When a condominium obtains a judgment for unpaid past assessments, that judgment is capped at the amount awarded by the Court. Any monies collected by way of wage execution, bank execution or any other type of execution (real or personal) should be applied to offset the judgment. If an owner resumes payments subsequent to the entry of the judgment, those payments should be applied to the current assessments only. If the owner makes a payment that exceeds the currently monthly assessment, the Condominium can apply the surplus portion of the payment to offset the judgment.
Stacey R. Patterson, Esq., Counsel
Ansell Grimm & Aaron, P.C.
365 Rifle Camp Road
Woodland Park, New Jersey 07424
973.247.9000 x 423
This is a very interesting question. Generally speaking, payments made on a debt are applied to the oldest balance outstanding, but this is not a hard and fast rule if the parties agree that payments can be applied in a different manner.
With regarding to wage garnishment, the right to a garnishment is based on the judgment obtained. So, payments collected by way of a wage garnishment should be applied to the judgment balance. Other payments can be applied as agreed, or intended, by the parties. If the owner intends that the payments be applied to current amounts owing, the association can accept them this way to keep the current balance current.
Monies collected on any judgment are to be applied in the order set forth in the Governing Documents or applicable state statute. Often they are applied to late fees and interest prior to the underlying principal/assessments due, but reference must be made to the Governing Documents.
At Becker we take the position that only payments received as a direct result of a wage garnishment or levy against the debtor/unit owner’s funds are applied against the judgment balance due. Only direct payments made by the debtor/unit owner to the Association (not through the Sheriff or Court Officer) should be applied against the current maintenance fees or common expense assessments and not the judgment amount unless directed otherwise by the debtor/unit owner.
There are times (however rare), that unit owners will write in the reference line of a check or in an accompanying note with the check, that the payment should be applied “towards the judgment balance”. In such case, the payment should be applied against the judgment balance not the maintenance fees.
Under Section 3315(h) of the Pennsylvania Uniform Condominium Act, unless the declaration provides otherwise, any payment received by an association must be applied first to any interest accrued by the association, then to any late fee, then to any costs and reasonable attorney fees incurred by the association in collection or enforcement and then to the delinquent assessment. This means that payments are applied to the oldest delinquent balance first. Payments are not applied toward any new assessments that have come due after the date of the judgment. Once the judgment has been paid in full, it must be marked as satisfied with the court. If there are any remaining assessments owed after the date of the judgment, then a new collection action must be brought against the unit owner.