THE ABC'S OF 6(D)'S

Recently, our office has received many questions regarding 6(d) Certificates. Therefore, I have been asked to write a short article dealing with some of the basic issues that continue to arise relating to the issuance of 6(d) Certificates.The first issue that seems to be brought up quite often is what should be the date of the 6(d) Certificate?The answer is simple. The 6(d) Certificate should be dated the date it is signed. Many condominiums date their certificates through the end of the month. However, it is impossible to know with certainty whether or not any future amounts will be due by a unit owner through the end of the month. Although you may know that there will be no future condominium fees or special assessments during the month, one does not know whether or not any fines or charges will be assessed to the account. The most common occurrence is when a unit owner causes damage to the common areas prior to moving out. If the unit owner already has in their possession a so-called "clean" 6(d) Certificate through the end of the month, it is difficult (but not impossible) to put a lien on the unit for those costs.Who should sign the 6(d) Certificate?  For properties professionally managed, I believe the simplest solution is that the Property Manager should sign the 6(d) Certificate.  They are the ones who know the financial records and know whether or not an account is current, so why go to the trouble of obtaining the Board Members signatures and trying to find a notary who can acknowledge those signatures. This is especially so now that the notarization rules just became more stringent. By preparing and recording a Delegation of Authority, the Manager can be authorized to sign 6(d) Certificates on behalf of the Board.  Otherwise, if the property is self-managed or the Board insists on keeping control of the 6(d) Certificates, the Board Members must sign the 6(d) Certificate.  The Certificate should be signed by Board Members who are currently on file at the Registry of Deeds.How do you deal with special assessments that are not yet due?Some 6(d) Certificates specifically state that the 6(d) is only certifying as to expenses that have been assessed and are due. However, many forms of 6(d) Certificates do not include the phrase "and due". If a 6(d) Certificate states that there are no common expenses which have been assessed relating to a certain unit and doesn't use the words "and due", and there is a special assessment which is not yet due, then the Association may have lost its lien for that special assessment.Should special assessments which are not yet due be listed on the 6(d) Certificate?The Condominium Statute appears to require the disclosure of special assessments which are not yet due, and I believe it is a better practice to note the assessment on the 6(d) Certificate.  Otherwise, a new unit owner may not be aware of a special assessment, which may even be due within thirty (30) days of the closing.  There is an argument to be made that the Association should not be disclosing the special assessment if it is not due, as the buyer has not asked the question. However, it is my belief that full disclosure of such an item will avoid an immediate conflict with a new unit owner in the community who will feel that the Association should have told them this information.Should there be a charge for a 6(d) Certificate? The Condominium Statute was specifically amended to provide that a reasonable charge may be assessed for the issuance of a 6(d) Certificate.  Over the last few years it has become standard in the industry for both managed and self-managed properties to charge a fee for the issuance of a 6(d) Certificate.Should an Association require that all funds have cleared prior to issuing a 6(d) Certificate for a sale?Although this is not always the practice, we have seen a number of instances where unit owners have issued personal checks for their final payment.  They obtain a 6(d) Certificate and the check then bounces or is stopped. Once the closing has occurred and the 6(d) recorded, the lien on the unit has been extinguished.  Therefore, any funds that are still owed by the prior unit owner can only be recovered directly from that unit owner. This is usually not worth the effort.  The safest approach is to make sure that all funds have cleared or that a certified check is paid at the time the 6(d) Certificate is issued.What should an Association do if a unit owner still owes money when the 6(d) Certificate is requested?The statute specifically requires that a 6(d) Certificate must be issued within ten (10) business days of written request. An Association may not withhold a 6(d) Certificate because funds are due.  Instead, a so-called "dirty" 6(d) Certificate is issued.  A dirty 6(d) Certificate is a 6(d) Certificate that states that funds are due. A 6(d) Certificate is basically a statement as to what is owed by a unit owner.  In most instances the 6(d) Certificate states that no money is due; however, when you have a situation where money is due the 6(d) Certificate must be issued if the unit owner requests the same. Naturally, the 6(d) Certificate form must be modified to state the amount that is due.What happens if a unit owner insists on a 6(d) Certificate that says that no money is due in order to close?In most instances, Associations will issue a clean 6(d) Certificate to the closing attorney with a letter indicating that the 6(d) Certificate is to be held in escrow pending payment to the Association of the money that is still due. However, recently this custom has come into question a number of times when checks were not received by the Association after the closing due to mistakes or mishandling.  The safest approach is to take the position that the Association will not issue a certificate that shows no funds are due until all funds have been paid. However, if the owner will have no money until they receive the closing proceeds, this may be impossible.  The safest approach in that instance is to state to the closing attorney that a dirty 6(d) Certificate will be issued. This way no mistake can occur with the clean 6(d) Certificate being recorded without payment being made to the Association. Naturally, the closing attorney should be advised that once payment in full is received by the Association that a clean 6(d) Certificate will be issued. Make certain to make it clear to the attorney that a fee for the issuance of the 6(d) Certificate will also be required in order for the 6(d) Certificate to be issued.What should a 6(d) Certificate state when the Condominium Association is in the midst of the collection of an outstanding balance?There are many different forms of 6(d) Certificates that are being used by the attorneys in connection with collecting outstanding balances.  Our advice in these instances is that you have the Condominium Association attorney deal with the issuance of the 6(d) Certificate.  This is also the practice in the industry. As the attorney is already involved in the case, the attorney will be in the best position to advise you in this matter. The 6(d) Certificate should break down the priority lien so that it complies with the Condominium Statute.For more information regarding this article contact Richard Brooks at rbrooks@meeb.com.