Posted by Adam S. Kessler, Esq.

Condominium associations, their boards and management companies often are uncertain how to handle collection of assessments after a unit owner has filed for bankruptcy.

The General Rule

The New Jersey Condominium Act, N.J.S.A. 46:8B-1, et seq. gives a condominium association the power and responsibility to make and collect assessments. N.J.S.A. 46:8B-14(b).

The Condominium Act specifically provides that by acceptance of title, a unit owner is “conclusively presumed to have agreed to pay his proportionate share of common expenses accruing while he is the owner of a unit.” N.J.S.A. 46:8B-17.

The Appellate Division has noted that a unit owner’s obligation to pay assessments is nearly “unconditional”. Glen v. June, 344 N.J. Super 371 (App. Div. 2001).

How Bankruptcy Filings Effect the General Rule

A unit owner is responsible to an association for assessments commencing from the date a unit owner files a bankruptcy petition.  This is because post-petition condominium assessments are exemptions to discharge.

Post-Petition Maintenance Prior to Discharge

Under Section 523(a)(16) of the Bankruptcy Code, post-petition condominium assessments are payable and non-dischargeable as soon as the debtor files a petition.  However, associations cannot pursue the post-petition non-dischargeable assessments until a discharge is granted by the Bankruptcy Court.

The Bankruptcy Court held in In re Hawk, 314 B.R. 312 (Bankr. D.N.J. 2004), that post-petition condominium assessments are a “claim”, as that term is defined in Section 362(a)(5) and (6), that arose upon the debtor taking title and before the commencement of the bankruptcy.  As a result, pursuing post-petition maintenance prior to discharge would violate the Bankruptcy Code’s automatic stay provision.

The Hawk Court reasoned, in part, that Congress defined when post-petition fees and assessments can and cannot be discharged in Section 523(a)(16), thereby implicitly affirming that future post-petition assessments are claims. The Court stated that if post-petition fees were not claims, they would not be subject to discharge.

Conclusion

Even if a discharge is granted for pre-petition assessments, the unit owner continues to be responsible to the association for post-petition assessments.  However, post-petition assessments are subject to the automatic stay provision of the Bankruptcy Code and cannot be pursued by the association until a discharge is granted by the Bankruptcy Court.