Rhode Island Supreme Court Holds Condominium Lien Foreclosure Sale Extinguished Prior-Recorded First Mortgage

The Rhode Island Supreme Court recently held that a condominium lien can extinguish a prior-recorded first mortgage on the property.  See Twenty Eleven, LLC v. Botelho, 127 A.3d 897 (R.I. 2015).  In 2004, an individual purchased a condominium unit and simultaneously executed a mortgage securing a note in the amount of $114,400.  In 2011, the condominium association foreclosed on the property due to unpaid condominium assessment fees in the amount of almost $7,500, and the property was sold to the plaintiff in this action.  In 2013, the mortgagee attempted to foreclose on the property, and the plaintiff instituted an action seeking to quiet title, arguing that the condominium lien had super priority status and therefore that the 2011 foreclosure sale extinguished the mortgage.  Though the Superior Court dismissed the plaintiff’s action, the Supreme Court reversed.  It held that, pursuant to a state statute, six months of condominium assessments are given priority over prior-recorded mortgages.  See 34 R.I. Gen. Laws Ann. § 34-36.1-3.16.  Therefore, upon the 2011 foreclosure sale, the mortgage was extinguished, despite the fact that it was recorded prior to the condominium lien.  The Court noted, however, that another provision of the statute allows a first mortgagee the right of redemption if it pays the condominium association the full amount of the lien within 30 days of the sale.  See 34 R.I. Gen. Laws Ann. § 34-36.1-3.21.  Nonetheless, as the mortgagee in this case failed to do so, its mortgage was extinguished.  Recognizing that the decision meant that a $7,500 condominium lien had extinguished a $114,400 prior-recorded mortgage, the Court held “we are mindful of the implications of our holding today and the draconian nature of its effects. And yet, we are also reminded of the ancient maxim ‘dura lex sed lex.’ which stands for the proposition that although the law may be harsh, it is still the law.” 

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.