(I Swear This Is Not A Boring Post About) Foreclosures And Statutes Of Limitations

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Mortgage (pd)Although foreclosures have not been in the news as much lately as they were several months ago, New Jersey courts still issue at least one or two decisions per week involving residential foreclosures. While I have written about some of the more interesting ones in the past (here, here, and here), most now follow a familiar pattern – final judgment is entered against a borrower, the borrower moves to vacate the judgment arguing that the lender lacks standing, and (almost always) the court finds that the lender had standing and denies the motion. Every now and again, however, a court addresses an interesting issue worth writing about. The Law Division's decision in Deutsche Bank National Trust Company v. Hochmeyer is one of these cases.

In Hochmeyer, defendant entered into a mortgage with a maturity date of June 1, 2036 that was recorded on October 25, 2007. Defendant defaulted on December 1, 2006. Remember these dates. They will be important later on.

Under New Jersey law, a lawsuit to foreclose on a residential mortgage must be brought before the later of (1) six years from the date when the last payment is made or "the maturity date set forth in the mortgage," OR (2) thirty six years from the date the mortgage was recorded, OR (3) twenty years from the date of default. In other words, every foreclosure lawsuit has three potential end dates for the statute of limitations, but only the earliest one counts. 

In Hochmeyer, the parties agreed that calculating the limitations period using the second or third options would yield dates many years in the future — thirty six years from the date the mortgage was recorded would be October 25, 2043, and twenty years from the date of default would be December 1, 2026. They disagreed, however, over the calculation under the first option. The difference was important because, under defendant's approach, the date not only would have been the earliest one, and thus the operative one, but it would have expired before the complaint was filed rendering the complaint untimely. Plaintiff obviously disagreed with defendant's approach. For the reasons set forth below, the court sided with plaintiff.

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No, You Cannot Enforce A Mortgage That Has Already Been Paid In Full

by: Peter J. Gallagher (@pjsgallagher)

The Appellate Division recently dealt with an unusual situation involving a borrower trying to enforce a mortgage, which had been satisfied years earlier, against a lender that was foreclosing on a different loan. While disputes occasionally arise between lenders regarding which loans have priority over others for the purpose of foreclosure, it is highly unusual for a borrower to attempt to enforce a mortgage, much less one that had been fully satisfied. Nonetheless, this was precisely what the Appellate Division faced in Valley National Bank v. Meier.

The facts of Meier were not disputed. In 1999, the Meiers obtained a loan from Community Bank of Bergen County for $168,000, which was secured by a purchase money mortgage. At the time, Mr. Meier was the president, CEO, and chairman of the board of Community Bank, which later merged with Valley. Six years later, the Meiers obtained a home equity loan from Community Bank that was also secured by a mortgage on the same property. Two years after that, Mr. Meier paid off the original mortgage, allegedly using pre-martial assets to do so. At some point prior to paying off the mortgage, the Meiers divorced. Instead of getting a discharge of the mortgage after paying off the note, Mr. Meier received a written assignment of the mortgage which he subsequently recorded.

 

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Does A Condominium Association Have Any Recourse When A Court Denies Its Request For Legal Fees?

Kate Muscalino aims to answer that question in her recent article, "You May Have Recourse When A Court Denies Your Board Attorneys's Fees,"  which begins:

Collections have become an area of increasing concern for condominium associations, as some unit owners struggle to pay their common charges on time and in full. As unit owners' debt continues to rise, associations are left with few options to collect: a lien on the unit and a lawsuit against the individual unit owner.

Many condo associations have been frustrated in their attempts to collect from a unit owner individually, as judges are often sympathetic to delinquent unit owners, offering extensions, scrutinizing certifications of amounts due and reducing or eliminating the association's ability to collect attorneys' fees.        

Click here for the rest of the article.

