By William R. Dziedzic

Bendett & McHugh, PC*

USFN Member (CT, ME, MA, NH, RI, VT)

In the case of [T]he Vermont House Condominium v. Salese et al, a Vermont Superior Court Judge issued a decision effectively refusing to expand the condominium association’s super-priority lien over a first mortgage beyond the statutorily mandated six-month priority.

In this action, the Plaintiff (“association”) submitted a proposed judgment decree that sought to extend its statutory “super-priority” lien to all common expense assessments that became due from the defaulting unit owner and not just the six months that accrued before it filed its action. The mortgagee objected.

An association’s six-month super-priority lien derives from the Vermont Common Interest Ownership Act (VCIOA.) However, while VCIOA allows common expense assessments that became due from the defaulting unit owner, absent acceleration, during the six months prior to the condominium association filing its action, in the past decade there have been a number of superior court decisions expanding the lien beyond six months, often including common assessments that become due during the pendency of the action, as a matter of fairness. The courts looked to factors such as the increase in loss mitigation efforts by lenders, the implementation of a state mortgage foreclosure mediation program, and other factors that have led to longer foreclosure timelines and their impact on the six-month priority lien. As such, the priority lien was expanded in certain counties beyond the six months.

The association argued that under the “fairness” doctrine the statute in this matter should be interpreted to include the entire amount of common assessments that became due as, it alleged, lenders and servicers often “abuse” VCIOA “by dragging their heels in condominium foreclosure proceedings…because the Association is forced to serve as their property manager for free for years at a time.” The court declined to expand the reading of the priority statute beyond the six months prior to the action under a plain reading of the language of the statute, a review of the history of the statute demonstrating legislative intent, rules of construction, and settled common law principles.

The decision is important because, although it is only a trial court decision, it is persuasive on the judges in Vermont. This decision will be a much-needed tool in the toolbox when loan servicers request and negotiate priority lien payoffs throughout this county, and hopefully a trend other trial court judges will adopt statewide.

It should be noted that until the Vermont Supreme Court addresses the split of interpretations of the priority statute, it will continue to be a county by county, judge by judge, interpretation. As always, it is important to contact local counsel when requesting association lien payoffs. 

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USFN August e-Update