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Who Should Condominium Associations Bill for Dues in a Foreclosure When the Owner is No Longer in Possession?

By: Thomas W. Hartmann
The Hartmann Law Firm LLC; 908-731-6976
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In Mill Creek Island Berkeley Condominium Assoc., Inc. v. Nitto, 34-2-7287 , App. Div. (July 2015), Plaintiff Mill Creek Island Berkeley Condominium Association, Inc. sought to overturn an order dismissing its claim against Holly Nitto for unpaid condominium fees.

Nitto had filed for Chapter 7 bankruptcy in June 2012, listing the unpaid condominium fees as a debt. The Bankruptcy Court granted her a discharge.

After the bankruptcy discharge, when Nitto apparently still failed to pay condominium association dues, the condominium association filed a lawsuit to recover such dues.

Nitto asserted that her mortgage lender, Wells Fargo, had "changed the locks and put a notice on the door that they have winterized the unit and taken ownership in March of 2012." Wells Fargo had also filed a foreclosure action against her but refused to formally take the deed to the property through a transfer of deed in lieu of foreclosure.

The trial court expressed concern over who actually possessed the condominium. Nitto had not been in the property since 2012. The judge concluded that, because of the foreclosure, Wells Fargo, not Nitto, was in control of the property. The judge then questioned whether the association should have sought to recover the unpaid fees from the bank rather than Nitto.

The trial judge ruled that the condominium association could not collect the outstanding condominium fees from Nitto because she no longer had possession of the unit. Instead, the liens would remain on the property and could be enforced when the title was transferred to a new owner.

The New Jersey Appellate Division has reversed, but only to allow the case to return to the trial judge to insure the correct law was applied and to make more complete findings as to the role of Wells Fargo in connection with the property. The Appellate Division noted that there is no dispute that Nitto no longer has a possessory interest in the condominium unit.

The judge will determine whether Nitto still has any interest in the unit and whether Wells Fargo should be forced to take title to the unit or schedule a prompt sheriff's sale. Equally important, the judge is to determine whether Wells Fargo acted so inequitably by refusing to do take title before that it should be compelled to pay the overdue condominium fees instead of Nitto.

While this case is still in the court system and under review, it is one that condominium associations should follow closely to insure that they consider whether to bill the mortgage holder in foreclosing properties which the original owner no longer occupies, as well as the original owner.

The Hartmann Law Firm LLC can assist condominium and townhouse associations with these matters to insure their assets are protected. Beyond this, we can help guide businesses through issues ahead of litigation or aggressively advocate in litigation and business disputes should the need arise.

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