On November 7, 2014, the Massachusetts Appeals Court issued its decision in the case of Drummer Boy Homes Association, Inc. vs. Carolyn P. Britton et.al., which has major implications for condominium associations and property managers.
The relevant issue in the Drummer Boy case was whether condominium associations can file multiple concurrent lawsuits to establish so-called “rolling liens” to take advantage of the limited priority lien provision of the Massachusetts Condominium Act.
The Law and Past Practice
The Massachusetts Condominium Act gives condominium associations a priority lien (also known as a “super-lien”) for up to six months of unpaid condominium fees and the costs of collecting such fees. In other words, if certain statutory notice requirements are followed then up to six months of unpaid condominium fees and the corresponding collection costs take priority over any first mortgage and are paid first in any foreclosure action.
The super-lien has proven to be a very effective method for condominiums associations to collect unpaid fees and collection costs because mortgage holders will often pay the super-lien amount to avoid any impact on their mortgage priority.
However, because the notice and collection process can take longer than the six months covered by the super-lien, it has been the practice of condominium associations to file multiple concurrent lawsuits to cover successive six-month periods (a so-called “rolling lien”). Unfortunately, it is this practice that has been prohibited by the Massachusetts Appeals Court.
The Drummer Boy Decision
In the Drummer Boy case, a unit owner withheld payment of condominium fees in a dispute with the association over parking rights and fines. The association filed three separate and concurrent lawsuits asserting a super-lien for eighteen months of unpaid fees and collection costs. The lawsuits were consolidated into one case and the association ultimately prevailed, but the trial court ruled that the association only had a super-lien over the first six months before the first lawsuit was filed and not the eighteen months claimed by the association. In other words, only six months’ worth of fees, and the corresponding collection costs, took priority over any first mortgage and would be paid first in any foreclosure action. The Appeals Court agreed with the trial court in rejecting the use of concurrent lawsuits to establish a rolling super-lien.
There is no question that this is a bad decision for condominium associations, but the six month priority lien is still a very powerful tool for obtaining payoffs from mortgage holders. It is essential, however, that associations and property managers not delay in pursuing their rights to avoid any unnecessary loss during the six month priority window. Condominium associations may also have to seek foreclosure more often and more quickly than has been necessary in the past. Finally, the Drummer Boy decision appears to be limited to concurrent lawsuits and we do not think that it prohibits associations from filing a new lawsuit after an earlier lawsuit for unpaid fees has been dismissed.