Wednesday, January 3, 2018

Some Technical Lessons in MA Condo Lien Foreclosures

The recent Land Court case of Deutsche Bank National Trust v. Wozny contains several lessons for those of us involved in condominium lien foreclosure sales. To recap, MA condominiums are entitled to a lien for unpaid common area fees. Six months of unpaid common area fees are by statute a superlien ahead of a first mortgage, so  when a condominium forecloses the superlien, the foreclosure wipes out a first mortgage.

The lessons arise from two facts, that when the condo sued to enforce its six month superlien, the attorney did not name the first mortgagee as a party to the suit, and when the mortgagee got notice of the condo lien foreclosure sale, it did nothing to protect its interest, such as paying the outstanding condo fees or appearing at the sale and buying the condo.

Lesson One - Always name the first mortgagee in your condo. fee collection suit. Filing a suit to collect money or foreclose a lien is not an academic exercise. Since first mortgagees commonly pay off superlien condo fee amounts to preserve their priority, why not name the first mortgagee in the suit? Everyone else does, why didn't this attorney? Yes, Judge Scheier found it was not strictly necessary to do so, thereby saving the attorney from his oversight but costing the condo the fees to litigate the case to judgment.

Lesson Two - Don't ignore legal notices that your borrower is behind on her condo fees and there is going to be a foreclosure sale of the condo. Doubtless the mortgagee argued that the mortgage was assigned to it after the condo lien enforcement judgment, (relieving it of any duty to read its mail, especially notices of condo lien foreclosure sales?) so I suppose there is some colorable excuse for the mortgage holder not doing anything to protect itself, once it got notice of the delinquency and the foreclosure sale. That's about as far as it goes. The first mortgage holder's failure to take action after notice is otherwise entirely its responsibility. 

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