On December 22, 2006, the Honorable Neil H. Shuster, Chancery Division, Mercer County Superior Court, rendered a decision in the case of Washington Mutual Home Loans, Inc. v. Rodrigo S. Lima, et al. This decision marks the first time that a New Jersey court has addressed the issue of distributing surplus funds resulting from a foreclosure sale on an “affordable housing unit” where a township or municipality was the successful bidder.

In this case Hopewell Township claimed entitlement to all surplus funds above the mortgaged amount arguing that under current New Jersey Law the owner of the affordable unit would be “personally obligated to pay the administrative entity responsible for assuring affordability any surplus funds,” should the property be foreclosed upon. However, the Brandon Farms Condominium Association argued that the New Jersey Condominium Act, which provides homeowner associations the right to collect on any liens, takes priority over the statute cited by Hopewell Township. Brandon Farms also argued that it would be impractical to expect an association to provide a myriad of services to its members if it has no means of collecting assessments to fund the costs of services.

Despite the Township’s claim to the entire surplus, Judge Shuster found that Brandon Farms was entitled to have their liens satisfied using surplus funds, and that only after the Association collected on their liens would any remaining monies go to the Township.