DEATH, TAXES AND COMMON EXPENSES

Published on: September 18, 2018

“In this world nothing can be said to be certain, except death, taxes and common expenses”. Benjamin Franklin – 1789. Okay, not the exact quote. However, if Franklin was alive today and lived in a condominium, his quote would likely have included common expenses. Common expenses are frequently compared to municipal taxes. This makes sense, since both are established by an annual budget and assessed to owners based on individual property values or the percentage interest in the association.   Taxes and common expenses are also liens against the property which remain in place unless paid or wiped out as a matter of law.

What occurs when two of these certainties collide? Specifically, death and common expenses. What happens to a unit owner’s obligation to pay those common expenses when they die? Does it end with the owner? Does it pass on to the heirs? Or does it simply remain a lien against the unit? More importantly, what can and should a Board do to ensure that the association’s lien is protected while at the same time being sensitive to the sometimes delicate issue of the passing of a neighbor.

From a legal perspective, associations are well protected to recover common expenses when a unit owner passes away. Massachusetts law is well settled that a unit owner has an absolute obligation to pay common expenses. In addition, the lien for unpaid common expenses has a priority position over most other existing liens, provided that the association takes the appropriate steps to prioritize the lien. Fortunately, the obligation to pay common expenses does not end if a unit owner passes away. The association still has the same authority and obligation to collect the common expenses. However, an association does face some unique challenges when seeking to enforce a lien against a deceased owner.

The main challenge is that the unit owner and any other person who may have an interest in the unit, must be included as a party to the action brought to enforce the lien. If the owner is deceased, who do you bring the action against? If the estate is being probated, a personal representative is named to administer the estate. The personal representative is named as the defendant in the lien enforcement action.

It’s more challenging if the estate is not probated because it is uncertain as to who has an actual interest in the property. Without knowing who the interested parties are, it is unclear as to who should be included as a party to the action. There is some debate as to the best way to include unknown parties in an action. Our opinion, based on discussions with various title companies, is to first name all known relatives. This information can be obtained through obituaries and discussions with known relatives.   Next, add to the complaint, as Defendants Parties-In-Interest, “any heirs’ devisees and personal representatives of the estate”. After the complaint has been filed, the association should request from the court permission to serve the complaint by publication, in addition to regular service. Taking these additional steps to include and serve unknown parties, is generally sufficient for the court to issue a judgment and order of sale. Once a judgement and order of sale has been issued, the association may proceed to foreclose in the normal course.

In addition to the unique legal challenges, Boards must navigate the potential emotional impacts related to enforcing a lien against a deceased owner. Boards should take into consideration the individual circumstances before deciding how aggressively to pursue enforcing the lien against the unit.  In some cases, the unit has been vacant for a long time and the family has made clear that they have no interest in the unit.  In other cases, the death may be sudden and unexpected and families may be struggling to decide how to handle the estate.  Boards should find the correct balance between sympathy for the families and their fiduciary duties to the association.  Fortunately, the law in Massachusetts, although fairly strict with time frames and requirements, does allow for some flexibility as to when the lien enforcement process can be initiated and how aggressively each step should be pursued.  As long as certain steps are taken in a timely manner, Boards should be able to find the right balance to protect the association while at the same time being sensitive to grieving families.

If you have any questions regarding this article or any other lien enforcement issues please contact Will Thompson at wthompson@meeb.com.