Community Associations Should Take Advantage of New, Increased Lien Priority Legislation

On April 29, 2019, Governor Murphy signed into law a package of foreclosure bills designed to help owners keep their homes, shorten the time a house sits vacant, and prevent abandoned properties from becoming eyesores. Of specific interest to community associations was the expansion of the statutory “lien priority.” The new law now provides that both condominium and homeowner associations are eligible to receive a six-month “rolling” lien priority. This means that instead of having a priority for only six months of assessments, an association may be eligible to claim a six-month priority for every year that it has a recorded lien (up to five years).

By Ronald L. Perl, Esq., CCAL & Jonathan H. Katz, Esq.

On April 29, 2019, Governor Murphy signed into law a package of foreclosure bills, all of which were all passed by the New Jersey Legislature on March 25, 2019. Among these new laws are provisions lawmakers promise will help owners keep their homes, shorten the time a house sits vacant, and prevent abandoned properties from becoming eyesores.

The big news for community associations, however, is that the new law expands the scope of lien priority for community associations. This new provision will create for the first time a lien priority for homeowner associations, and will provide both condominium associations and homeowner associations a six (6) month “rolling” lien priority. This means that instead of having a priority for six months of assessments once every five years, associations will have a six month priority once each year.

Prior to today, only condominiums in New Jersey were able to claim limited lien priority. As previously enacted, the lien priority statute entitled a condominium association to six (6) months of “aggregate customary assessments” following a mortgage lender’s Sheriff’s sale so long as the association has a lien recorded prior to the mortgage lender’s initiation of the foreclosure process. Put simply, even though this limited priority existed, it could only be exercised once every five years. So in most cases associations were forced to write off years of unpaid assessments, which increased the assessment burden for the paying owners and adversely affected associations’ budgets and the ability to make necessary repairs and/or capital replacements. Of course, homeowners associations were not even entitled to those six months of fees.

By Ronald L. Perl, Esq., CCAL

On March 25, 2019, the New Jersey Legislature passed a bill 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).

Jonathan H. Katz, Esq., a partner in Hill Wallack’s Community Associations Practice Group, will be speaking at this year’s CAI-PA/Del Val – New Jersey Regional Council 2018 Legal & Legislative Update.

Join CAI as we review legislation and regulations that became law in the past year and will provide an update on legislation pending in the current legislative session in Trenton. We will also review relevant case law decided in the past year, including cases involving transition, dispute resolution, and collection issues. Then join us for a Happy Hour immediately following the program.

P.J. Whelihan’s Pub + Restaurant 
1854 Marlton Pike East
Cherry Hill, NJ  08034

This Course is approved by the Community Association Managers International Certification Board (CAMICB) to fulfill continuing education requirements for the CMCA® certification. This course will earn managers two (2) continuing education credits, which also help satisfy the requirements to apply for the PCAM designation.

Happy hour is included with your registration! Enjoy appetizers and drink tickets following the program.

For more information or to register, click here.

From the Foundation for Community Association Research (and our friend, Clifford J. Treese, CIRMS), the Community Association Fact Book was developed to support the Foundation’s mission of providing research-based information to all community association stakeholders – homeowners, board members, management professionals as well as attorneys, accountants, developers, mortgage lenders, federal agencies, public officials and others – all who work with the Foundation and the Community Associations Institute to build better communities.

Here are some of the statistical highlights:

• As of 2017, there were approximately 344,500 community associations in the United States, which means that approximately 22-24% of the U.S. population lives in an association.
• Of those 344,500 community associations, about 54-60% are homeowners associations, 38-42% are condominium associations, and 2-4% are cooperatives.
• Approximately 70 million people live in a community association in the United States.
• By comparison, in 1970, there were only 10,000 community associations (housing approximately 2.1 million residents).
• The states with the most community associations in 2017 were: (1) Florida (48,000 associations) and (2) California (45,900 associations). Texas remains a distant third (20,000 associations), followed by Illinois (18,650 associations), North Carolina (13,950 associations), and New York (13,850 associations).
• New Jersey is 17th with 6,850 associations and Pennsylvania is 18th with 6,800 associations.
• Seven (7) states still have fewer than 1,000 associations: Alaska, Arkansas, Mississippi, North Dakota, South Dakota, West Virginia and Wyoming.
• There were approximately 2,380,000 community association board and committee members in 2017, who collectively performed approximately 80,500,000 hours of service for their associations (the estimated value of that volunteer time totals $1.98 billion).
• There were approximately 50,000-55,000 community association managers and between 7,000-8,000 community association management companies in 2017.
• It is estimated that between 30-40% of all associations nationally are self-managed, meaning they do not employ a professional manager or management company for day-to-day services.
• Approximately $90 billion in assessments was collected from community association homeowners in 2017, and $25 billion was spent from accumulated reserve funds for the repair, replacement and enhancement of common property.

You can find the 2017 Community Association Fact Book (as well as the 2015 and 2016 versions) by clicking here.

To view the New Jersey State Summary, click here. For the Pennsylvania State Summary, click here.

Thanks again to Cliff Treese and the Foundation for their hard work on the Fact Book this and every year.

For more information on this or any other issue concerning your community association, please contact one of our Community Associations attorneys. For breaking news or updates on new blog posts, follow us on Twitter at: @njcondolaw.