Super Lien Status Update
Good afternoon, Chairman Okey, Vice Chairman Murray, Ranking Minority Member Oelslager and other distinguished members of the Civil and Commercial Law Committee. Thank you for allowing me to give testimony today on this important piece of legislation, which is designed to help level the playing field for condominium associations who, through no fault of their own, are literally caught “holding the bag” in the unfortunate situations where units are sold at sheriff’s sales.
Allow me to start by telling you a little about myself: My name is Darcy Good and I am a member of the Community Associates Institute, which is an organization that works for the betterment of community associations with local chapters throughout Ohio and across the country. I also volunteer and serve as the Vice-chair for the Ohio Chapter’s Legislative Action Committee, which promotes legislation to improve community associations in Ohio. Professionally, I am an attorney that represents hundreds of condominium associations across the state and, as a practitioner for over 12 years, have had a front row seat in witnessing the devastating impact that sheriff’s sales have had on these neighborhoods. Finally, I owned and lived in a condominium, serving as Board Secretary for 6 years.
From my personal and professional experiences, I am here today to voice my strong support for this legislation because I know it will help protect and even improve the property values of Ohio’s condominium associations for the direct benefit of its owners, residents, and, although they do not want to admit it, the lenders.
Over the last few months, I have heard the questions asked by even those in support and the arguments raised in opposition. I am here to answer as many of those questions as I can and to set the record straight regarding the myths and falsities circulated by the opposition.
Rep. Murray has asked for statistical evidence to prove that the “super lien” legislation as similarly passed in the other states has had no negative impact on lending. As everyone knows, it is nearly impossible to disprove a negative. Still, as evidenced by the letter that was submitted last week on behalf of CAI and the letter that I attached to my testimony today, there is NO evidence of any reduction of lending or increase in money to be escrowed. I refer you to the letter from Mr. Lombardi from Rhode Island – a state that had a 6-month priority lien in place for almost 20 years before the legislature amended it to strengthen its priority even more. If the lenders in Rhode Island have not required fees to be escrowed after dealing with the law for almost 20 years, why would they in Ohio? CAI is for the betterment of condominium associations. If we didn’t believe this was good for condominiums in Ohio, I wouldn’t be standing here today with the full support of the national organization behind me.
Last week, we heard testimony from the Ohio Bankers League (OBL) and the Ohio Mortgage Lenders Association (OMLA) and I would be remiss if I didn’t correct a number of misrepresentations so not to lose sight of the real issue before us.
First, the condominium model is not “broken” as Mr. Adelman tried to suggest. Even with the number of foreclosures on the rise, the vast majority of condominium owners (approximately 80% of the cases we handle) pay in full to stop the foreclosure process and ultimate sale of their unit. And, all you have to do is drive around Greater Columbus to see the number of condominium associations that are still being built to know they are still a viable product. Second, there is no “taxation without representation” in condominium association as Mr. Adelman surmised. The Ohio Condominium Act mandates that the Board of Directors consists of unit owners elected by the members of association. This is the same mandate that is proposed in SB 187, which you recently passed unanimously out of your committee. Third, if passed, the “Super Lien” is not limitless, as Mr. Steed suggested. Anyone who has a basic grasp of how a condominium operates knows that, also by statute, the common expenses must be charged proportionately in accordance with the assigned percentages of undivided interest and, therefore, an association could NOT raise the fees on just the unit in foreclosure in some devious attempt to recover a greater amount from the lender of a unit sold at sheriff’s sale. Fourth, it boggles my mind how the OMLA could think that the additional fees, such as attorneys, paralegals, and court costs, could be limitless when it knows that in Ohio, we have judicial foreclosures and none of the fees are collectible unless deemed reasonable by the Court and awarded in the Decree of Foreclosure.
Lastly, I want to address the money tree issue. The point that is being missed is that the money tree already exists, just not for condominiums. It has, in fact, long existed for single-family homes. In fact, lenders have provided it voluntarily as every mortgage includes provisions that, if the mortgagor (borrower) fails to do any number of things to protect the property, for example not maintaining sufficient casualty insurance, the lender will step in and pay those costs to ensure that its investment in the property is protected. When necessary, the lender will even hire contractors to maintain the landscaping, snowplowing, and exterior maintenance while the foreclosure case is pending.
When a lender approves a loan in a condominium association, however, it knows that the association bears those costs. In effect, it is shifting the responsibility of protecting its investment to the association and, in reality, requiring the rest of the owners to pay for the maintenance that the lender would pay for in a single-family home. Yet, I am not aware of lenders requiring borrowers of single-family homes to escrow fees to cover those potential costs nor am I aware of any discount offered to borrowers for condominium units on their loans since they do not get the same benefit. So, I believe it is the lenders’ business model that is broken and needs to be fixed. It has put an unfair burden on condominium associations for far too long and, as you are aware, many states have already righted this wrong. It is time Ohio did the same for the hundreds of thousands of its citizens who call condominiums their homes.
And so I conclude with my request that you support this legislation so to level the playing field for condominium associations so that they may continue to properly maintain the condominium property for the benefit of their members and even the lenders by protecting their investments, and the property values of Ohio’s condominium homes.