BACK TO BASICS
MEEB attorneys have been enforcing liens and recovering unpaid condo fees for our clients for over 28 years. When you’ve been doing something for that long, it’s easy to take the process for granted. At times, new clients come on board and they have never had a delinquent owner before. They have no idea if it’s even possible to recoup what is owed. Well, the answer is a resounding yes, and this article is meant to introduce, or perhaps refresh your memory, as to how unpaid fees can be recovered in Massachusetts. (The process is far different in New Hampshire and Rhode Island.)
The process for recovering unpaid common fees is set forth in section 6(c) of the condo statute (M.G.L. c. 183A). The first step is to provide notice to the unit owner of the delinquent amount owed. Notice is sent to the unit, or mailing address provided by the owner, by both regular and certified mail. Our job as counsel is to check Registry records to ensure the actual owner is notified. At times, the condo’s records may show that John Smith is the owner, but in reality, the owner of record is the ABC Realty Trust of which Mr. Smith is a Trustee. Proper notice is critical in order to comply with the statute.
If Mr. Smith is unable, or unwilling, to resolve the arrearage issue, the next step in the statutory process is to send two separate notices to the owner’s first mortgage holder. One notice informs the mortgagee that the unit owner is 60 days or more in arrears. The second notifies the mortgagee of the Condo Trust’s intent to file suit to enforce its lien if payment is not made. These notices are sent by regular and certified mail as well. The identity of the first mortgagee is determined by performing a title search with the Registry of Deeds which is available online.
If Mr. Smith still remains unable to pay after all required notices have been sent, the next step is to file suit to enforce the lien on the unit. Since the statute provides for a six-month priority lien—meaning a lien that leaps in front of the first mortgage as the senior-most lien on the property—we file suit when an owner is six months in arrears. There may be instances when suit may be filed earlier than the six-month mark, but generally speaking, suit occurs in month six. Once the suit is docketed with the court, the clerk will send back an “attested copy” of the complaint. The attested copy is essentially a verified true and accurate copy of the complaint which the Registry will accept for recording. The recording of the complaint is the priority lien which secures our client’s interests in the delinquent unit.
With a priority lien recorded, the Condo Trust is guaranteed of ultimately recovering at least six months of fees. By way of example, if the bank were to foreclose after a priority lien had been recorded, such a sale would be subject to the priority lien meaning that the sale buyer must pay off the lien in order to obtain good title. In practice, the existence of the priority lien typically means that the mortgagee will quickly scramble to pay it off so as to preserve its status as first lienholder which is always of paramount concern. The priority lien, and the ability to foreclose on that lien when necessary, provides a tremendous amount of leverage which routinely allows our clients to recover unpaid fees.
If you have a delinquent owner in your condo, the best time to contact counsel is when the owner is two to three months in arrears. I suggest that early in the second month of an arrearage, the Board or management should send notice to the owner reminding him of the arrearage and requesting payment (or a repayment plan offer). This friendly reminder should also notify the owner that if non-payment continues, the owner will be submitted to counsel for further efforts and that the legal fees and costs incurred will be assessed to the unit.
Note that the condo statute specifically provides that the legal fees and costs relative to enforcing a lien may be assessed to the unit. Thus, all of the legal fees incurred by the Trust become part of the amount that must be repaid by the unit owner. This shifting of costs is all the more reason for owners to confront arrearages sooner than later.
If the owner ignores notice from the Board or manager, we can then start the process outlined above. By starting around month three (or so), there is plenty of time to send the required notices while simultaneously allowing the owner the opportunity to catch up, or get on a repayment plan, before suit must be filed.
If you have a delinquent owner in your association, contact MEEB today.
Written by Dean Lennon