Washington DC | Dallas TX | Irvine CA
202.628.2000

WBK Industry News - State Regulatory Developments

Tennessee Amends Condominium Act to Protect Priority of Liens

Tennessee has amended its Condominium Act (Act) to clarify the priority of a condominium association (COA) lien in relation to prior recorded mortgage or deed of trust liens in a foreclosure action. The amendments are effective for any foreclosure action initiated on or after June 1, 2016.

Prior to these amendments, the Act provided that a COA lien was prior to recorded mortgage or deed of trust liens in a foreclosure action to the extent of the common expense assessment based on the periodic budget adopted by the COA that would have become due in the absence of acceleration during the six months immediately preceding institution of an action to enforce the COA lien. As amended, the Act now limits the COA lien’s priority to an amount not exceeding 1% of the maximum principal indebtedness of a lien secured by the prior mortgage or deed of trust (Priority Amount). The amendments also clarify that any foreclosure by a COA of its COA lien will be subject to any mortgage or deed of trust encumbering the property and will not extinguish the lien of such mortgage or deed of trust, and that any foreclosure by the holder of a mortgage or deed of trust is subject to the COA lien up to the Priority Amount.

The Act also required, prior to the amendments, that the COA declaration, including delinquent amounts up to the Priority Amount, be recorded in order to constitute perfection of the lien. As amended, the Act now provides that a lien for any delinquent amount up to the Priority Amount is perfected without recording.

A copy of the amended provisions is available here: http://share.tn.gov/sos/acts/109/pub/pc0866.pdf.