Condo Media - June 2014 - 46

LEGISLATIVE UPDATE

Priority Lien Challenges
CAI-NE Legislative Action Committees Wrestling With Issue in Two States

he priority lien for community
associations tops the news in
this legislative update, as both
Massachusetts and Rhode Island
wrestle with the issue in different forms.
The Massachusetts Legislative Action
Committee (MALAC) is backing an
amendment to the state condominium
statute clarifying that community
associations have the authority to file
successive liens securing their right to
collect six months of unpaid common
area dues plus attorney's fees from
delinquent owners. That longstanding
and generally accepted interpretation
of the statute has been challenged by
plaintiffs in Massachusetts and other
jurisdictions, who contend that the priority lien provisions in state laws allow
only a single priority lien over the life
of the loan, even if unpaid assessments
continue to mount beyond the initial
six-month priority period.
Because the clarifying language the
MALAC has proposed hasn't encountered any serious opposition, Mathew
Gaines, chairman of the committee and
an associate in the Massachusetts law firm
Marcus, Errico, Emmer & Brooks, thinks
it has a good chance of winning Senate
approval, if it comes up for a vote. At press
time, the bill was awaiting final review
in the Ethics and Rules Committee, the
final stop for all bills before they are sent
to the floor. "We're trying to convince
the committee to release it," Gaines said
at the time. If the committee doesn't act,
the bill will die when the legislative session
ends in July.
While this legislation awaits a vote,
the Massachusetts Appeals Court is
also considering the question of how
broadly or narrowly the priority lien
authority should be defined. The
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Condo Media * June 2014

condominium owners who initiated
this action (Drummer Boy Homes v.
Britton) became embroiled in a longrunning dispute with their association,
throughout which they withheld payment of their common fees.

Rhode Island Dispute

The Rhode Island LAC (RILAC) is
also grappling with an adverse judicial
interpretation of that state's priority lien law. Here, a Superior Court
judge ruled that while an association

Because the priority lien dispute has
surfaced in many other states, it has
become a national concern.
As the dispute dragged on, the association filed a series of suits seeking
to extend its priority lien for successive
six-month periods. A trial court held
that the association could file only a
single six-month priority lien and the
appellate division of the district court
upheld that decision. Reviewing the
legislative history of the statute, the
court concluded that the lien was
intended to create an "equitable balance" between the association's need
to collect unpaid fees and the equally
compelling need to protect the interests of mortgage lenders.
"The association's interpretation that
it may file successive suits to extend its
lien priority over a prior first mortgage
beyond a six-month period of time
would ... undermine the purpose of the
statutory scheme," the court stated. "We
cannot accept such an interpretation."
The association has appealed that
decision to the Massachusetts Appeals Court, which heard arguments in
March and is expected to issue an opinion later this year. But if the legislature
approves language clarifying the priority lien in the interim, Gaines notes, the
court's decision will be moot.

can foreclose to enforce its lien, the
foreclosure action does not extinguish
the rights of the first mortgage lender.
Courts in other jurisdictions (Nevada
and the District of Columbia) have
reached the same conclusion, but none
of these decisions "make any sense,"
contends Edward Allcock, co-chair of
the RILAC.
The judges in all these cases have
argued that while associations can assert
their priority by foreclosing ahead of the
first mortgage lender, the relevant statutes don't state specifically that the first
mortgage is extinguished in that process.
But the mortgage foreclosure statute
itself doesn't say other liens are extinguished if the first mortgage lender forecloses, Allcock points out, because: "It's
obvious. It's common law and common
sense. There can only be one priority.
Enforcing a priority lien, by definition,
wipes out everything (with the exception
of taxes) standing behind it."
The argument against the contrary judicial interpretation in these cases is even
stronger in Rhode Island, Allcock says,
because of legislative action to amend the
state's priority lien provision about five
years ago. At the urging of the RILAC,

Condo Media - June 2014

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