Publication Date
Summer 2018
Journal
Indiana Law Journal
Abstract
During the recent real estate crisis, competition for scarce dollars pitted the holders of defaulted mortgages against condominiums and homeowner associations seeking to collect maintenance assessments. Statutes providing mortgagees with lien priority threatened association ability to provide services, and imposed a disproportionate burden on non-defaulting unit owners. Statutes enacted in other states gave associations a “super priority” lien for six months of assessments, but left uncertainty about the meaning of that super priority in an environment in which foreclosure delays became the norm.
The last five years have brought a spate of litigation over the relative rights of associations and mortgagees. The litigation appears to have settled one contentious but critical issue: the super priority lien confers on associations the right to foreclose. Other issues, however, remain unsettled, and often depend on state-specific statutory provisions.
As a policy matter, associations liens should enjoy complete priority over mortgage liens. As a matter of fairness, priority for association liens prevents banks from free riding on maintenance expenditures made by non-defaulting unit owners and ensures that all units bear their fair share of maintenance expenditures. From an efficiency perspective, banks are in a far better position to account for potential economic downturns than are associations. Moreover, giving associations priority over banks solves what is otherwise a difficult collective action problem in situations where multiple banks hold mortgages on different underwater units within a single common interest community.
Volume
93
Issue
3
First Page
807
Last Page
844
Publisher
Indiana University Maurer School of Law
Keywords
Banking and Finance Law, Bankruptcy Law, Bankruptcy, Housing Law, Liens, Property--Personal and Real, State and Local Government Law, Taxation--Federal, Taxation
Disciplines
Banking and Finance Law | Bankruptcy Law | Housing Law | Law | State and Local Government Law | Taxation-Federal
Recommended Citation
Stewart E. Sterk,
Maintaining Condominiums and Homeowner Associations: How Much of a Priority?,
93
Ind. L.J.
807
(2018).
https://larc.cardozo.yu.edu/faculty-articles/454
Included in
Banking and Finance Law Commons, Bankruptcy Law Commons, Housing Law Commons, State and Local Government Law Commons, Taxation-Federal Commons
