New Jersey appellate division holds that lenders are not liable for condo fees as “mortgagees in possession:” the battle shifts to the issue of association’s applications for the appointment of a receiver:
By: Kathleen Cavanaugh, Esq.
In Woodlands Community Ass’n v. Mitchell, et al., New Jersey Superior Court, Appellate Division, Docket No. A-4176-15T2 (June 6, 2017), we successfully argued that the imposition of liability “as mortgagee in possession” for undertaking basic property preservation was not only inconsistent with the mortgage documents and state statutes, it was contrary to public policy and common sense. In Woodlands, the Court considered whether or not a lender was liable because it had changed the locks and winterized the mortgaged property. The Appellate Division concluded: “We are satisfied that the minimal efforts taken here by defendant to secure its interest in the mortgaged property are not sufficient to convert itself into a mortgagee in possession.” It noted that the mortgagee had “taken on the costs and borne the burden of the abandoned property,” and therefore had not purposely “availed itself of the benefits of the Association.”
However, there is another issue brewing. During oral argument of the Woodlands case, the Court asked whether or not the appointment of a receiver would be the solution to the problem of unpaid condominium association fees accruing during foreclosure proceedings – an issue not before the Court. I argued that the appointment of a receiver would unduly impede the ultimate sale of the mortgaged premises, and it would be unfair to rent a unit to a tenant knowing it is likely that the tenant will face a request to vacate and possible eviction in the future. Sandelands Eyet is prepared to make a proper record that the appointment of a receiver is not the solution, because we expect an Appellate ruling on that issue in the foreseeable future.