Ability to Collect Assessments in Danger

August 11, 2017
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A recent amicus curiae brief aims to help protect associations' financial stability. Virginia-based Community Associations Institute (CAI) has endorsed a new amicus curiae brief supporting community association priority lien rights. CAI, an international authority in community association governance, management, and education, announced that Jaime Fraser Carr, Esq., and Marvin J. Nodiff, attorneys with The Community Association Lawyers in Missouri, filed the first amicus curiae brief on behalf of CAI with the Supreme Court of the United States in the case Bourne Valley Court Trust v. Wells Fargo Bank, N.A. (An amicus curiae brief is one submitted to a court by a person or group who is not a party to a lawsuit, but has a strong interest in the matter, with the intent of influencing the court’s decision.)

The attorneys have been leading the efforts to file amicus curiae briefs with the courts in Nevada specifically on cases related to limited lien priority for community association assessments.

The Uniform Common Interest Ownership Act (UCIOA)—along with its predecessor acts, the Uniform Condominium Act, the Model Real Estate Cooperative Act, and the Uniform Planned Community Act (collectively, the “Uniform Laws”)—facilitate an association’s ability to collect common expense assessments by providing that, subject to limited exceptions, the association’s lien takes priority over all encumbrances that arise after the recording of the declaration. The rationale for this approach lies in the realization that the association is an involuntary creditor that’s obligated to advance services to owners in return for a promise of future payments, and the owners’ default in these payments could impair the association’s financial stability and its practical ability to provide the obligated services.

The priority of the association’s lien is critical because if there’s insufficient equity in a unit/parcel to provide a full recovery of unpaid assessments, the association must either reassess the remaining unit owners or reduce maintenance and services. The potential impact of these acts on the community and the association’s status as an involuntary creditor argue in favor of providing the association lien with priority with regard to competing liens.

The case is crucial to the association’s maintenance role. The attorneys argue in support of the plaintiff as well as the 21 states and the District of Columbia that give associations a statutory right to have a true priority in their lien rights.

In a press release, CAI noted that it is extremely grateful to the attorneys leading the efforts to protect state statutory priority lien rights for community associations. CAI also stressed that priority lien is critical for the financial stability of homeowners associations and condominiums.

CAI continues to pursue efforts to protect priority lien states to enable community associations to perform their role in maintaining critical services.

CAI encourages at a minimum for states to adopt the 2014 revised version of UCIOA Section 3-116 priority lien language. Statutes that don’t reflect the UCIOA language may be strengthened by increasing the period for which associations are given a lien, explicitly stating priority lien is a priority in right and not merely a priority to payment, and including in the priority lien reasonable attorney’s fees and costs associated with collection. CAI is hopeful the Supreme Court will hear this case and that CAI’s brief helps to protect the financial stability of the community associations in which 68 million Americans reside.