Lien Priority Law Update Headed to Governor Murphy for Signature
On March 25, 2019, the New Jersey Legislature passed legislation that will enhance the lien priority for condominium associations and, for the first time, give the same lien priority to homeowners associations.
If this legislation is signed by Governor Murphy, both condominium and homeowners associations will enjoy a limited priority over all other liens (except for municipal liens or liens for federal taxes). The legislation would amend the lien priority provisions already contained in the Condominium Act and add the lien priority provisions in the Planned Real Estate Development Full Disclosure Act (PREDFA).
This lien priority applies to the “aggregate customary assessment against the unit owner for the six month period prior to the recording of the lien.” Significantly, the limited priority would now be “cumulatively renewed on an annual basis as necessary.” This means that an association can have a priority for one-half (six months) of the annual assessments each year, which is a tremendous enhancement to the existing lien priority that only allowed one six month priority. So, if an association updates its lien each year, each lien will have its own six month priority.
Another important change is that the statutes now authorize the lien. Language has been removed from the existing law that required the lien to be authorized by an association’s governing documents. So under this legislation, even if your governing documents do not contain a specific provision authorizing a lien, your association will now have the ability to record liens for non-payment of association assessments.
Also, while the existing law provides that associations may record a lien for unpaid assessments, including any other moneys duly owed the association (such as interest, late fees, fines and reasonable attorneys’ fees), the new legislation adds “expenses” and clarifies that the attorneys’ fees must be “imposed or incurred in the collection of the unpaid assessments.”
The law still provides that:
- Except for the priority amount, the lien is subordinate to unpaid property taxes, as well as a mortgage or other liens recorded prior to the association lien.
- A lien may not be recorded solely for late fees.
- Except as to the newly enacted cumulative annual renewal, the lien priority expires sixty (60) months after recording of a particular lien.
- In order to be entitled to the priority, the holder of a first mortgage must be notified of the lien unless, after a good faith effort, the association cannot ascertain the first mortgagee’s identity.
- The lien claim can only include amounts due and payable when the lien is recorded (so it is important to know whether your documents allow for acceleration of assessments).
Please note that the lien priority still does not apply to cooperatives.
The Senate Bill is S3414 and the Assembly Bill is A5002. Both bills can be found here.
If your association has questions about the new legislation or any other assessment collection matter, contact Klein Property Management or call (732) 446-0611.