In general, a lien for common charges is subordinate to a first position mortgage. However, in certain situations this will not be the case. A recent court decision discussed this issue.
In Wilmington Trust , N.A. v. Elmwood NYT Owner, LLC, 2022 NY Slip Op 31188(U) (New York County Supreme Court), a mortgage foreclosure action was brought against a unit whereby the Board of Managers of the 229 West 43rd Street Condominium (hereinafter “Condo”) was made a party defendant seeking to cut off their filed lien against the premises. The Condo filed a motion to dismiss the action against them stating that their lien is superior to the mortgage. The building where the unit lies is an exclusive non-residential condominium and the By-Laws had specific language stating that any lien for common charges is superior to the mortgage against the unit. While RPL §339-z states that it is subordinate to all sums unpaid on a first mortgage of record, the last sentence of the statute carves out priority in an exclusive non-residential condominium. Specifically, the statute 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.”
While this is the exception to the rule, counsel for foreclosing plaintiffs must be aware that they might have to sell subject to any common charges of record as they would in a second lien mortgage foreclosure action. It is crucial that the Declaration and By-Laws be reviewed prior to the commencement of any action.
Our office is here to assist with any questions or concerns herein.
Please contact David Schwartzberg, Foreclosure Counsel, atdschwartzberg@advantagegroupny.com or 631.549.7721 with any questions.