For most condominiums, monthly payments are the sole source of income and critical to maintaining solvency. Rising costs and economic uncertainty
may lead to increasing numbers of owners failing to submit payment timely. Quickly recovering dues from delinquent owners is essential to preventing the condominium itself from becoming financially distressed.
Massachusetts General Laws Chapter
183A, § 6 grants organizations of unit owners priority
status for a portion of unpaid dues. This is a powerful collection tool that
allows an organization of unit owners to recover debt ahead of other creditors,
including first mortgagees. It is important that boards and managers understand
how this priority amount is calculated and established.
When a unit owner's common expenses are more than sixty days
past due, a lien automatically arises on the unit for all the amounts due pursuant
to M.G.L.
c. 183A, § 6.
This occurs without any action on behalf of the organization of unit owners. While
the lien itself arises automatically, the "super priority" portion is
not automatically established. An organization of unit owners is only granted
priority status after it files a lawsuit against the unit owner.
The super priority is secured only for common expenses for
the six months preceding the commencement of the lawsuit and reasonable
attorneys’ fees incurred in enforcing the lien. All other fees, including monthly
assessments outside the six-month window, late charges, fines, and interest, do
not receive priority status over first mortgages.
Timing is critically important because the organization of
unit owners cannot immediately file suit against a delinquent owner. Notice
must first be sent to both the unit owner and the first-lien mortgagee. Only
after these notices are sent can the organization of unit owners perfect the
full scope of its super priority lien by filing its lawsuit. Because the notice
includes a response time, the organization of unit owners can lose priority if
it delays too long; it cannot simply send out notice and file suit the same day
if it intends to perfect and preserve the super priority.
The six-month priority can be established for successive
periods by filing another complaint. A condominium must restart the whole
process, including sending the applicable notices. For example, if the organization
of unit owners established its priority by filing a complaint in January, and
as expected, the dues continue to go unpaid for the following six months, then
the organization of unit owners may file suit again to establish priority for that
six-month period of common expense assessments. The January lawsuit only
establishes priority retroactively, it does not create a priority for amounts
unpaid in the months that follow the filing of the complaint. These “rolling
liens” may continue indefinitely for successive six-month periods if necessary.
Accordingly, the boards or managers should send overdue account
ledgers to legal counsel as soon as the sixty-day threshold is reached. Boards are
sometimes tempted to give owners extra time to repay past due balances in
reliance on assurances that payment will be submitted on a later date or in
response to other stated reasons for failure to timely pay. However, in
reaching any agreement with a unit owner care must be taken because an organization
of unit owners risks losing priority status by delaying. Moreover, the sooner notice is sent to first
mortgagees, the sooner they will pay the priority amounts and legal fees – especially
where they can avoid increasing legal costs by forcing the organization of unit
owners to file suit.
Some boards also mistakenly assume that there is no mortgage simply
because the same unit owner was previously involved in a lien enforcement
action and did not have a mortgage at that time. Unit owners may acquire
mortgages at any time, including between lien enforcement actions, and the only
way to be certain no mortgage exists is through a title search. A board can only make an informed decision
where it has all the relevant information.
Massachusetts law provides condominium associations with
powerful collection tools, but only if boards use them properly and promptly.
The super priority under M.G.L.
c. 183A, § 6 requires
timely action and the involvement of legal counsel. If properly and timely
leveraged, an organization of unit owners should be able to recover all unpaid
common expense assessments; however, delays risk priority status. Boards should
establish clear policies for sending delinquent accounts to legal counsel at
the sixty-day mark, even for accounts already involved in ongoing litigation.
An associate in the
Quincy-based firm of Moriarty, Bielan & Gamache LLC, Chris O'Connor possesses
a strong foundation in condominium association law and experience handling
complex litigation in construction, real estate, and business matters. Chris
can be contacted at coconnor@mbgllc.com.
