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Question: Are late fees and/or fines and/or legal fees treated differently in collection than the monthly common expense assessments?
Answer: No. With respect to each and every type of assessment
set forth above, the Massachusetts Condominium Statute, at M.G.L. c. 183A, §6(a)(ii), states as follows:
“[S]uch assessment shall constitute a lien against the unit from the time the assessment is due and shall be enforceable as common expense assessments under this chapter.”
Question: Can a unit owner be sent to collection if they only owe late fees and/or fines and/or legal fees?
Answer: Yes. Since all types of assessments are enforceable as “common expense” assessments, any of them may be the subject of a collection action. However, the caveat is that Boards should carefully consider whether collection is appropriate where no monthly fees are due. In such cases, the Court will scrutinize the association’s late fees, fines and/or legal fees and the association must provide validation satisfactory to the Court in order to obtain a Judgment for the full amount sought.
Question: Can we collect special assessments and/or late fees, etc. in the “super” lien?
Answer: No. The “super” lien is limited, by definition, to six months of routine fees and legal fees and costs. The Condominium Statute actually specifies that “[t]he priority amount shall not include any amounts attributable to special assessments, late charges, fines, penalties, and interest....”
Question: Can we collect a “super” lien if no action has been filed?
Answer: Maybe. The Condominium Statute clearly defines the “super” lien by reference to the institution of an action which, in plain terms, is the filing of a Complaint. As such, some mortgage companies and purchasers attempt to argue that absent a Complaint there is no “super” lien. Fortunately, more often than not, we are successful in arguing the merits of payment of the “super” lien and avoidance of the negative consequences of not paying it. However, the best method for associations to properly secure their debt is the timely institution of collection action.
Question: Does the bank or mortgage company that forecloses on a unit for their first mortgage have to submit payment of the “super” lien?
Answer: No. Since the association’s “super” lien is of higher priority than the first mortgage, technically the foreclosure sale is subject to it. This means that the new owner is responsible for payment of the “super” lien. In many cases, the bank or mortgage company will pay the “super” lien, but they are not required to do so. In the event that they do not, the association collects payment from the new owner.
Question: What happens to our collection action when a “super” lien is paid but there is still an outstanding balance?
Answer: When a “super” lien is paid in any given action, the association loses priority status in the event of foreclosure. As such, our advice is to dismiss that action and, if necessary, immediately begin a new collection to recover additional outstanding amounts.
Question: What happens if the tenant does not pay the Association under the Attachment of Rents?
Answer: The collection action against the unit owner continues, even though the Attachment of Rents is in effect, so the Association is not barred from pursuing its foreclosure action. A tenant can also be brought into the court proceeding immediately, through a Reach and Apply Action. In such circumstances, the association requests that the Court immediately issue an Order for the tenant to pay; however, this can be costly and may only delay the Association's Complaint to Foreclose. Additionally, a tenant may move out thereby creating a further financial hardship on the unit owner (i.e., bankruptcy) and inhibit the ability of the Association to obtain its funds. This option would be determined on a case-by-case basis.
Question: Do banks, mortgage companies and purchasers have to pay multiple “super” liens when you “roll” the lien?
Answer: Some banks, mortgage companies and purchasers argue that the Condominium Statute does not provide for “rolling” the lien or multiple “super” liens. Fortunately, more often than not, we succeed in arguing that because the Condominium Statute does not prohibit “rolling” the lien, we can do so and each “super” lien must be paid.
Question: How many times can you “roll” the lien?
Answer: Since “rolling” the lien is a statutory “gray” area, there is no set amount. Because this process is only required when the litigation and/or foreclosure processes become lengthy, it is seldom necessary to “roll” the lien more than once. Our collection team strives to process our cases to final resolution as efficiently as possible. In one peculiar matter, we “rolled” the lien three times and collected 18 months of condominium fees as a “super” lien.
Question: What if there is an error and the 6(d) certificate issues with a lower balance than that actually owed?
Answer: According to the Massachusetts Condominium Statute, the 6(d) certificate, once recorded, “shall operate to discharge the unit from any lien....” The statute also provides that the 6(d) certificate “shall be binding on the organization of unit owners, the governing body of the organization of unit owners, and every unit owner....” In addition, Massachusetts Title Standard No. 69 provides that a “clean” 6(d) certificate shall evidence clear title despite evidence of a lien on record at the registry.
As such, it is crucial that all due care be taken in issuing 6(d) certificates to avoid any error. In the unfortunate event of an error that substantially prejudices the association, an argument may be made by analogy to mortgages. Some Court decisions state that where a mortgage is clearly discharged as a result of an inadvertent error that the mortgage debt is still owed.
Question: What happens if there is a balance on the account, the unit owner is not paying and they want a 6(d) certificate anyway?
Answer: A 6(d) certificate displaying a balance is a perfectly valid 6(d) certificate. If used for a sale, a “dirty” certificate results in the new owner being responsible for the stated balance.
Question: What assessments should be included in the balance listed on the 6(d) certificate?
Answer: Generally, any assessments that are or will be due as of the “good through” date that appears on the certificate. In rare circumstances, when there is a significant special assessment imminent or an enforcement action is underway or imminent, the 6(d) certificate can be modified to make mention of such future circumstances so that the new owner is on notice.
Question: What happens if a unit owner sells their unit without a 6(d) certificate and there is a balance on the account?
Answer: The new owner is responsible for the balance.
Question: Does an association have to accept a payment plan?
Answer: No. However, if reasonable, a payment plan is a good alternative to litigation. Litigation takes months and, when requested, Courts will grant unit owners time to pay their balances.
Question: What is a reasonable payment plan?
Answer: Several factors must be considered including whether the unit owner has defaulted on any plans in the past, their outstanding balance and the time period requested for payment. Trustees may avoid being accused of providing a unit owner with a “loan” by ensuring that payment plans resolve the outstanding balance in less than 12 months.
Question: If a unit owner presents a payment plan to the Trustees, the Trustees can simply accept it, correct?
Answer: The Trustees have the authority to approve or deny payment plans. However, to protect the association’s rights, legal counsel will require that the plan be presented in writing. Further, legal counsel will require execution of a Payment Plan Agreement specifically designed to protect the association in the event of the unit owner’s default. In sum, although the decision is for the Trustees, payment plan proposals should be referred to counsel for processing.
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