Real Estate Attorney with THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY

Several association boards of directors have problems understanding the homeowner association lien rights and how the Florida “safe harbor” exemption to payment works. This article applies to when the investor makes a loan and then forecloses it and gets title at the foreclosure sale.

An important Florida case came out this past Spring that gives a good example.

Here there were two associations – the homeowner association and the community association. There was a foreclosure sale which was going to wipe out the liens of the associations.

The foreclosure action was filed by the lender (who was not the original lender that made the loan) and foreclosure was granted. The foreclosure sale occurred and the lender was the purchaser.

After the foreclosure sale, the associations each issued their estoppel letters to the buyer/lender and included in those letters amounts for violation fines, costs and attorney fees. The lender then filed a complaint to have the additional charges (other than regular monthly assessments under the safe harbor exemption) removed from the amounts the buyer/lender owed the associations.

In the analysis the court looked at the pertinent safe harbor statute which essentially says that the parcel’s unpaid common expense and regular periodic or special assessments that accrued or came due up to 12 months immediately preceding the foreclosure and for which payment by the association has not been received is to be paid by the purchaser at the foreclosure if the purchaser is the plaintiff in the foreclosure action. The amount is the one year of assessments or 1% of the original mortgage debt, whichever is larger.

There are some other qualifications but they are just details.

But the court went on to look at the argument of the associations where the law says that any payment received by an association shall first be applied to any interest accrued, then to any late fees and then costs and attorney fees, and then to the delinquent account.

The associations could not reconcile how they can just accept the safe harbor limitation on the money and still apply the funds fully to the account of the parcel based on the application of proceeds statute.

The court accepted the concept that “interest, late fees, attorney fees and collection costs” are “individualized” charges to induce compliance, rather than common expenses or regular or special assessments.  And so it is today that Associations are not entitled to any “junk fees” or “individualized fees” when entitled to monies from a mortgagee that obtains title through foreclosure.


Copyright 2016 Richard P. Zaretsky

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make.  This article is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1615 FORUM PLACE, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660  RPZ@ZARETSKYLAW.COM - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide

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Nice article. I was wondering what "junk fees" are. I hate Associations; serves them right.

Sep 04, 2016 11:47 AM #1
Richard Zaretsky
THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY - West Palm Beach, FL
Florida Real Estate Attorney

George -

Junk fees are such fees as late fees, attorney fees, property inspection fees, interest, and such other add-on fees that are not part of the usual budgeted assessment amount.

Thanks for reading!

Sep 06, 2016 09:32 PM #2
Thomas McCombs
Century 21 HomeStar - Akron, OH

Just curious, what would that 1% of the mtge amount have come to? 

Excellent discussion!

Sep 07, 2016 11:58 PM #3
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Richard Zaretsky

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