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February 18, 2016 Posted in Community Association Law Share

In what will be a benefit to condominiums throughout the State, when confronted with collection actions that fall into Chapter 13 bankruptcy, the U.S. District Court reversed a determination of the Bankruptcy Court that Association liens could be “stripped off” and disregarded.  On appeal from the Bankruptcy Court, Judge Freda Wolfson of the United States District Court issued a decision yesterday reversing a ruling of Judge Gravelle finding that in Chapter 13 cases, a condominium association’s lien cannot be “stripped off” (aside from the statutory six months of maintenance provided for in the New Jersey Condominium Act).    In the matter of, In Re Rones, 15-4271-FLW, an Association filed an amended lien on the debtors’ primary residence prior to the debtor’s filing for Chapter 13 bankruptcy.  At the time of the bankruptcy filing, it was believed that more was owed on the mortgage than the property was worth.    The debtors filed a Chapter 13 plan proposing to only pay the Association six months of maintenance fees, and to strip off the remainder of the lien. The Association objected on the grounds that its lien was protected under the anti-modification provision of the Bankruptcy Code, 11 U.S.C. 1322(b)(2).  The Bankruptcy Court issued an opinion finding that the lien was wholly unsecured except for the six months of maintenance fees that were entitled statutory priority under the New Jersey Condominium Act. The Court said that the remainder of the lien could be stripped off. The Bankruptcy Court and the parties all agreed that the lien was consensual in nature, and therefore a security interest. This part of the Bankruptcy Court’s decision was not contested on appeal. (Had the lien been determined to be statutory, as opposed to consensual – by agreement through the Master Deed – this would have ended the issue, because statutory liens are stripped off.)   Despite the Court’s conclusion that the lien was a consensual one, the...

January 12, 2016 Posted in Community Association Law Share

Assessing fees and penalties against condominium association residents can be a dicey issue for boards, particularly given the fact that board members are also residents of the community and may be involved socially with those residents whose accounts reflect a default.  Nonetheless, collection of dues and membership fees is an integral component to maintaining a healthy bottom line. Sometimes, unfortunately, it takes litigation to ensure that some residents are compliant with the dues requirements.