New Jersey Limits HOA Lien Priority to Six Months of Assessments, Expiring in 60 Months

New Jersey runs two parallel lien statutes with almost identical text. Condominiums are governed by the Condominium Act at N.J.S.A. 46:8B-21, in Article V of chapter 8B. Every other planned real estate development association, meaning the homeowners associations governed by the Planned Real Estate Development Full Disclosure Act, is governed by N.J.S.A. 45:22A-44.1, which the Legislature added in 2019 so that non-condominium associations would have the same collection tool. The two sections use the same six-month ceiling, the same 60-month expiry and the same foreclosure language, so the practical answer is the same whether the buyer bought a condominium unit in Hoboken or a townhouse in a Marlton planned community.

Under subsection a. of both sections the lien secures far more than the missed dues. It covers any unpaid assessment for a share of common expenses or otherwise, any other moneys duly owed the association, interest, and any late fees, fines, expenses and reasonable attorney's fees imposed or incurred in collecting the unpaid assessment. There is one hard limit written into the same sentence: an association shall not record a lien in which the unpaid assessment consists solely of late fees. The lien only takes effect when a claim of lien is recorded in the public records of the county where the unit sits, and that claim must state the description of the unit, the name of the record owner, the amount due and the date when due, must include only sums already due and payable when it is recorded, and must be signed and verified by an officer or agent of the association. Once the owner pays everything the lien secures, the paying party is entitled to a recordable satisfaction of lien.

The priority is deliberately narrow. Subsection b. limits it to a lien resulting from customary assessments, and both sections define that term to mean the periodic payments due for regular and usual operating and common area expenses under the association's annual budget. Reserves for contingencies are excluded, and so are late charges, penalties, interest and any fees or costs for collection or enforcement of the assessment or of the lien. A special assessment for a new roof therefore earns no priority over the bank. The payments must also be due monthly, or no less frequently than quarter-yearly, in a form acceptable to the Federal National Mortgage Association so that a superior mortgage on the unit is not disqualified from purchase by Fannie Mae as a first mortgage.

Four timing rules decide whether the priority is available at all. As against a particular mortgage, the association's lien must be recorded before the association receives the summons and complaint in an action to foreclose that mortgage, or before a lis pendens for that foreclosure is filed with the county recording office. Where several liens are filed, either by one association or by more than one association on the same unit, the total granted priority still cannot exceed that single six-month figure, and priority runs by recording date with the earliest recorded lien taking first use of it. Apart from the cumulative annual renewal, the priority expires on the first day of the 60th month following the date the association's lien was recorded. And an association cannot take a second bite: if an earlier association lien has already obtained priority over the same mortgage for a 60-month period, a later lien gets no priority over that mortgage. When it records a lien that may carry priority, the association must notify the holder of the first mortgage in writing, and an association that makes a good faith effort but cannot identify the mortgage holder is deemed in substantial compliance.

Subsection f. is the foreclosure power. Liens for unpaid assessments may be foreclosed by suit brought in the name of the association in the same manner as a foreclosure of a mortgage on real property, and the association may bid on the unit at the foreclosure sale and then acquire, hold, lease, mortgage and convey it, unless the master deed or bylaws prohibit that. The association can also sue for a money judgment on the arrears without waiving the lien. Nothing in either section alters the status or priority of municipal liens under R.S. 54:5-1 et seq., so unpaid municipal taxes still outrank the association.

Subsection c. makes the grantor and grantee of a voluntary conveyance jointly and severally liable for all assessments accrued to the closing date, without prejudice to the grantee recovering from the grantor, and the grantee alone is liable for what accrues while the grantee owns the unit.

Cooperatives sit outside this scheme. N.J.S.A. 45:22A-44.1(g) states that the section does not apply to cooperatives and does not diminish the priority of a cooperative's issuer's lien or security interest in the shares of stock and the appurtenant proprietary lease, which is perfected when the shareholder's ownership interest first comes into existence.

An owner who falls behind on assessments faces a recorded claim of lien in the county records that also carries interest, late fees, fines, collection expenses and the association's reasonable attorney's fees. The association may then foreclose that lien by suit in its own name in the same manner as a mortgage foreclosure on real property, and unless the master deed or bylaws forbid it the association may bid at the sale and take title to the unit. It may alternatively sue for a money judgment on the arrears without giving up the lien.

The owner's protections are structural rather than procedural: only the aggregate customary assessment for the six months before recording can outrank a prior first mortgage, reserves and special assessments never do, a lien for late fees alone may not be recorded, and the priority dies on the first day of the 60th month after recording unless cumulatively renewed each year. S. and liens for federal taxes are unaffected and remain ahead of the association. Paying everything the lien secures entitles the payer to a recordable satisfaction of lien.