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Common Interest Associations’ Ability to Collect Past Due Assessments

Published: December 17th, 2015

By: Brian M. Stephens

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Homeowners’ associations (“HOAs”) across Florida run into problems when it comes to trying to collect past due assessments. This problem is especially apparent in cases where the owner’s unit for which the past due assessments were owed has entered foreclosure.

Generally, a foreclosure proceeding by a senior lien holder – like a lender who forwarded funds to allow for the purchase of property – will extinguish the rights of junior lien holders – like HOAs which have established lien rights for unpaid assessments. Thus, many HOAs have shared concerns that the right to collect on a lien for the unpaid assessments would be extinguished in foreclosure and would, thus, be uncollectable.

The legislature attempted to save the HOA from this fate by giving it another party from whom they could collect the assessments – the new owner. Florida Statutes 720.3085(2) not only states that parcel owners must pay assessments from date of ownership, but the statute also provides that both the new owner[1] and the owner whose rights were foreclosed are jointly and severally liable for past due assessments. Thus, the legislature has guaranteed the HOA’s the right to continue to pursue the delinquent homeowner and the power to seek payment of the assessment from the new owner.

Florida Statutes 720.3085(2), however, will not always overcome that which is provided in the HOA’s declaration – even where the language in the declaration is in direct conflict with this provision of law. Thus, a declaration’s language can specifically disclaim the HOA’s right to continue to pursue the delinquent owner as well as prevent the HOA from seeking payment for the assessments from the new owner.[2]

Subtle factors can come into play in determining whether the HOA’s declaration will prevent the HOA from collecting from the new owner. But, generally, the declarations creating this collection problem share common traits. These problem declarations typically: (1) were created prior to the enactment of 720.3085(2), F.S., (2) specifically disclaim the right of the HOA to collect from the new owner, and (3) do not contain language that the declaration subjected itself to future statutory changes – like the adoption of 720.3085(2), F.S. A simple change in this language, at least for one court, would have meant the difference between the HOA being able to collect the unpaid assessment versus going home empty handed.[3]

Courts give a reason for why the statute cannot overcome the declaration in this instance. That is, Chapter 720 of the Florida Statutes is not designed or intended to overcome contractual rights created by HOA agreements and declarations.[4] Where the declaration creates certain contract rights – for example, by stating that a purchaser in foreclosure will not be subject to or liable for the unpaid assessments – then those contract rights should be respected. Courts, thus far, have resisted infringing on the promises made in the declaration. Case law is still developing on the subject, however, and there is a question as to whether the provisions in the declaration will be allowed to continue to trump the statute.

The moral to the story is that HOAs should carefully consider what their governing documents do and do not say. A few simple words, or lack thereof, may mean that the HOA will go home empty handed when trying to collect unpaid assessments from a new purchaser.

About the Author:
Brian M. Stephens is an associate in Dean Mead’s Viera/Melbourne office. He represents businesses and developers in various aspects of commercial and residential real estate, leasing, financing, land use, title claims and growth management. He may be reached at (321)259-8900 or by email at BStephens@deanmead.com.

 

[1] Mortgagees (lenders) are not totally exempt from liability get some preferential treatment. F.S., 720.3085(2)

[2] See generally, Pudlit 2 Joint Ventures, LLP v. Westwood Gardens Homeowners Association Inc., 40 Fla. L. Weekly D1248a (Fla. 4th DCA 2015); Genesis RE Holdings, LLC. v. Woodside Estates Homeowners Association, Inc., FLWSUPP 2302GENE (17th Judicial Circuit Broward County 2015); Willoughby Estates v. Bank United, FLWSUPP 2302WILL (15th Judicial Circuit Palm Beach County 2015).

[3] See generally, Genesis RE Holdings, LLC. v. Woodside Estates Homeowners Association, Inc., FLWSUPP 2302GENE (17th Judicial Circuit Broward County 2015).

[4] Pudlit 2 Joint Ventures, LLP v. Westwood Gardens Homeowners Association Inc., 40 Fla. L. Weekly D1248a (Fla. 4th DCA 2015)