In preparing for a recent closing on a refinance, it came to my attention that the Borrower did not have a Declaration of Homestead. A simple fix, but it is surprising how many property owners hold title without the protection afforded by the statute. Under Massachusetts law, an individual may declare a homestead in their principal residence thereby protecting up to $500,000.00 in their home from unsecured creditors (see General Laws of Massachusetts Chapter 188, Section 1).

Example: Joan owns a home, which is her primary residence, and has recorded a Declaration of Homestead. Joan’s credit card company seeks to attach $10,000.00 in credit card debt which Joan contracted for and defaulted on subsequent to the recording of the Declaration of Homestead. The credit card company would be barred from attaching this debt under the statute. It should be noted that Joan is still liable for this debt, but her interest in the property is protected.

Example 2: Dan owns a home, which is his primary residence, and has recorded a Declaration of Homestead. Dan has taken out a second mortgage with his local credit union. Dan then defaults on his second mortgage. In this example, the statute will not protect Dan. The credit union holds a security interest in the property and therefore is a secured creditor who would be exempt.

Summary:

• A Declaration of Homestead protects the investment in one’s primary residence from the claims of unsecured debts up to a maximum of $500,000.00.
• The Declaration of Homestead must be filed with the appropriate Registry of Deeds.
• A Declaration of Homestead will not protect a homeowner from the following: (i) tax assessments, claims and liens; (ii) first and second mortgages; (iii) an execution issued by the Probate Court to enforce a judgment for support; (iv) court judgments based on fraud, mistake, duress, undue influence, or lack of capacity; and (v) debts contracted prior to the recording of the Declaration of Homestead.

In 1992, the Massachusetts legislature provided condominium associations (more commonly known as HOAs) throughout the Commonwealth with a powerful tool, the so called “Condo Super Lien Bill” (M.G.L. c. 183A § 6). Under this law, condominium associations can enforce a lien against condo owners who fail to pay their condo fees. The lien for these unpaid condo fees, as well as attorney’s fees and the cost of collection, have priority over the first mortgage. In order to achieve priority; however, the statute requires that the owner and first mortgagee (i.e. the bank/lender) be provided with a notice once the fees are 60 days delinquent. This first notice is commonly referred to as the 60 Day Notice. A second notice, known as the 30 Day Notice, is then required 30 days prior to filing the lien foreclosure action. The 30 Day Notice is sent only to the lender. Should the unit owner and lender fail to pay the outstanding condo fees, the court may order a lien enforcement sale of the unit. The buyer at the lien enforcement sale would take the condo free of the first mortgage. Clearly lenders will want to avoid this situation and so most every mortgage includes a provision allowing the lender to pay outstanding condo fees on behalf of the unit owner.

In the typical case, when all is said and done the condominium association has collected the outstanding fees, the lender has protected its interest (in the real property) by paying the outstanding fees, and the offending unit owner is left having to repay his lender the condo fees as well as any collection costs and attorney’s fees.

If you are a condominium association in need of assistance with respect to outstanding condo fees, please consult with a Boston real estate attorney before beginning the process to ensure that the statutory requirements of the Condo Super Lien Bill are met.