New Jersey Court Finds Residual Beneficiary of Homeowner’s Estate is Not Liable for HOA Assessments

UNPUBLISHED New Jersey Appellate Court decision (July 8, 2014).

A homeowners association sought to collect unpaid assessments that accrued after the death of a homeowner against the homeowner’s surviving daughter who was the “residuary beneficiary” and the executrix under the homeowner’s will. At the time of the mother’s death the property was worth less than the balance owed on a reverse mortgage that the mother had put on the property. The estate had limited funds that were used to pay the association’s monthly assessments after the mother’s death until they ran out. The association then sued both the estate and the daughter for the unpaid assessments that were accruing contending that under New Jersey law when a person dies, his or her property devolves to the person to whom it is devised by will. The association thus contended that the daughter became the owner of the mother’s home upon the mother’s death and therefore became responsible for payment of all of the association’s assessments that thereafter came due. The daughter contended that the assessments were owed by the estate.

The trial court held that only the homeowner’s estate was liable for the unpaid assessments that accrued after the homeowner’s death because devolution is subject to the rights of creditors and the administration of the estate. Since the property was left to the daughter as part of the “residuary” of the estate and not as a specific devise, only the estate was responsible for the assessments.

In affirming the trial court’s decision, the appellate court stated that under the applicable New Jersey law, is clear that because the property was not specifically devised to the daughter and instead was included in the residuary of the mother’s estate, the executor of the estate (the daughter) was responsible for taking possession and managing the property, including payment of taxes, mortgage interest, and other charges (such as the association’s assessments) on behalf of the estate and as part of the estate’s administration. Accordingly, the daughter was not personally responsible for payment of the association’s assessments that accrued after the mother’s death.

See case decision: Homestead_At_Mansfield_Homeowners_Ass’n_v._Estate_of_Mount_(N.J._Super._App._Div._2014)1