Condo Association Prohibited From Executing On Assessment Lien
Written by: Alan Nochumson
If a condominium unit owner fails to pay a common area maintenance expense assessed against his unit by the condominium association, the delinquent assessment becomes an automatic lien on the condominium unit. In Forest Highlands Community Association v. Hammer, the Pennsylvania Superior Court recently explained that a condominium association cannot execute on the assessment lien without first filing a complaint.
The underlying facts of Hammer are somewhat unclear. After the townhouse owner in Hammer failed and refused to pay the homeowner association’s fees, the association filed a separate lien against the townhouse owner with the Court. The association then somehow obtained a civil judgment in order for there to be a basis for the lien. After the association filed a writ of execution with the sheriff to sell the townhouse to satisfy the money judgment, the townhouse owner filed a motion to strike the writ of execution, claiming that she had never received notice of the delinquent assessment or notice of the lien filed with the Court.
The trial court granted the townhouse owner’s motion to strike the writ of execution upon finding that the record did not show that the association had secured a money judgment against the townhouse owner in advance of attempting to execute on its lien. The association appealed and the case was remanded to the Pennsylvania Superior Court from the Pennsylvania Supreme Court.
Under the Uniform Planned Community Act (UPCA), homeowner associations “ha[ve] within its arsenal of powers: 1) the ability to collect assessments for common expenses from unit owners; 2) to institute litigation in its own name on matters affecting the planned community; 3) to impose and receive payments, fees or charges for the use of the common elements of the Association; 4) to impose charges for late payment of assessments and, after notice and an opportunity to be heard, levy reasonable fees for violations of the Association; 5) to charge a capital improvement fee, annually, for the general common expense to each unit owner; and 6) to exercise all other powers that may be implemented in this Commonwealth by legal entities like the [a]ssociation.”
In order to protect its rights, the UPCA provides that “[t]he association has a lien on a unit for any assessment levied against that unit or fines imposed against its unit owner from the time the assessment or fine becomes due.” An association’s lien is perfected simply by recording its declaration, which also perfects the lien.
APPELLATE DECISION
Since the homeowner association in Hammer was duly recorded, it was undisputed that the association’s lien was perfected on the day the townhouse owner failed to pay her assessments. The appeal thus centered on how the association should have executed on the assessment lien.
The association in Hammer attempted to execute on the lien without instituting a complaint. The association argued that the automatic creation of a lien upon a unit owner’s property for failure to pay assessment fees dispensed with the need to file a complaint and thus allowed the association to seek repayment of the unpaid fees by means of a sheriff’s sale.
The Superior Court did not believe that the association substantially complied with the requirements of UPCA to allow enforcement of Appellant’s assessment lien.
Citing the UPCA, the Superior Court pointed out that an “association’s lien may be foreclosed in a like manner as a mortgage on real estate” and “an association is not precluded from pursuing other avenues to obtain payment of assessments less drastic than foreclosure.” Under the clear language of the UPCA, “an association can avail itself of an action in debt or in contract to collect an assessment.”
In striking the writ of execution, the Superior Court held that the association should have followed the UPCA by filing a complaint, not a second and redundant lien, concluding that the association’s “failure to commence the lawsuit by the filing of a complaint, in contrast to a sheriff’s sale, was its downfall.”
In doing so, the Superior Court rejected the association’s contention “that using a sheriff’s sale to recoup monies claimed due from [the owner] was the proper step to enforce its assessment lien.” Rather, the Superior Court reiterated that “the first step to enforcing an assessment lien is the filing of a foreclosure complaint, action in debt or contract.
Since the association sought enforcement of the assessment lien rather than personally against the townhouse owner, the association was required to file a mortgage foreclosure complaint.
The Superior Court noted there is a world of difference between filing a second lien and a mortgage foreclosure action. The Superior Court pointed out that the procedural requirements for commencing a mortgage foreclosure action are set forth in the Pennsylvania Rules of Civil Procedure and are to be strictly followed.
By following these procedures, the Superior Court reasoned that the townhouse owner would have been unable to contest receiving notice of the action, which she claims never occurred, and would have allowed her the opportunity to question the proper amount, if any, of the assessment lien.
Under this line of reasoning, the Superior Court also found that the writ of execution violated the townhouse owner’s due process rights. The Superior Court stated that the owner failed to receive notice of the alleged debt and was not given means to deny liability.
LESSONS LEARNED
The Superior Court in Hammer was clearly dumbfounded as to why the association attempted to execute on an assessment lien without first filing a complaint. Through its decision, the Superior Court has clearly drawn a line in the sand for any attorneys who represent condominium associations in the enforcement of assessment liens.
Reprinted with permission from the September 25, 2006 edition of The Legal Intelligencer © 2006 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.
