In Canada Many Corporations Get Paid Before Banks and Taxes

Reading up on Condominium news from all over, this article in the New York Times talking about condominium corporations that vet purchasers caught my attention for numerous reasons.

Near the end of the first page is the comment:

In case of a default, the city is first in line to recover outstanding real estate taxes or other charges, followed by the mortgage lender. The condominium is third in line, and usually all it can do is file a lien against the property and hope that it will be repaid when the apartment is sold.

In Alberta, liens by the condominium corporation against a unit have first standing – that is above banks and taxes. There has been a very strong focus in Canada that the corporation should be given the powers to ensure the viability and upkeep of the common property. We have relatively lenient lien laws and the ability to foreclose and collect (it’s not simple, there is still a process, but it is a proven and supported process with case law). That has made the survivability of corporations much higher than in the US when owners default on paying contributions and special assessments.

This inability of the corporation to have the required standing and power to recoup outstanding HOA fees (in the US) seems to have triggered a very aggressive position by boards to keep out “possible deadbeats. “

… increasing number of condominium boards are hoping to weed out financially questionable buyers by requiring extensive application packages. Demands can include years’ worth of federal tax returns, detailed lists of all assets and liabilities, several letters of references, and even board interviews.

It’s not clear from the article if the corporations actually have the power to even ask for these documents or this process. They do have the power (which is not available in Canada as far as I know) to reject a purchaser if they (1) the corporation purchases the unit or (2) designate a different buyer at the same price. I get the feeling that it is from this right of changing the purchaser that they generate belief (which may be allowed legislatively) to challenge a person’s right to purchase in the corporation.

This ability to deny rights of purchase is highly concerning to me – and part of my concern is, I admit, not knowing the legislation. But what are the grounds that a corporation in NYC deny an owner – and do they even have to give a reason? Could we face a board that wants to keep a development all racially pure (whatever strain of race that is) and just buy the unit or appoint a new purchaser without reason? It is a concern that a condominium has the right to choose who can, and cannot, live in their building. In Canada, if you have the cash, and can abide by the by-laws (which can not filter on race, creed, or other human right) you can have the unit.

I once said that condominium are very very localized government. Could you imagine say a city that had the same right to deny purchasers to live in their city? That every resident had to provide financial stability documents before living there even if they can pay the price of the unit. How very unsettling.