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Micheve, L.L.C. v. Wyndham Place At Freehold Condominium Association

July 02, 2004


On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Monmouth County, DC-11395-02.

Before Judges Carchman, Wecker and Weissbard.

The opinion of the court was delivered by: Weissbard, J.A.D.


Argued June 3, 2004

After a non-jury trial, defendant Wyndham Place at Freehold Condominium Association (defendant or the Association), appeals from a judgment requiring that it refund to plaintiff, Micheve, L.L.C., six months of condominium maintenance fees owed by the prior owner of the unit purchased by plaintiff at a sheriff's foreclosure sale. Plaintiff cross-appeals from the trial judge's determination that it was responsible for a capital contribution assessment and administrative processing fee. We affirm on both the appeal and the cross-appeal.

The facts, most of which were the subject of a stipulation at trial, are quite straightforward. At a sheriff's sale, on April 8, 2002, plaintiff successfully bid on a condominium unit at 32-02 Oliver Court in Freehold and purchased it for investment purposes. A foreclosure judgment had been entered against the property on February 7, 2000. On June 4, 2002, the sheriff's deed of sale was signed.

At an April 15, 2002 board meeting, the Association passed a resolution that amended the requirement that a unit owner pay a one-time capital contribution assessment equivalent to three months of fees plus $750, to take effect for any unit acquired after June 1, 2002. The same resolution memorialized the collection of a one-time $125 processing fee, although the Association had been charging the fee since at least 1994. The resolution provided that a unit owner"shall pay" the fees"[u]pon acquisition of title to a unit." Defendant asserted at trial that it was entitled to collect these fees specified in the resolution because plaintiff took title to the property on June 4, 2002, which was after the June 1, 2002, effective date of the resolution.

Plaintiff resold to a third party on September 17, 2002. At the time the property was resold, the Association assessed plaintiff a total of $3125.70, which consisted of: $920.28 in association fees for the six month period prior to the sheriff's sale; another charge of $920.28 for six months of association fees from April (the time of the sheriff's sale) to September 2002 (when plaintiff sold the unit); a capital contribution charge of $1285.14; and a $125 processing fee that was charged when a unit changed hands to cover the expense of reviewing the books to determine any amounts due. On February 25, 2000, approximately two years prior to plaintiff's purchase of the unit, defendant had recorded a lien with the Monmouth County Clerk's Office for unpaid common expenses on the property. Plaintiff disputed its obligation to pay $750 of the capital contribution charge.*fn1 However, plaintiff paid the amounts demanded by the Association for back fees, the capital contribution and the processing fee. Plaintiff also paid the unit's Association fees for April to September 2002.

On October 12, 2002, plaintiff filed a complaint in the Special Civil Part, seeking a refund of allegedly illegal charges the Association had imposed on it to cover the $920.28 in maintenance fees covered by its six-month priority lien, $1285.14 for the contribution to capital and $125 for the processing fee.

A bench trial was held on July 2, 2003. In an oral ruling, Judge O'Hagan concluded that plaintiff was entitled to a refund of the association fees attributable to the six month period prior to the date of the sheriff's sale because the charge was precluded by the provisions of N.J.S.A. 46:8B-21(e), which states that a purchaser who takes title of a condominium unit as a result of foreclosure is not responsible for the unpaid portion of common expenses chargeable to the former owner.

In a subsequent written decision, the judge ruled that plaintiff had to pay the additional capital contribution fee of $750 and the one-time processing fee of $125. The judge held that the date of the sheriff's sale was not the controlling date for determining when plaintiff became the owner of the unit. He reasoned that prior to the date the deed was conveyed, the mortgagor still had the right of redemption and other parties had the right to object by motion to the sale. Moreover, Rule 4:65-5 required the Sheriff to file a report with the court before any sale could become final."[N]either the date of sale or the payment of consideration is determinative." As a result, the judge concluded that ownership was transferred when the"appropriately executed" sheriff's deed was"delivered" on June 4, 2002.

Judge O'Hagan rejected defendant's contention that it was entitled to counsel fees on the basis that it had to sue to enforce a lien, finding that the lawsuit was an action by the property owner seeking the disgorgement of monies paid to defendant. Thus, the"American system" required each side to bear its own fees.

Defendant argues that various provisions of the Condominium Act, N.J.S.A. 46:8B-1 to -38, permitted it to collect, from plaintiff, six months of the association fees that had accrued prior to plaintiff's purchase of the unit. We reject defendant's argument, and agree with Judge O'Hagan's well- reasoned conclusions.

The Condominium Act provides for associations to place liens on units for unpaid association fees, with certain limitations:

a. The association shall have a lien on each unit for any unpaid assessment duly made by the association for a share of common expenses or otherwise, including any other moneys duly owed the association, upon proper notice to the appropriate unit owner, together with interest thereon and, if authorized by the master deed or bylaws, late fees, fines and reasonable attorney's fees.... Such lien shall be effective from and after the time of recording in the public records of the county in which the unit is located of a claim of lien stating the description of the unit, the name of the record owner, the amount due and the date when due....

b. A lien recorded pursuant to subsection a. of this section shall have a limited priority over prior recorded mortgages and other liens,, [sic] except for municipal liens or liens for federal taxes, to the extent provided in ...

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