ASSOCIATION CANNOT CLAIM ASSESSMENTS WHILE IT IS THE OWNER

By
Real Estate Attorney with THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY
https://activerain.com/droplet/4SqL

Under Florida real estate law the new owner is liable for the old past due assessments from the prior owner.  The typical facts are that the homeowner stopped paying the association and the mortgage. The association then forecloses first and often the association is the winning bid at their foreclosure sale for their lien.  But then the lender forecloses on its mortgage and there is a buyer at that mortgage foreclosure sale. Real Estate investors who purchase Florida condominiums or other association homes at real estate foreclosure sales now have been given guidance on their liability to the condominium association (or homeowner association) for past unpaid assessments.

When the buyer at the mortgage foreclosure sale is a third party (not the lender), the buyer does not have the protection of the foreclosure “safe harbor” rules that prevent the condominium or homeowner association from collecting from the lender the unpaid condominium or homeowner association assessments.  The buyer is thus subject to the obligation to pay the back assessments unpaid at the time of the lender’s real estate foreclosure sale.

The law in Florida is governed by statute.  The statute says that a unit owner, regardless of how his or her title has been acquired, including by purchase at a foreclosure sale or deed in lieu of foreclosure, is liable for all assessments which come due while he or she is the unit owner.  Additionally, a unit owner is jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of title.  This liability is without prejudice to any right the owners may have to recover from the previous owner the amounts paid by the owner.

An appellate case that was decided June 1, 2016 had the classic fact pattern that we see in Florida.  The association was the owner of the unit by foreclosure of its own lien.  While it was the owner the association did not pay the assessments.  When the lender finally completed its foreclosure, the association went after the new buyer for condominum assessments both before and after the  lender mortgage foreclosure - including the unpaid assessments that accrued during the time the association was the owner of the unit and thus a "unit owner."

So based on the law I cited above, the new unit owner had a claim against the prior owner (the association) for the unpaid assessments it was being sought by the association.  Now common sense says that if the association did not pay and they were the prior owner, then if the new unit owner had to pay the association for the unpaid assessments, that same new unit owner also had a claim against the association for the monies the new unit owner had to pay the association.

Confusing?  Well it all makes sense if you just follow the money. The appellate court felt that this was a senseless position for the association to take.  The appellate court had a simple was of explaining it – they said that the association is indeed due the money – but the new unit owner is also then due that same money back from the association – therefore,  “it’s basically a wash.” 

You would think that such a simple answer could have been realized by the association, but it took a panel of three judges to show everyone the folly of the association’s demand.

 

The court decision can be found here.

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All Things Florida
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Short Sales and Forclosures ONLY
PALM BEACH COUNTY SHORT SALES
Tags:
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florida real estate attorney
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Ambassador
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Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Richard- I realized that I had trouble following what part of this (not your writing) because it seemed to have tossed away common sense. 

Jun 13, 2016 01:48 PM #1
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Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

This is strange. I thought it was this way before.

Maybe in our cases the associations did not try to do it, but we were told long ago that the Associations could not seek unpaid Association Dues for the time when they were the owners.

I remember one President of the Board made a stupid decision to foreclose when the unit was in short sale, and then whining that now the Association was liable for the Dues, and could not collect it from the Buyer at subsequent Foreclosure by the first lienholder...

Interesting...

Jun 13, 2016 03:16 PM #2
Rainmaker
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Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

A bit greedy from the association in my opinion.  Nice to see a reasonable ruling from the court.

Jun 13, 2016 08:42 PM #3
Rainmaker
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Richard Zaretsky
THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY - West Palm Beach, FL
Florida Real Estate Attorney

There was a time when associations - fed up with the delaying banks - wanted to get at least some control of the property and even rent out the units themselves.  So sometimes the strategy worked by either the association getting rents or the association getting paid on the lien by a purchaser that would try to milk rents from the property until the bank foreclosed.

A recent article out of Tampa showed how at least one investor purchased at association foreclosures and then put the unit into bankruptcy - essentially forcing the lender to negotiate a resoltuion to the loan.

Jun 13, 2016 09:03 PM #4
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Richard Zaretsky

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