As some of you may have heard, last Friday the Massachusetts Appeals Court issued its decision in the case of Drummer Boy Homes Association, Inc. v. Britton. Our firm, together with other industry leaders and the Community Associations Institute (“CAI”) of New England, have been keeping a close watch on the developments of this case. Unfortunately, the Appeals Court’s decision is not the decision that we – as community association advocates – had hoped for, and it likely will change the way associations and their advisors should pursue lien enforcement.
At issue in Drummer Boy was the so-called “rolling lien” and the current practice of filing multiple lien enforcement actions. The Massachusetts Condominium Act, M.G.L. c. 183A, provides that condominium associations have a limited priority lien – that is, a lien superior to the first mortgage holder – for unpaid common assessments and the costs of collection associated therewith (including attorneys’ fees). This priority lien is limited to a six month period by the statute; however, for the past two decades it has been the regular practice in Massachusetts to protect multiple six month periods by “rolling the lien” and filing successive actions in court. In most cases, this strategy allowed associations to recover all or nearly all of the regular unpaid assessment amounts pursuant to the statute. This technique was particularly important to our clients given that the timing of even a “swift” lien enforcement action would leave certain amounts falling outside of the six month protection period. The Drummer Boy decision runs contrary to the current practice and sets precedent that “rolling the lien” to protect priority amounts will no longer be allowed by the courts of the Commonwealth.
There is no doubt that the decision has major implications for associations throughout the state. However, we are advising clients that the sky is not falling. We have been informed that the parties involved in the Drummer Boy decision will likely seek further appellate review of the Appeals Court decision, and it is possible that the Supreme Judicial Court could reverse the outcome in the case. Further, while the decision will necessarily change current practices, associations are not without viable remedies. Going forward it will be crucial to pursue lien enforcement without delay in order to avoid any unnecessary loss in the six month priority window. Also, while the Drummer Boy decision remains the state of the law, 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. Finally, the decision appears to be limited to concurrent actions, and we do not believe it would prohibit associations from filing subsequent actions to recover unpaid amounts as a priority after a pending first lien enforcement action had been dismissed.
Over the next few weeks we anticipate that CAI will be coordinating a seminar to discuss Drummer Boy and its impact in more detail. In the meantime, should you have any questions about pending cases or future actions, please do not hesitate to contact us.