. Many condominium associations have therefore authorized amendments to their governing declarations that limit the number of units available for rent. Under the UPCA and UCA, unanimous consent from all unit owners is required if the amendment changes the “use to which the unit is restricted.”
Regardless of whether a condominium unit is available for rental or purchase, the “use to which the unit is restricted” is still considered residential. Act 21 of 2016 simply makes it clear that the phrase “use to which the unit is restricted” cannot include the leasing or rental of units.
Lien for Assessments
Condominium associations rely on unit assessments to levy fees used for the maintenance, repair and infrastructure of the condominium community. These fees are secured by provisions in the UPCA and UCA that impose upon each unit a “lien for assessments.” Although this statutory lien provides legal recourse to assist condominium associations in obtaining outstanding fees (in the form of the ability to foreclose on the unit), many associations instead seek to recover fees via personal judgment against the unit owner. Obtaining a personal judgement means the resident’s ownership of the unit is not placed at risk.
In 2015, the U.S. Court of Appeals held that a personal judgment obtained by a community association does not preserve the statutory lien. Simply put, associations now must file lien foreclosure actions within three years of delinquency or the lien is extinguished, resulting in much more expensive and aggressive foreclosure proceedings.
Act 21 of 2016 will rectify the issue to resolve assessment delinquencies without putting ownership of homes at risk through foreclosure proceedings intended to protect the association’s lien position.
For more news and updates from PBA's Government Affairs team, go to www.pabuilders.org/government-affairs
Follow us on Twitter @pabuildersGA