Over the years, it has become the norm to have delinquent common expenses paid by an owners’ mortgage lender. In situations where there is no mortgage lender or the lender refuses to make payment, condominiums typically need to rely on either the owner curing the arrearages or obtain a court order to foreclose on its lien.

In response to Hennepin, many states, including Massachusetts, amended their tax foreclosure statutes.

A Refresher on Town of Milford v. Boyd, 434 Mass. 754 (2001)

There is a rarely used third option for instances in which the town where the property is located has recorded a tax taking. In 2001, MBM’s Tom Moriarty argued the case of Town of Milford v. Boyd, 434 Mass. 754 (2001), before the Supreme Judicial Court. In Milford, the Town had filed a tax taking on units owned by the developer. Once a municipality files a tax taking on property, the municipality becomes the “owner of record” as that term is used in G.L. c. 60, sec. 77, the statutory provision that controls a municipality’s obligation to comply with covenants recorded in the chain of title of the property that call for the payment of money, and the owner must “redeem” title by paying the amounts due and owing to the municipality. In the case, the Courtyard at Milford Condominium Association sued the Town of Milford for payment of unpaid common expenses after the Town filed its tax taking and assumed title. The Land Court found for the association, finding that the common expenses are covenants running with the property and, as owner of record, the Town received the benefit of such covenants, including insurance, common utilities, landscaping and snowplowing. The Town appealed, and the Supreme Judicial Court agreed with the Land Court decision, finding that, pursuant to G.L. c. 60, sec. 77, “the town did benefit from the association’s continued care and maintenance of the common areas.” Boyd, 434 Mass. at 759. As “owner of record” for tax title purposes, the Town still had responsibility for the care and maintenance of the units. The Boyd Court observed that “[p]ermitting the town to avoid payment of the charges from and after the date of the tax taking could “threaten the financial integrity of the entire operation, including the units taken by the town.” Id. at 760, quoting Trustees of the Prince Condominium Trust v. Prosser, 412 Mass. 723, 726 (1992).

Under a tax taking, the municipality assumes an obligation for covenants from which it benefits that call for the payment of money. There is no limited priority as there is for first mortgage holders under G.L. c. 183A, sec. 6. Further, the common expense liability would begin as of the date of the tax taking until the date of the decree of tax foreclosure. Whatever amount of common expenses the municipality pays can be added onto the amount the owner must pay to the municipality in order to redeem the property.

Effect of the Hennepin Decision on Tax Takings

In instances in which the municipality has filed a tax taking and there is no mortgage holder, issuing a notice of delinquency against the municipality is a valid option for the association. However, the 2023 U.S. Supreme Court’s decision in Tyler v. Hennepin County, Minnesota, 598 U.S. 631 (2023), affected how municipalities treat tax deficiencies.

In Hennepin, the Supreme Court struck down a Minnesota law, as the state’s strict tax foreclosure laws did not specify what happens to surplus proceeds when the sales price of a property exceeds the amount of the actual tax debt, after a tax foreclosure sale has been finalized. Hennepin County had historically retained the surplus funds and divided them among several county organizations, not paying any surplus monies to the foreclosed owner or to any mortgagee of record, based on the argument that failure to pay real estate taxes meant the property was “abandoned.” The Court, in a unanimous decision, declared that such a scheme violates the Takings Clause of the Fifth Amendment.

In response to Hennepin, many states, including Massachusetts, amended their tax foreclosure statutes. The changes to G.L. c. 60, effective as of November 1, 2024, include: 

- A reduction in interest rate charged, from 16% to 8%;

- Terms of repayment agreements increased from 5 to 10 years;

- Following the recording of a tax taking, a municipality must wait 12 months before filing a tax foreclosure petition;

- Return of surplus proceeds to the property owner;

- After obtaining a foreclosure decree, the municipality must list the property within 180 days with a licensed broker; and

- The property must be sold by public auction if it does not sell within 12 months.

Parting Thoughts

As a municipality must now record the tax taking and then wait 12 months before filing the tax foreclosure petition, absent property owner redemption, the municipality could be liable for much more than 12 months of common expenses. As the Milford decision states that the municipality’s liability lasts from the filing of the tax taking until issuance of the decree of foreclosure, this could leave a municipality on the hook for quite some time, especially if the municipality enters into a payment agreement with the property owner. However, if a municipality pays the common areas expenses on behalf of the tax payer, it clearly has the right to add the debt to the unit owner’s tax obligation ensuring that the municipality will be made whole. The only mistake the municipality can make is to foreclose on the unit without having first paid the common area expense fees as it may then find itself obligated to pay the common expense assessments to the association without any recourse against the unit owner.