Uncertainty in the Application of Connecticut Condominium and Common Interest Ownership Foreclosure Statutes- a Tale of Two Governing Acts
| Pages | 223 |
| Publication year | 2021 |
66 CBJ 223. Uncertainty in the Application of Connecticut Condominium and Common Interest Ownership Foreclosure Statutes- A Tale of Two Governing Acts
Connecticut General Statutes contain an operative "second" generation condominium act (fn1) and a "third" generation common interest community act ("CIOA"). (fn2) One fundamental difference between these two coexisting statutory schemes which continues to create uncertainty relates to the applicability of either or both acts to the perfection and priority of association liens for unpaid common charges in pre-CIOA condominiums. As a result, conflicts have arisen between condominium associations attempting to invoke protections afforded by CIOA, and banks and unit owners contending that the 1976 Act continues to govern the collection and enforcement of association liens.
This article discusses the dilemma posed by the interaction of the 1976 Act and CIOA as applied to pre-CIOA condominium common charge assessments, explains how several lower Connecticut courts have addressed this apparent ambiguity thus far, and suggests guidelines for the practitioner to consider.
The foreclosure of association liens for unpaid common charges pursuant to the 1976 Act and CIOA differ in two important areas.
First, under the 1976 Act, in order to perfect a condominium association's lien for unpaid common charges, a notice of lien must be filed on the applicable land records. (fn3) CIOA eliminates the need to record a notice of lien for unpaid common charges
by providing that recording of the declaration constitutes record notice and perfection of the association's lien. (fn4)
Second, unlike the 1976 Act, CIOA provides that an association may claim a "super-priority" over first and second mortgagees for up to six months of common charges. Section 47258(b) states that such a lien is prior to all other liens and encumbrances on a unit except:
(1) liens and encumbrances recorded before the recordation of the declaration ... (2) a first or second security interest on the unit recorded before the date on which the assessment sought to be enforced became
delinquent, . . . and (3) liens for real property taxes and other governmental assessments or charges against the unit .... The lien is also prior to all security interests described in subdivision (2) of this subsection to the extent of the common expense assessments ... which would have become due in the absence of acceleration during the months immediately preceding institution of an action to enforce either the association's lien or a security interest described in subdivision (2) of this subsection.
Although § 47-214 defines the scope of CIOA with respect to condominiums created prior to January 1, 1984, an ambiguity exists as to whether either or both acts should be applied to ascertain the perfection and priority status of common charge assessments accruing thereon after January 1, 1984. Section 47214 states that CIOA applies to all common interest communities created on or after January 1, 1984 (and therefore the 1976 Act is no longer applicable to the formation of new communities). In addition, § 47-216 states that:
Section ... 47-258.[regarding lien perfection and priority] . . . applies] to all common interest communities created in this state before January 1, 1984; but ... only with respect to events and circumstances occurring after January 1, 1984, and do[es] not invalidate existing provisions of the declaration, bylaws or surveys or plans of those common interest communities.
The contrast between the different protections offered by the 1976 Act and CIOA, coupled with an apparent presumption in favor of retroactive application of CIOA, have resulted in inconsistent approaches being taken by Connecticut superior courts to date. (fn5)
In Connecticut National Bank v. Ridgeway, (fn6) the court applied both the 1976 Act and CIOA in order to quantify the scope and establish the priority of an association's lien over a foreclosing first mortgage lender. "Reading" both governing acts together, the court in Ridgeway held that where a statutorily mandated notice to bidders indicated that the foreclosure by sale was subject to "condominium charges," the purchasing
mortgagee was responsible for the six months of unpaid assessments claimable by the association. (fn7)
Insofar as § 47-216 delineates the applicability of CIOA (including § 47-258) to condominiums established under the 1976 Act, the court was apparently persuaded that the General Assembly intended that the Acts be construed together, and specifically, "that the six months' priority of § 47-258" was applicable. (fn8) In support of such contention, the Ridgeway court cited to the language of the drafters of the Uniform Common Interest Ownership Act ("UCIOA"), (fn9) recognizing that the awarding of six months' assessments was "[a] significant departure from existing practice." (fn10) Notwithstanding the court's
emphasis on the fact that the bidding mortgagee had actual notice of the unpaid assessments, its willingness to exercise its equitable powers to protect the association was apparent. (fn11)
A second alternative thus far utilized by courts in Connecticut is to invoke C10A protections regardless of the governing act under which the subject condominium was created. For instance, the court in Hayes House Condominium v. Galvez (fn12) neglected to consider the applicability of the 1976 Act in connection with a foreclosure action brought for common charges, assessments and interest accruing since 1987. (fn13) By focusing strictly upon the commencement date of the alleged breach or "event" rather than the date of recordation of the subject declaration (and the law governing at the time of formation), the court in Galvez applied portions of § 47-216 so as to invalidate any attempt to bring a foreclosure action pursuant to the 1976 Act. (fn14)
While courts have applied C10A alone and in conjunction with the 1976 Act, the 1976 Act may nonetheless be solely applicable in those instances where the constituent documents mandate compliance with its provisions. Section 47-216 prohibits the application of CIOA provisions where to do so would result
in the invalidation of provisions of the constituent documents of pre-CIOA condominiums. Therefore, if specific reference is made in a declaration to the 1976 Act or § 47-77, and an "opt-in" amendment has not been properly and fully effectuated, (fn15) it would appear that a defendant owner, lender, or subsequent encumbrancer could successfully challenge utilization of CIOA's perfection and priority protections. Inasmuch as CIOA does not invalidate or amend the 1976 Act, (fn16) it is also arguable that references within operative documents to "governing law" or the 1976 Act, "as amended," do not automatically invoke CIOA protections, but instead imply the applicability of § 47-216 to such condominiums.
While the diligent practitioner will scrutinize all relevant condominium documents in preparing or answering any condominium foreclosure complaint, an element of uncertainty has attached to Connecticut condominium law practice attributable to the interaction of the 1976 Act and CIOA. The potentially retroactive application of CIOA, often taken for granted, should not, however, be assumed, particularly where legislative guidance is apparently lacking.
There is no clear legislative history regarding the intent of the Connecticut General Assembly in enacting CONN. GEN. STAT. §§ 47-216 (fn17) or 47-258. Nor is there any discussion in the legislative
history of CIOA evincing an intent to uniformly apply CIOA retroactively. Most notably, CIOA's legislative history is devoid of any reference to the 1976 Act, suggesting that no attempt was made to delineate the intended application or interaction of either or...
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