Woodview Condominium Association, Inc. v. Shananhan, et al; 2007 N.J. Super. Lexis 53.
In a recent case, New Jersey’s appellate court held that a mortgagee in possession of a condominium unit is personally liable for condominium monthly maintenance fees, HOA fees, special assessment fees, and other condo fees that accrue during the mortgagee in possession’s possession and control of the unit. Here, the mortgagee in possession is personally liable for these fees even though he is not the legal owner of the unit.
In Woodview Condominium Association, Inc. v. Shanahan, et al., Kevin Shanahan owned two (2) units in the common interest community. In early 2000, Mr. Shanahan conveyed title to both units to Tomas Pratts, Jr. who in exchange executed a one-year purchase money mortgage payable to Mr. Shanahan. Mr. Pratts eventually experienced a default on mortgage. Thereafter, Shanahan assumed control of both units as a "mortgagee in possession". Shanahan then rented the units to third parties.
New Jersey’s Condominium Act conditions liability for special assessment and monthly maintenance fees on "ownership". However, special rules and doctrines apply to mortgagees in possession. For instance, New Jersey law provides that "a mortgagee in possession may be liable for services rendered to him in connection with the property during his occupancy thereof on the basis of an express or implied contract." Here, Woodview provided services to these units, including utilities and common elements. Here, "monthly dues … represent carrying costs necessary to maintaining the property and keeping the rental income flowing". Ultimately, Shanahan should not be allowed to benefit from the goods and services provided by the association to him without "having to pay" that association "his pro rata share of the costs".