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Court of Appeals Clarifies Condominium Lien Priority
Real Property Law Section 339-z provides that a condominium board's lien for unpaid common charges shall have priority over liens other than “sums unpaid on a first mortgage of record.” When a first mortgagee also extends a second mortgage loan, and consolidates the two mortgages, does the condominium's lien enjoy priority over the second mortgage? In Plotch v. Citibank, N.A., NYLJ 5/11/16, p. 22, col. 1, the Court of Appeals held that when both mortgages loans were extended before any default on common charges, both mortgages enjoy priority over the condominium's lien.
The Plotch Facts
In 2000, Citibank extended a $54,000 first mortgage loan to the owner of a condominium unit, and recorded the mortgage. The following year, Citibank extended a $38,000 second mortgage loan to the same unit owner, and the parties entered into a consolidation agreement. The second mortgage and the consolidation agreement were both recorded. Subsequently, the unit owner defaulted on its common charges and seven years later, the condominium filed a lien for unpaid common charges. The condominium foreclosed on its lien, and, in a 2010 foreclosure sale, Plotch bought the unit for $15,100, subject to “[t]he first Mortgage of record against the premises.” Plotch then brought an action for a judgment declaring that Citibank's second mortgage was subordinate to the lien for common charges, and that Plotch therefore owned the unit subject only to Citibank's first mortgage. Supreme Court and the Appellate Division both concluded that both of Citibank's mortgages enjoyed priority over the lien for unpaid common charges, and Plotch appealed.
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