– By Laurie F. Masotto, Esq. (originally published in July 1998)
A recent U.S. Supreme Court decision could be helpful to homeowner associations in collecting judgments for delinquent assessments in cases where the Internal Revenue Service (“IRS”) records a lien against the debtor’s real property after an association’s judgment lien. In U.S. v. Estate of Romani, the Supreme Court resolved a conflict between two federal statutes, one which provides that federal tax liens “shall not be valid” against properly recorded prior judgment liens, and the other which provides that, in certain circumstances, claims of the U.S. Government “shall be paid first.”
In 1985, a Pennsylvania court entered a $400,000 judgment against Romani. The judgment was recorded in the county clerk’s office, thereby becoming a lien against RomaniÕs real estate. Later, the IRS filed a series of tax liens on Romani’s property, totalling $490,000. Romani died in 1992, leaving an estate worth only $53,001. The estateÕs administrator sought permission from the court to transfer the real property to the judgment creditor, but the IRS claimed that its later-recorded tax lien had priority.
The Supreme Court decided that a prior-recorded judgment lien prevails over a later-recorded federal tax lien and authorized conveying the property to the judgment creditor. This decision is important for homeowner associations in situations where there is not enough money to satisfy creditors. So long as an association’s judgment lien is recorded before IRS tax liens, the association should have priority in satisfying its judgment.