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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 40 August 2024 F E A T U R E S T O R Y ADDRESSING LIEN PRIORITY BETWEEN A MORTGAGE AND A HOMEOWNER'S ASSOCIATION'S "SUPER LIEN"—THE NORTH DAKOTA SUPREME COURT'S CLARIFICATION IN GOULD B y T H O M A S C . D Y E R A cross the country, numerous states have passed uniform community housing statutes that create liens for homeowner's associations against units in their commu- nities for unpaid assessments. These liens are typically automatically enforceable upon failure to pay an assessment. Once enforceable, the liens can obtain "super priority" status over other lien holders. The super priority lien of an association has been the source of much litigation, across multiple jurisdictions, between associations and mortgage holders. Recently, the North Dakota Supreme Court provided an inter- esting clarification and analysis on these competing interests when an association attempted to circumvent the recording requirements necessary for perfection in Indus. Comm'n v. Gould, 2024 ND 32 (2024). In Gould, the North Dakota Supreme Court was confronted with an appeal regarding a trial court's order granting summary judgment to the North Dakota Housing Finance Agency (NDHFA) on the issue of priority over the association's lien and NDHFA's right to foreclose. Factually, a group of entities known as "Fendee" built a housing development that included a homeowner's association. The governing documents for the association were recorded in 2013. Of importance in this matter, pursuant to the govern- ing documents, monthly assessment payments were due on the tenth of each month. Carrine Gould purchased the home in question through a loan and mortgage with Guaranteed Rate, Inc., on or about August 30, 2019. Said mortgage was re- corded on or about September 5, 2019. On September 6, 2019, Guaranteed Rate, Inc. assigned the mortgage to NDIC, which was acting on behalf of NDFHA. During the purchase financing process, Fendee charged Gould a monthly assessment on August 31, 2019, but as previously stated, that assessment did not become due until September 10, 2019. In January 2021, Gould failed to make payments on the property and subse- quently defaulted on the note. In Septem- ber 2021, Fendee recorded its lien against Gould for unpaid association assessments, fines, penalties, interest, and legal fees. NDFHA initiated foreclosure on the property in January 2022 due to the 2021 default. Gould then passed away in January 2023, causing Fendee to amend its lien for additional costs in February 2023. Both parties moved for summary judg- ment at the trial level, and the court deter- mined NDFHA had the right to foreclose due to Fendee's liens being subordinate to NDFHA's mortgage. Fendee appealed on the premise that the association's lien was superior due to its super priority status without debt owed, as provided in the association's governing documents. In its analysis, the court relied upon the language in Fendee's recorded gov- erning documents to render a decision. Specifically, a provision of the governing documents stated that the recording of the declaration constitutes record notice and immediate perfection of the associa- tion's lien. The provision further waived any further recording requirements for individual lien claims for unpaid assess- ments, meaning the association's lien was immediately and automatically perfected against all units and unit owners. Another section of Fendee's declaration went on to say that "[t]hese Restrictive Covenants shall be superior and senior to any lien hereafter placed upon any portion of the Subject Property, including the lien of any mortgage or deed of trust." In reviewing this language, the court T H O M A S C . D Y E R is an Associate Attorney at the Pennsylvania office of Hladik, Onorato & Federman, LLP. Dyer is a recent graduate of Widener Commonwealth Law School, where he graduated Magna Cum Laude. During his time in law school, Dyer was a member of the Widener Commonwealth Law Review, where he served on the executive board as the Executive Managing Editor. Dyer earned certificates of achievement in his Property and Bankruptcy courses. Dyer also had the privilege of externing in the chambers of the Honorable Henry W. Van Eck in the United States Bankruptcy Court for the Middle District of Pennsylvania for two semesters. Through his coursework, he obtained a Business Advising Certificate upon graduation. Prior to law school, Dyer earned his B.S. in Business Administration from Saint Joseph's University. There, he graduated Cum Laude with a major in marketing. In his free time, Dyer enjoys watching Philadelphia sports as well as playing basketball.