Condo Media - July 2022 - 41

" PRIORITY LIEN " PRIORITY
These priority lien categories include
reasonable costs and attorneys' fees
incurred by an association to enforce
its lien and budgeted common expense
charges that became due, absent
acceleration, " during the six months
immediately preceding the institution
of an action to enforce the lien. "
[Emphasis added].
In the quoted, italicized statutory
language is the key concept for purposes
of this article, of which both association
board members and property
managers should be aware. Common
charges that fall outside of this defined
six-month period do not attain priority
status for which first mortgagees
typically opt to pay in order to preserve
their priority lien position.
APPLYING PAYMENTS
The scenario that frequently arises is
when either a delinquent unit owner
or his/her first mortgagee makes payments
during the critical six-month,
pre-legal action bubble. In this situation,
the first question to be asked
is whether any of such payments
were accompanied by a specific directive
from the payor that the payments
were to be applied toward specific
months (i.e., " payment for March 2022
condo fee " ). If so, then the payment
must be applied to the specific monthly
charges, as directed, for purposes of
calculating the association's priority
lien position - even if that results in
diminishing all or part of the association's
six-month priority bubble.
However, the good news is that
Massachusetts courts have held for
many years that absent a specific
directive as to how a payment is to be
applied, the payee may " apply it as he/
she chooses. " This is an important legal
principle for priority lien calculation
purposes since some delinquent
unit owners and even some mortgagees
assume that payments made during
a specific month must be applied
to the common charges for that specific
month without more. This simply
is not the case under Massachusetts
law. The payor must specifically direct
to which month(s) payments are to be
applied. Otherwise, the association -
not the payor - gets to decide how to
apply payments.
REAL-WORLD CONSEQUENCES
Example: A unit owner is delinquent
for 12 months, but either the
unit owner or her/his mortgagee
make some payments during the
six-month, pre-legal action priority
period without specifying how the
payments should be applied. In that
case, the association can and should
apply the payments toward the earliest
account balance (not toward the
month(s) in which the payments
were made), in order to preserve the
association's six-month priority lien
position over the first mortgagee.
As you might imagine, some banks
have complained that applying payments
in this fashion prejudices the
bank. In one such case several years
ago, the judge recognized the association's
right to apply payments as
above, absent either a statute or the
payor's specific directive.
In so holding and rejecting the bank's
" prejudice " argument, the particularly
astute judge went on to opine in
common sense fashion, " The detriment
to the bank does not however
mean that the [association] must
cause detriment to itself in order to
protect the bank's position. "
So, circling back to the original
question above, at least one answer
to " How best to maximize the priority
portion of an association's lien
when a unit owner and/or mortgagee
makes periodic payments toward
a delinquent account? " is for condominium
boards and association
managers to keep careful track not
only of payments but also whether
any such payments are accompanied
with specific directives as to how
the payments are to be applied -
whether via a notation on a check or
by separate transmittal letter. If not,
then the association should be free
to apply the payments toward unpaid
charges as it chooses.
n JOSEPH D. SAURINO, ESQ.
IS AN ASSOCIATE WITH THE
LAW FIRM MARCUS, ERRICO,
EMMER & BROOKS, P.C.
ESI Waterproofing and
Masonry Restoration, Inc.
Since 1987 we have been providing state of the art
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EMAIL: info@esiwm.com
July 2022 CONDOMEDIA 41
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