(This applies to Homeowners Associations only. It does not impact Condominiums)
A recent holding in the case of Coral Lakes Community Association, Inc. vs. Busey Bank, N.A., et al., that was filed on February 19, 2010 may greatly impact your homeowners association. As you may have already heard, the Court ruled that a Bank has no responsibility for past due assessments to a homeowners association under Section 720.3085, Florida Statutes if the associations governing documents provide otherwise. Essentially the holding provides that the governing documents will control over the Statute.
In the case, the Coral Lakes Community Association’s Declaration provided that its lien for unpaid assessments was inferior to that of a first mortgage and that a mortgage holding bank was not obligated to pay the Association any past due assessments when the bank obtained title to the property. The Association’s governing documents contradicted Section 720.3085, Florida Statutes which was adopted in 2007 and provides that a first mortgage holding bank that takes title must pay the association the past 12 months worth of assessments or 1% of the original mortgage amount, whichever is less.
The Declarations for most, but not all, homeowner association have almost identical language to the language in the Coral Lakes case, subordinating the Association’s lien for past due assessments to the first mortgage. This is obviously not a good development for homeowner associations, but it is difficult to predict how much of an impact this will have because presently many foreclosure properties are not being taken back by the first mortgage holder but rather are being sold to a third party either via a short sale or at the foreclosure auction. As such we expect that in many cases the association will still recover the entire past due account in those situations.
Even though “assignees” of the Bank or others who may purchase the property at the foreclosure sale may also argue for immunity under the wording of the “foreclosure provisions” in many Declarations, we still have good arguments against those claims of “immunity” because their “interests” arise at the time of or after the sale. Therefore, we can argue that Section 720.3085, Florida Statutes, as presently written, applies to them and they are liable for all past due assessments as a result.
We recommend that you have legal counsel review your current governing documents and then if you have a problem, you may want to amend your Declaration to impose the Statutory liability on the Banks.
CONDO & HOA LAW GROUP, LLC
THIS APPLIES TO HOMEOWNERS ASSOCIATIONS ONLY. IT DOES NOT IMPACT CONDOMINIUMS. |
