Newsletter Archive

Issue #72, Winter 2008

Condo Act Amended

Section 15 of the Condominium Act, N.J.S.A. 46:8B-15, has been amended by P. L. 2007, c. 165, effective September 10, 2007. The amendment requires that "all funds collected by an association shall be maintained separately in the association's name". This is followed by restrictions on the commingling of funds. In addition, the amendment permits the association to "levy and collect a capital contribution, membership fee, or other charge upon the initial sale or subsequent resale of a unit...". However, this may only be done if it is "authorized by the master deed or bylaws"  It is presumed that newly-created regimes will include such a provision in their master deeds, and that many existing master deeds will be amended in a similar fashion.

From the practitioner's and title insurer's standpoint, the purchase of condominium units is often complicated by issues arising from outstanding (or allegedly outstanding) dues and other charges. It should be noted that, by law, upon the sale or transfer of a unit, seller and purchaser are jointly liable for the satisfaction of unpaid dues and assessments. N.J.S.A. 46:88-21. Unpaid charges constitute a lien. Id. It is therefore prudent to obtain a statement from the condominium association prior to closing, as permitted by law. ld.

A client who buys a unit from a lender which has acquired title through foreclosure may be placed in the middle of a battle between the lender-seller and the association as to the proper amount due. Although by statute a lender which acquires title through the foreclosure of a [first] mortgage generally takes free of unpaid dues owed by the mortgagor, another statutory provision allows the association to claim up to six (6) months of dues provided the association has filed a notice of lien in the land records before the commencement of the foreclosure suit. N.J.S.A. 46:8B-21 and -22. The lender is of course responsible for payment of dues accruing after the date of the foreclosure sale (if it is the successful bidder). Nevertheless, statements obtained from the association may continue to reflect prior unpaid dues for which the lender is not legally responsible. These situations must be resolved on a case-by-case basis.

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