Lien for Common Charges Priority
The below case discusses the priority of a " Lien for common charges" filed against a Non-Residential Condominium Unit where the applicable Condominium Declaration and By-Laws specifically granted priority of the Common Charge Lien over and above that of any Commercial Mortgage on the Unit. The team thought this would be a good case for you to review as it highlights the importance of closely reviewing your Condominium’s governing documents when evaluating Common Charge Lien priority for a Non-Residential Condominium Unit.
Under Real Property Law (“RPL”) Section 339-z (“Lien for common charges…”), a lien for unpaid common charges is “prior to all other liens except…(ii) all sums unpaid on a first mortgage of record.” In the foreclosure of a first mortgage on a unit in a commercial condominium, the Board of Managers asserted, in a counterclaim,
that its common charge lien against the unit was superior to the lien of the mortgage being foreclosed. It argued that RPL Section 339-z only applies to a traditional sale or conveyance of a unit and not to a lender’s foreclosure sale.
The Supreme Court, New York County, noted that Section 339-z also states: “Notwithstanding the above, the declaration of an exclusive non-residential condominium may provide that the lien for common charges will be superior to any mortgage liens of record”; the condominium’s By-Laws provide that “[t]o the extent permitted by applicable Law, [the condominium’s common charge liens] shall be superior to any mortgage liens of record” on a unit. The mortgagee’s motion to dismiss the counterclaim was therefore denied.
Wilmington Trust, N.A. v. Elmwood NYT Owner, LLC, 2022 NY Slip Op 31188, decided April 6, 2022, is posted at https://www.nycourts.gov/reporter/pdfs/2022/2022_31188.pdf
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