A Lender that Secured and Winterized a Condominium Unit is not a “Mortgagee in Possession”

In a published opinion handed down on June 6, 2017, the New Jersey Appellate Division held that a lender’s assignee that winterized a condominium unit and secured the property by changing the locks after the owner/mortgagor defaulted on the loan and vacated the unit is not a “mortgagee in possession” responsible for the payment of condominium fees and assessments. In the matter, Woodlands Community Association, Inc. v. Nationstar Bank, LLC, et al., Docket No. A-4176-15T2, the Appellate Division recognized that where a mortgagee is determined to be in possession of the property, the mortgagee is “liable for delinquent condominium common charges.” However, the Court also reasoned that “[w]hether a mortgagee or its assignee is in possession is determined on a case-by-case basis.”

The Court noted that “[t]he use of the word ‘possession’ in the designation ‘mortgagee in possession’ is somewhat misleading,” citing caselaw holding that “dominion and control” are more descriptive of a mortgagee in possession, rather than actual “possession.” In the matter at hand, the Court held that “[w]e are satisfied that the minimal efforts taken here by defendant to secure its interest in the mortgaged property are not sufficient to convert itself into a mortgagee in possession. Defendant has not taken over the control and management of the unit nor exercised the requisite dominion over the property short of securing the unit.”

The decision settles the issue of whether securing and winterizing a vacant condominium unit following the owner’s default subjects a mortgagee to liability for the assessments. Lenders can rest assured that the mere act of securing their collateral pursuant to the terms of a mortgage after a defaulting mortgagor vacates, without more, will not subject them to liability for unpaid condominium assessments.