A. In the case of a sale of a unit where delivery of a disclosure statement is required pursuant to Subsection C of Section 54 [47-7D-2 NMSA 1978] of the Condominium Act, a seller shall, before conveying a unit, record or furnish to the purchaser releases of all liens affecting that unit and its common element interest which the purchaser does not expressly agree to take subject to or assume. This subsection does not apply to any real estate which a declarant has the right to withdraw.

B. Before conveying real estate to the association, the declarant shall have that real estate released from all liens the foreclosure of which would deprive unit owners of any right of access to or easement of support of their units, and all other liens on that real estate unless the disclosure statement describes certain real estate which may be conveyed subject to liens in specified amounts.

History: Laws 1982, ch. 27, § 63.

Compiler's notes. — This section is similar to § 4-111 of the Uniform Condominium Act, with the following main exceptions: "disclosure" is substituted for "public offering" throughout this section of the state Condominium Act; and the bracketed language in subsection (a) of § 4-111 of the Uniform Condominium Act, relating to the provision of a surety bond or substitute collateral for or insurance against a lien, is deleted.

COMMISSIONERS' COMMENT

The exemption for withdrawable real estate set forth in subsection (a) [Subsection A] is designed to preserve flexibility for the declarant in terms of financing arrangements. Theoretically, a developer might partially avoid the lien release requirement of subsection (a) [Subsection A] by placing part of the common element improvements such as a swimming pool or tennis court on withdrawable real estate. By doing so, it could separately mortgage that part of the common elements without being obligated to discharge the mortgage or secure partial releases when individual units are sold. (However, even if there were no withdrawable real estate exemption from the release-of-lien requirement, developers could still separately mortgage such improvements as pools and tennis courts without having to discharge the mortgage on sale of units. All they would have to do is leave the particular real estate out of the condominium and then convey it directly to the association subject to the mortgage.)

If a mortgage or other lien created by or arising against the developer attaches to withdrawable real estate after the declaration has been recorded, a lapse of the developer's right to withdraw the real estate would also terminate the rights of the lienor, since the lien would attach only to the developer's interest (the right to withdraw). However, an alert lienor would not permit the right to withdraw to lapse without taking steps to see that the right to withdraw is exercised. If the mortgage or other lien attached to the real estate and was perfected before the condominium declaration was recorded, lapse of the right to withdraw would not affect the lienor's rights and it could foreclose on the real estate whether or not the developer had lost the right to withdraw. As a practical matter, whether the mortgage or other lien against withdrawable real estate arises before or after the declaration is recorded, unit owners may find that, if the association does not release liens on withdrawable real estate containing common elements, the lienor will be able to withdraw the land and deprive the unit owners of its use. Therefore, unit purchasers and their counsel should be alert to that possibility.

If units are created in withdrawable real estate, the units, when sold, are subject to the release-of-lien rule of subsection (b)(1) [Subsection B] and after a unit in a particular withdrawable parcel is sold, that parcel can no longer be withdrawn. In that case, any lien created by or arising against the developer which attached to the real estate and is subordinate to the condominium declaration would automatically expire.

Am. Jur. 2d, A.L.R. and C.J.S. references. — 15A Am. Jur. 2d Condominiums and Cooperative Apartments §§ 18, 21, 22, 26, 38.

31 C.J.S. Estates § 153 et seq.