Massachusetts condo lien

massachusetts condominium super lienDrummer Boy Homes Association, Inc. v. Britton

In a long awaited ruling pitting condominium associations against mortgage lenders backed by the Federal Housing Finance Authority, the Supreme Judicial Court has upheld the so-called “rolling” super-priority lien for unpaid condominium fees. What this means for condominium associations in Massachusetts is that they are able to seek super-priority liens for successive 6 month periods of unpaid condominium fees, rather than be limited to one six month period. The super-priority lien takes priority over the first mortgage on the delinquent unit, thereby giving the condominium association a powerful tool to collect unpaid condo fees.

Thomas Moriarty, Esq. of Marcus, Errico, Emmer and Brooks, who represented the condominium association told me that “we are pleased with the results and we believe that this leaves condominium associations with the power to ensure payment of condominium fees as was intended by the Massachusetts legislature when it enacted the priority lien provisions of the statute 23 years ago to deal with the emergency created by unit owners not paying condominium fees to pay for essential services.”

The SJC recognized that the non-payment of condominium fees can have disastrous consequences upon a condominium association, especially smaller projects. The super-priority lien was established by the Legislature in reaction to the real estate recession in the early 1990’s where many condominium associations were financially devastated by non-payment of condo fees. Among other protections, the super-priority lien enables an association to leverage the mortgage lender to pay up to 6 month’s worth of outstanding condominium fees on behalf of the delinquent owner. The “rolling” lien practice developed by condominium attorneys where the outstanding balance exceeded 6 months worth of fees. Two years ago, the Appeals Court ruled that the rolling lien procedure was not permissible, leaving condominium associations in limbo regarding their ability to collect unpaid fees.

Led by Tom Moriarty and Alan Lipkind of Burns & Levinson, condominium associations successfully persuaded the SJC that the Legislature intended for associations to have the protections of the “rolling” lien. The justices reasoned that “our interpretation of the statute is consistent with the Legislature’s long-standing interest in improving the governance of condominiums and strengthening the ability of organization of unit owners to collect common expenses, thereby avoiding a reemergence of the serious public emergency that developed in the early 1990”s.”

This is a major victory for condominium associations who should all be having collective sigh of relief. If you have any questions about this ruling or need assistance collecting unpaid condo fees, please contact me at [email protected] or 508-620-5352.

Drummer Boy Homes Association v. Britton

{ 4 comments }

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

___________________________________

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

{ 0 comments }