On April 29, 2019, an important bill for community associations was signed into law by Governor Murphy. This bill, A5002/S3414, extends the lien priority for condominium associations and creates the same lien priority for homeowners associations.
Lien priority becomes relevant when the lienholder of a prior recorded mortgage on a unit commences a foreclosure action. As long as the association has a timely recorded lien to secure delinquent assessments (and other amounts due) attributable to the unit, the association will be paid a portion of those delinquent assessments by the foreclosing lender or third party purchaser at the conclusion of the foreclosure process.
Before this new law, condominium associations were entitled to lien priority for a total of six months’ assessments only and homeowners associations were not entitled to the lien priority at all. Now that this new law has been passed, both condominium associations and homeowners associations are entitled to the lien priority and the lien priority is extended to six months per year for each year a lien is recorded up to five years (30 months maximum).
How will this lien priority law affect your community association?
If you manage a homeowners association, it will now be entitled to a lien priority equal to six months’ of assessments per year for five years. If you manage a condominium association, it will continue to be entitled to the lien priority, but it will increase to an amount equal to six months’ of assessments per year for five years. Associations must file timely liens before the lender files its foreclosure action to realize these benefits. In addition, associations should be sure to update their liens to receive the maximum allowable lien priority for each year.
This new law will be extremely beneficial to community associations.
If you are a board member or manager with questions about collections in your community association, please contact Mary Barrett or Melissa Volet.