Mass. SJC Upholds Multiple Priority Liens The Drummer Boy Case

Mass. SJC Upholds Multiple  Priority Liens

The Massachusetts Supreme Judicial Court recently issued its ruling and order in one of the most important condominium cases ever decided.  In Drummer Boy Homes Association, Inc. v. Britton, the SJC held that an association can maintain multiple, contemporaneous priority liens by filing successive actions to enforce its lien for unpaid common expense assessments.  The decision was welcome news not only for the board and unit owners of Drummer Boy, but for the entire condominium industry in Massachusetts.

The issue in the case arose from a dispute over parking rights in the Lexington condominium complex.  Ultimately, the Defendant unit owners began to withhold payment of their monthly common expense assessments.  As a consequence, Drummer Boy filed suit as the organization of unit owners to enforce the condominium association’s lien for those unpaid assessments. When the common expense assessment went unpaid for an additional six months Drummer Boy filed a second complaint.  For the same reasons, Drummer Boy thereafter filed a third complaint.  Since c. 400 of the Acts and Resolves of 1992 was passed, there has been virtually no dispute in the Commonwealth that the filing of an action by the organization of unit owners to enforce a lien for unpaid common expense assessments prioritizes six-months of common expense assessments over the lien of a first mortgage.  This prioritization is important because it is often the case that only liens with priority over the first mortgage are “satisfied” or paid.  The question in the Drummer Boy case was whether the filing of each successive action, while prior actions were pending, established an additional six-month’s priority lien.  

Dispute Lasted for Decades

The facts of this case illustrate how important the answer to that question is.  The dispute in Drummer Boy has been moving through the court system for close to a decade.  In the event that the organization of unit owners could only maintain one priority lien at a time, Drummer Boy would stand to lose several years of common expense assessments, none of which would have priority above the lien of the first mortgagee.  Those common expense assessments would have to be absorbed by other, innocent owners who, despite meeting their obligations, would be forced to subsidize the delinquent owners.  

The SJC concluded in Drummer Boy that G.L. c. 183A, §6(c) allows an association to maintain multiple priority liens at the same time.  The court held that the language of c. 400 when read with language added to the statute in 1998 – which clearly referenced and recognized “priority liens”  – indicated the legislature understood that multiple six-month priority liens could be maintained at the same time.  

As many readers are aware, Marcus, Errico, Emmer & Brooks, P.C., together with other industry professionals, was involved in the passage of c. 400 creating the priority lien as well as the 1998 amendments which provided first mortgagees with the power to prevent an association from taking action to enforce its multiple “priority liens.”  As counsel for Drummer Boy, in the SJC, it was invaluable to my efforts as an advocate to have direct access to the players who were responsible for securing the enactment of these provisions in the first instance.  

The support from the Community Associations Institute, on both a local and national level, was also instrumental in achieving a successful outcome in this case.  Attorneys Charles Perkins, Scott Eriksen and David Chenelle from Perkins & Anctil co-authored CAI’s amicus brief with Henry Goodman and Ellen Shapiro of Goodman, Shapiro & Lombardi.  CAI’s amicus brief convincingly argued the strong public policy reasons supporting the recognition of multiple, contemporaneous priority liens.  

Amicus Briefs Filed

Surprisingly to some, several banks which lend to condominium associations in Massachusetts filed amicus briefs in support of Drummer Boy’s position.  The effort was engineered by Wes Blair of Brookline Bank, with the shoulder-to-shoulder support and participation of Avida Bank, Mutual of Omaha Bank, North Shore Bank and Rockland Trust Company.  While the uninitiated and/or uninformed (including, unfortunately, several national banks and Federal agencies), perceive the rolling lien in Massachusetts as contrary to the interest of the banks, these insightful lenders recognized not only that the rolling lien preserves the value of their collateral when they loan on unit sales but that condominium associations – when benefitting from the rolling lien as a collection mechanism – are a desirable borrower.  The amicus brief, expertly authored by Alan Lipkind and Elizabeth Brady Murillo, of the law firm of Burns & Levinson, pointed out that those five banks alone have outstanding loans to more than 721 condominium associations totaling in excess of a quarter of a billion dollars.  In fact, the SJC specifically noted that statistic in its decision.  

The Real Estate Bar Association for Massachusetts also submitted an amicus brief, drafted by Clive Martine of Robinson & Cole and Diane Rubin of Prince, Lobel, in support of Drummer Boy’s efforts highlighting how successful the implementation of the “rolling lien” has been in the decades since the passage of c. 400.  

The rolling lien recognized by the SJC in Drummer Boy has been a significant factor contributing to the health and vitality of condominium associations in the Commonwealth.  An association’s ability to efficiently collect unpaid common expense fees allows it to provide essential services and maintain the common area property in a manner which preserves value.  It is an enormous victory for condominium associations and owners and all those who do business in the industry, including the banks. However, the national banks refuse to recognize the obvious benefits of the legislation and are on a quest not only to undermine the rolling lien, but even the single six-month priority lien.  It is equally apparent that these national banks have enlisted, if not co-opted, certain federal regulatory agencies in support of that effort.  Therefore, while the benefit of Drummer Boy cannot be overstated, it is important that every unit owner, board, and industry professional remain on-guard and at the ready, as it may be necessary to take action to defend the priority lien to preserve the hard-won benefits it has afforded condominium communities in the Commonwealth.

Tom Moriarty is a partner in the Braintree, MA firm of Marcus, Errico, Emmer & Brooks, and chair of its Litigation Department. He co-authored the amicus brief, coordinated strategy and argued the case before the SJC.

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