Massachusetts condominium lien

Appeals Court Puts Brakes On Condominium Rolling Super Lien Practice

by Rich Vetstein on November 22, 2014

in Condominium Law, Liens, Real Estate Litigation, Title Defects

massachusetts condominium super lienUpdate 3/30/16: SJC Reverses Appeals Court, Allowing Rolling Lien Procedure

Ruling Hurts Condominium Associations’ Collection Efforts

The Massachusetts Condominium Act gives condominium associations the ability to file a “super-lien” for unpaid monthly condominium fees, six months of which is given priority over a first mortgage against the unit. The super-lien has proven to be a very effective method for condominiums to collect delinquent fees because lenders will often pay off the super-priority amount so as not to affect their mortgage priority.

But what happens when a unit owner owes more than six month’s worth of condo fees? In that situation, innovative condominium attorneys have developed a practice of filing multiple lien lawsuits to create a “rolling” lien for successive 6 month periods. Unfortunately for condominium associations, the Appeals Court recently put the kibosh on this practice in the case of Drummer Boy Homes Association v. Britton (Nov. 7, 2014).

Rolling Lien Practice

In the Drummer Boy case, the unit owner withheld payment of condo fees in a dispute with the condominium trustees over parking rights and fines. (Note, this is a big “no-no” as the law provides that a disgruntled unit owner must pay fees under protest). The condominium lawyers filed three separate and successive lawsuits asserting a super-lien over 18 months worth of unpaid fees. The lawsuits were all consolidated. A district court judge ruled, however, that the association had a super-priority lien over only the first 6 months before the first lawsuit, not the 18 months’ worth claimed.

Court: Super-lien Limited To 6 Months Of Fees

On appeal, the Appeals Court likewise held that the association’s super-lien only covered the initial 6 month period, not the 18 month period claimed. The Court reasoned that the Mass. Condominium Act was modeled after the Uniform Condominium Act which clearly provided that the maximum amount of a super-priority lien was 6 months worth of fees, and that this was a fair balance between the interests of lenders and condominium associations. Of course, the condominium association is free to collect all of the outstanding fees from the unit owner and sell the unit at auction, but the first mortgage will have priority over all of the fees except for 6 months plus attorneys’ fees, so it’s essentially a Pyrrhic victory.

As the condominium attorneys over at Perkins|Ancil are saying, this ruling may be appealed to the SJC and going forward associations will likely be forced to avail themselves of the remedy of foreclosure sooner rather than later in order to fully protect their financial interests. Failing that, condominium associations will have to lobby the Legislature for a change in the super-priority lien amount over above the 6 month cap. This remains a case to watch!

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Got Lien? Massachusetts Condominium Liens & 6d Certificates For Unpaid Condo Fees and Special Assessments

by Rich Vetstein on September 24, 2011

in Condominium Law, Liens, Massachusetts Real Estate Law

images-7Unpaid condo fees and special assessments can be a real thorn in any condominium’s side, especially smaller condos. Not only do unpaid condo fees threaten the financial health of a condominium, but a high delinquency rate can run afoul of Fannie Mae/Freddie Mac and FHA condominium lending guidelines, thereby hindering the sale of a unit.

Fortunately, the Massachusetts Condominium Act, General Laws Chapter 183A, provides condominium trustees and managers with a fair amount of ammunition to recover those unpaid condo fees and special assessments. The law provides that condominium common expense assessments (monthly condo fees) are a lien against condominium units from the date each assessment becomes due, and that unit owners are personally liable for their share of condominium common expenses, including late charges, fines, penalties, interest, and all costs of collection. Ultimately, the condominium trust can foreclose its lien and sell the unit at foreclosure auction.

Massachusetts Super-priority Condo Lien

The real teeth of the Condominium Act is the “super-lien” provision. A properly filed condo lien has “super-priority” over the first mortgage on a unit for up to 6 months worth of unpaid condo fees, plus all attorneys’ fees and collection costs. Required 60 and 30 day statutory notices must be sent to the mortgage lender and unit owner prior to filing the lien. Typically, the mortgage lender will not want to allow a condo lien to negatively affect the priority of its mortgage, so it will pay the unpaid condo fees and other charges, then charge them back to the borrower/unit owner. Even in the case of foreclosure of a unit, the super-lien will continue to roll-over (up to 6 months worth).

6d Certificate

For all sales of Massachusetts condominiums, Mass. General Laws Ch. 183A, sec. 6(d) requires that the condo trustees sign a certificate verifying the outstanding condo fees assessed against the unit, if any. The term “6d” certificate refers to that statutory section of the Condominium Act, section 6(d). Lenders and their closing attorneys will require a “clean” 6d which states there are no unpaid fees. The recording of a clean 6d certificate will prevent the association from ever filing a lien against that unit.

No Right to Withhold

Another favorable aspect of the lien law is that a unit owner is not allowed to withhold payment even if he disputes the charges. There is no right to set-off. If the unit owner is unhappy or disputes the validity of the assessment, that’s too bad. He must pay the fees under protest, and file a suit challenging the legality of the assessment.

Collection Against Tenants

Another helpful remedy in the case of absentee unit owners is that the condo trust has a right to collect rents from tenants of non-paying unit owners. The condominium association will notify the tenants in writing that they are required to forward all future rent payments to the condo trust until the unpaid balance is satisfied. This typically gets the prompt attention of the unit owner.

Here is a sample 6d certificate.

Massachusetts 6d certificate sample

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Richard D. Vetstein, Esq. is an experienced Massachusetts Real Estate Condominium Real Estate Attorney. For further information you can contact him at [email protected].

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