Can an Owner Put Condominium Maintenance Fees in Escrow?

by Stephen Bush
Homeowners associations are responsible for condominium repairs and maintenance.

Knowing how to work with a condo homeowners association, or HOA, is an essential skill for anyone who owns a condominium. The HOA is responsible for operating and maintaining the common areas, such as the roof and recreational facilities. Some condo owners have concerns about paying condominium maintenance fees because they worry about the HOA’s financial state. However, making payments to an escrow account instead of a homeowners association is generally not a practical or legal option.

Paying Condo Maintenance Fees to the HOA

A condominium homeowners association is a nonprofit organization established by the original developer to manage shared portions of the property. Ownership of the HOA typically passes from the builder to condo owners after a predetermined number of units are sold to buyers. Membership in the homeowners association is usually a legal requirement included in the condominium purchase agreement and cannot be rejected. Condo owners are then required to pay monthly dues and periodic special assessments to the HOA. These payments are a legally binding obligation for each condo owner.

Review the HOA Financial Condition

Before purchasing a condo, prospective buyers and investors should look into the financial integrity of the homeowners association and note the condition of shared property areas. After buying a condominium, owners should continue monitoring HOA activities and expenses. If the HOA fails to perform its duties, this can affect the ability of condo owners to sell their units or obtain real estate financing.

Condo Financing and the Homeowners Association

Banks and other real estate lenders such as the Federal Housing Administration consider the financial condition of the condominium HOA a critical factor when making a mortgage loan decision. A condo buyer should anticipate lender objections if the homeowners association is insolvent, in poor financial shape or delinquent in making property repairs. The failure of condo owners to make regular maintenance fee payments can lead to financial shortfalls for the HOA.

Legal Alternatives for Condo Owners

Condos do not operate under the same legal guidelines as apartments. While withholding rent is a possible legal strategy when apartments are not operated properly and become uninhabitable, this approach is not available to condominium owners. Unpaid HOA maintenance fees are treated as a legal lien on a condo and can prompt collection fees and foreclosure if required payments continue to be delinquent. Placing condominium maintenance fees in escrow instead of paying them to the homeowners association will not provide legal protection to a condo owner. A more practical legal strategy is for a condominium owner to review his legal rights with an attorney and become more involved in HOA activities.

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About the Author

Stephen Bush is based in Ohio and has been a business finance consultant and writer for more than 30 years. Bush obtained a Master of Business Administration in management and finance at the University of California, Los Angeles.

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