HOA Liens in a Chapter 13 - 2004 New Jersey Case

A New Jersey District court examined the issue of an HOA "lien" on real property.  In the plan, the Debtor sought to surrender the real property back to the HOA.  The HOA objected and the Court held that an objection timely filed an properly prosecuted prevents confirmation of a plan under 1325(a)(5)(A).


Of interesting note is the analysis of HOA liens contained in the opinion which follows:


 

Homeowners' associations are created in New Jersey through a declaration of covenants, conditions, and restrictions contained in deeds and association bylaws. See Highland Lakes Country Club & Community Association v. Franzino, 186 N.J. 99, 110 (2006), citing E. Richard Kennedy & Mark D. Imbriani, The Rights of Tenants in Condominium and Homeowner Association Communities, 174 N.J. Law. 18, 18 (1996). Homeowners' associations may record these governing documents under N.J.S.A. 46:26A-2,8 as those documents affect title to real estate. See Highland Lakes, supra, 186 N.J. at 111. Once recorded, the recordation serves as notice to subsequent judgment creditors and purchasers. See N.J.S.A. 46:26A-12.9 These recorded covenants create a lien on the property. See Highland Lakes, supra, 186 N.J. at 111, citingLeisuretowne Ass'n, Inc. v.

McCarthy, 193 N.J. Super. 494, 501 (App. Div. 1984).

There are three types of special rights encumbering or chargeable to property: common law liens, equitable liens, and statutory liens. Id., citingJ.T Evans Co. v. Fanelli, 59 N.J. Super 19, 22 (Law Div. 1959). Homeowners' association liens are classified as equitable liens because they are created by the covenants contained in members' deeds. Id., citingFirst Fed. Say. & Loan Ass'n v. Bailey, 316 S.C. 350 (S.C.Ct. App. 1994). "For an equitable lien to arise there must be a debt owing from one person to another, specific property to which the debt might attach, and an intent, expressed or implied, that the property will serve as a security for the payment of the debt." Id. at 111-112, quotingFirst Fed. Sav. & Loan v. Bailey.

In re Specht

United States Bankruptcy Court for the District of New Jersey

June 16, 2014, Decided

Chapter 13, Case No. 10-26741 (CMG)