Stark & Stark Condominium Client Places into Rent Receivership an Affordable Housing Unit in Foreclosure
A Stark & Stark Community Association Group client recently defeated both the related municipality and unit's mortgagee and put an affordable housing unit into rent receivership. The condominium unit in question was abandoned by the owner; a low income woman who had qualified for the purchase of an affordable housing unit, as governed by New Jersey's Fair Housing Act and Council on Affordable Housing ("COAH"). Both the condominium and the condominium unit's mortgagee, Mortgage Lenders Network Home Equity Loan Trust (the "Bank") had filed separate foreclosure complaints against the owner. The condominium's foreclosure was completed first, with a judgment entered (the Bank having not yet secured a foreclosure judgment). Once the condominium learned that the owner had abandoned the unit, it filed a motion seeking the appointment of a rent receiver. The rent receiver, the condominium hoped, would identify and install a tenant, who would then pay monthly rent to the condominium, in an effort to offset the amounts in assessments, left unpaid by the owner.
The municipality opposed the condominium's motion arguing that the installation of a tenant would slow its attempts to ensure the unit's ultimate ownership by a low or moderate income family. Thus, the municipality argued, the unit should remain vacant until the Bank's sheriff's sale and ultimate purchase by the municipality. The Bank opposed the motion arguing that the installation of a tenant would slow its efforts to complete its foreclosure and sheriff's sale and that, if there is to be rent receiver, the Bank and not the condominium should be the recipient of the funds.
The condominium countered that it was and remains wholly inequitable for the condominium and its middle class neighbors to preserve this asset valued so highly by the municipality (it must ensure the continuation of this as an "affordable unit" to ensure compliance with COAH regulations) and the Bank (it intended to sell the unit after foreclosure for the amount of the unpaid mortgage, thereby recouping some of the Bank's losses) without any contribution from the unit's owner, the municipality or the Bank. Further, if the Bank was to be the beneficiary of the rent receivership, so be it, but then the Bank better start paying monthly assessments.
The court agreed with the condominium, ordering that a rent receivership be created. She further ordered that the municipality to identify persons qualified under COAH regulations to reside in an affordable unit. The Court ruled as well that the only way the Bank and/or the municipality could avoid the receivership and tenancy is if they pay the condominium's regular monthly fees.
The condominium's success here further illustrates how condominiums and associations must continue to be aggressive and creative to collect unpaid assessments and safeguard their rights during these difficult and challenging economic times. For further information on associations and rent receiverships, or collections in general, please contact David J. Byrne, Esquire, Co-Chair of the Community Association Group.
