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!
Under the joint and several liability provision of Chapters 718 and 720, both the new owner (i.e. a bank after foreclosure, or a new purchaser) and the previous owner of the deed are personally liable for the full amount of any unpaid assessments. This means either of the parties can be sued for the full amount and this liability does not end after the bank’s foreclosure; the safe harbor provision merely lowers the amount of liability solely in the case of a foreclosing bank who has taken title.
After the bank pays their statutory maximum amount, the Association can then go after the remainder of the delinquent balance from the original owner and should consider this option rather than just writing these amounts off. Assessment debt under Chapter 718 and Chapter 720 is personal debt just like any other (i.e. credit card debt, or an unpaid loan, etc) and an association can obtain a monetary judgment against any owner for the unpaid balance which accrued in relation to their ownership of the unit even after they have lost title. This isn’t always a viable and cost-effective approach, but it is one that should be explored!
At Murrell Law, we specialize in assisting associations with matters such as these and can help try and recoup all of the delinquent amounts you may have already written off after the bank paid their statutory maximum. Contact us today if you have any questions or wish to proceed in collecting your outstanding accounts!
Statutory Language on Joint and Several Liability:
Fla. Stat. § 718.116:
(1)(a) …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 owner may have to recover from the previous owner the amounts paid by the owner.
(b) 1. The liability of a first mortgagee or its successor or assignees who acquire title to a unit by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee’s acquisition of title is limited to the lesser of:
a. The unit’s unpaid common expenses and regular periodic assessments which accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or
b. One percent of the original mortgage debt….
Fla. Stat. § 720.3085:
(b) A parcel owner is jointly and severally liable with the previous parcel 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 present parcel owner may have to recover any amounts paid by the present owner from the previous owner.
(c) Notwithstanding anything to the contrary contained in this section, the liability of a first mortgagee, or its successor or assignee as a subsequent holder of the first mortgage who acquires title to a parcel by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee’s acquisition of title, shall be the lesser of:
1. The parcel’s unpaid common expenses and regular periodic or special assessments that accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or
2. One percent of the original mortgage debt.