When Do Condominium Associations Have Standing To Sue Under The Consumer Fraud Act?

by:  Peter J. Gallagher

In a recent decision, the Appellate Division restated and clarified the rules regarding when a condominium association has standing to sue a developer.  In Belmont Condominium Association v. Geibel, an association sued the sponsor/developer/contractor of the Belmont, a seven-story, thirty-four unit condominium in Hoboken, asserting common law fraud and negligence claims along with statutory claims under both the New Jersey Consumer Fraud Act (“CFA”) and The Planned Real Estate Development Full Disclosure Act (“PREDFDA”).  The claims arose out of the allegedly faulty construction of the Belmont, and certain pre-construction statements from the developer, including that it had “overseen the building and renovation of Over 400 Single Family & Condominium Homes.”  (Although largely irrelevant to the issues addressed by the Appellate Division, it turned out that the Belmont was actually the first building that the developer’s owner and general manager had ever constructed.)  As it relates to the faulty construction, the association alleged that the building was “plagued by water leaks” almost immediately after construction was complete.  These leaks impacted both the individual units and the common elements.  After years of repairs that did not correct the problem, the association sued the developer.  The association argued that construction defects were the cause of the water filtration, while the developer blamed the problems on poor and inadequate maintenance.        

Among other things, the developer in Belmont argued that the association lacked standing to bring claims under the CFA.  At the outset, the Appellate Division observed that New Jersey courts take a liberal approach to standing, and  have historically given wide recognition to suits by condominium associations.  It then analyzed the language of the New Jersey Condominium Act (“NJCA”) to determine whether the association had standing.  As it related to claims arising out of damage to the common elements, the Appellate Division held that the association had standing to sue because the NJCA vests condominium associations with the “exclusive right”(emphasis in original) to sue a developer for defects pertaining to the common elements, and generally prohibits individual unit owners from doing so. 

The Appellate Division rejected the developer’s argument that the association lacked standing because it could not demonstrate reliance by the original purchasers on any of the alleged misstatements.  On this point, the Appellate Division noted that reliance is not an element required to sustain a claim under the CFA.  The Appellate Division also rejected the developer’s argument that the association could only recover damages for the unit owners who actually sustained damage as a result of the developer’s alleged misrepresentations.  The Appellate Division held that because the NJCA allows associations to sue for damages to the common areas sustained by “any or all” of the unit owners, it was entitled to recover all of the damages necessary to repair any damages, not a prorated amount based on the number of unit owners who identified damages. 

However, the Appellate Division held that the association lacked standing to sue for damages to the individual units because the NJCA only vests it with authority to sue or be sued in connection with damages to common elements.  In Belmont, the damages associated with individual units all related to the windows, which the Appellate Division held were “personal to the unit owners,” and therefore not part of the Belmont’s common elements.  On this point, the Appellate Division reviewed the definition of common elements contained in both the NJCA and the master deed for the Belmont, neither of which identified windows as common elements.  Once the Appellate Division concluded that the windows were unit elements, not common elements, its decision on standing was a simple one because it had already concluded that an association has standing to sue for damage to common elements, but lacks standing to sue for unit elements.   

Good News For Condo Collections

by:  Katharine A. Muscalino

Collections have become an area of increasing concern for condominium associations, as unit owners struggle to pay their maintenance fees on time and in full during the current economic downturn.  As unit owners’ debt continues to rise, associations are left with few options to collect: a lien on the unit and a lawsuit against the individual unit owner.

Many condominium associations have been frustrated in their attempts to collect from a unit owner individually, as Special Civil Court judges are often sympathetic to delinquent unit owners, offering extensions, scrutinizing certifications of amounts due, and reducing or eliminating the association’s ability to collect attorneys’ fees.  Grandview at Riverwalk Port Imperial Condominium Association is one such association, but its frustrations were recently assuaged on appeal in Grandview at Riverwalk Port Imperial Condominium Association, Inc. v. Han

In this case, the association sued a unit owner for failure to pay maintenance fees, only to have the Special Civil Court inexplicably deny their demand for attorneys’ fees.  The Association appealed the judge’s rejection of their demand and the Appellate Division reversed the Special Civil Court, finding that the fees were authorized by statute and by the Association’s governing documents.  Noting that the unit owner had not objected to reasonableness of the attorneys’ fees and that the Appellate Division itself perceived “nothing unreasonable” in the attorneys’ fees, the Appellate Division remanded the matter to have the judgment amended to reflect the attorneys fees.