Important Recent Court Ruling on the Acceptance of Partial Payments

In August of this year, the Second District Court of Appeals issued a ruling which has potentially big ramifications for HOA/Condo collections. The case was St. Croix Lane Trust v. St. Croix at Pelican Marsh Condominium Association, Inc., 144 So.3d 639 (Fla. 2d DCA 2014), and the ruling addresses the acceptance of partial payments from delinquent owners.

 

Does taking title through a lien foreclosure prevent associations from collecting past-due amounts?

Chapter 718 (Condo) and 720 (HOA) of the Florida Statutes provide that anyone who takes title to a unit is “joint and severally” liable for any and all previous amounts due.  Joint and several liability is a legal term which means multiple parties are liable for the full amount; basically, the Association can choose who they want to collect the full amount from and that party’s only remedy is to go back after the other entities in the joint and several liability chain for portion which they should have paid.

In February of 2013, a landmark court ruling came out of the Third District Court of Appeals in Florida, known as the Spiaggia decision (Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc.).  The Spiaggia ruling sent shockwaves through the association law world as the Court held that an association also becomes joint and severally liable for any past-due delinquency if they take title through a lien foreclosure lawsuit.   

Does my HOA have to register with the DBPR?

Yes, under the new reform bill put into effect on July 1 (HB 7119) all homeowner associations are required to register with the Department of Business and Professional Regulation (DBPR) by November 22, 2013.  In addition, there will be a means of updating this information if it changes.  The community’s management company or CAM is required to submit this registration/report; the Board of Directors is charged with the duty if there is no management entity.  This will finally put HOA’s under the purview of the DBPR (as condos, time-shares and mobile homes have been) and provide a valuable source of oversight and some dispute resolution.

 

Here is a full description of the registration and report requirements taken straight from the text of the bill:

 

Does the MRTA wipe out HOA covenants?

The Marketable Record Title Act (MRTA) poses a serious threat to the power of homeowner associations to enforce their covenants and restrictions!

Can you imagine what would happen to your community if your HOA covenants and restrictions were suddenly legally unenforceable?  The MRTA Statute was borne out of good purpose; however, it may have this exact catastrophic effect on homeowners associations across the state.  The Act was intended to remove certain “stale” claims which prevent the transfer of real property.  Unfortunately, by definition, HOA covenants and restrictions may fall under the Act’s prohibition and become nullified.

 

Late fees must be specifically authorized in your Declaration or Bylaws

The vast majority of community associations across the state apply late penalties when assessments are not paid on time.  Late fees are a valuable tool in encouraging owners to make timely payments and they are commonly used by most associations and property management companies without giving it much thought.  Late fees are allowed by law; however, the statute specifically states that the application of late fees must be authorized in your community documents.  Here is the statutory language:

 

Associations do not have to walk away from remaining delinquency amounts after foreclosure!

Many Homeowner and Condominium Associations find themselves with a remaining balance of delinquent assessments after units are foreclosed on by the bank.  According to Florida Statute 718.116 and 720.3085, the bank only has to pay 12 months worth of assessments from the mortgagee or 1% of the original mortgage debt, whichever is less (referred to as the “safe harbor” amount).  A common misconception is that once the bank has paid the safe harbor amount that the Association cannot collect anymore of the remaining delinquent balance.  THIS IS INCORRECT!

 

Illegal for Community Association Managers (CAM) to Draft Claims of Lien!

Many Community Association Managers (CAMs) have a policy of drafting Claims of Lien (and Satisfactions of Lien) on behalf of the community associations they work with.  The most common are drafting and filing Claims of Lien related to unpaid assessments, something widely occurring across the state.  It is vital that all Associations and CAMs understand that this has been ruled to be the unlicensed practice of law by the Florida Supreme Court, and is therefore a criminal offense!  

Associations, force rent payments to go directly towards owners’ delinquent balance!

The collection of rents provision in Florida Statutes 718.116 and 720.3085 was designed to eliminate the situation where an owner is delinquent in paying their assessments, yet is collecting rent from a tenant.  This is a very powerful tool for Associations that allows them to require tenants to pay their rent directly to the Association or face legal consequences. The tenant receives credit for having paid their rent, and if they refuse, the Association is authorized by statute to move for eviction as if they were the landlord.

There was widespread confusion when the statute was initially enacted