On appeal from the Superior Court of New Jersey, Chancery Division, Somerset County, C-12057-06 and F-1396-02.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Lintner, Graves and Alvarez.
Plaintiff, Bedminster Hills Housing Corporation, is the quasi-public municipal entity responsible for the administration of Bedminster Township's affordable housing program under the Fair Housing Act (FHA), N.J.S.A. 52:27D-301 to -329. Defendant, Timberbrooke at Bedminster Condominium Association, manages the condominium complex known as Timberbrooke and located in the township. In June 2001, Delinda Fuller purchased an affordable housing unit in the condominium complex for $44,961 financed with a purchase money mortgage from Washington Mutual Home Loan (Washington). Fuller defaulted on her mortgage payments and condominium fees. Defendant recorded a lien for its unpaid fees on the unit. Both Washington and defendant filed actions against Fuller, obtaining separate judgments in July 2002. Thereafter, Fuller filed for Chapter 13 Bankruptcy and obtained a stay pending disposition of the bankruptcy action. The bankruptcy complaint was ultimately dismissed and the discharge of the debts was revoked.
A sheriff's sale was held on April 18, 2006. At the time of the sale, defendant's lien for unpaid assessments and fees amounted to $10,949.47. Plaintiff and a private individual participated in the bidding. Plaintiff ultimately prevailed, bidding the price up to $74,800 to keep the unit in its affordable housing inventory. Plaintiff's successful bid was approximately $14,000 in excess of Fuller's mortgage obligation to Washington plus costs. Following its successful bid, plaintiff contracted to sell the unit for $57,981, the "maximum sale price" under the affordable housing restrictions. Prior to closing of title, defendant notified the purchaser of its lien and advised that it would not permit the purchaser to join the condo association unless the amount was paid in full. The purchaser refused to close.
Defendant filed a motion in the foreclosure action, seeking release of the surplus funds sufficient to pay its lien. Plaintiff filed an Order to Show Cause to extinguish defendant's lien on the property. On October 5, 2006, defendant was granted intervenor status in the mortgage foreclosure action. The matters were consolidated and, following a hearing, Judge Derman issued a written opinion.*fn1 Citing N.J.S.A. 46:8B-22, for "expressly grant[ing] a condominium association the right to any surplus monies remaining after satisfying superior lien holders following foreclosure," Judge Derman found that N.J.S.A. 46:8B-21 "demonstrates a strong public policy of seeing that homeowners associations are compensated for back dues and assessments," thus giving defendant priority over plaintiff's access to the surplus funds under the Council on Affordable Housing (COAH) regulation, N.J.A.C. 5:93-9.14.
On appeal, plaintiff asserts that it is entitled to the surplus funds, notwithstanding defendant's lien, in accordance with N.J.A.C. 5:93-9.14, because to hold otherwise would "creat[e] a windfall situation for the defaulting homeowner and creditors."*fn2 We reject plaintiff's contention and affirm substantially for the reasons expressed in Judge Derman's comprehensive written opinion. Nevertheless, we make the following brief observations.
As the administrative agency created and authorized under the FHA, COAH is authorized to promulgate regulations to ensure that municipalities meet their obligation to provide a fair share of their region's need for low and moderate-income housing. N.J.A.C. 5:93-9.14 provides:
In the event of a foreclosure sale, the owner of the affordable housing unit shall be personally obligated to pay to the administrative entity responsible for assuring affordability, any surplus funds, but only to the extent that such surplus funds exceed the difference between the sales price at the time of foreclosure and the amount necessary to redeem the debt to the financial institution, including costs of foreclosure. [N.J.A.C. 5:93-9.14 (emphasis added).]
The Condominium Act, N.J.S.A. 46:8B-1 to -38 permits, subject to certain limitations, an association to place liens on units for unpaid association fees. N.J.S.A. 46:8B-21 provides in pertinent part:
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 . . . all such liens shall be subordinate to any lien for past due and unpaid property taxes, the lien of any mortgage to which the unit is subject and to any other lien recorded prior to the time of recording of the claim of lien.
c. Upon any voluntary conveyance of a unit, the grantor and grantee of such unit shall be jointly and severally liable for all unpaid assessments pertaining to such unit duly made by the association or accrued up to the date of such conveyance without prejudice to the right of the grantee to recover from the grantor any amounts paid by the grantee, but the grantee shall be exclusively liable for those accruing while he is the unit owner.
e. If a mortgagee of a first mortgage of record or other purchaser of a unit obtains title to such unit as a result of foreclosure of the first mortgage, such acquirer of title, his successors and assigns shall not be liable for the share of common expenses or other assessments by the association pertaining to such unit or chargeable to the former unit owner which became due prior to acquisition of title as a result of the foreclosure. Any remaining unpaid share of common expenses and other assessments, except assessments derived from late fees or ...