10Sep
By: Sean Murrell On: September 10, 2013 In: Uncategorized Comments: 0

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.  The legal ramification of this ruling is that once an association has taken title, they lose the ability to collect ANY previous amount due from the next titleholder, even the ‘safe harbor’ amount (12mo/1%) from a subsequently foreclosing bank.  Many banks began citing Spiaggia in support of their refusal to pay safe harbor upon taking title from an association through mortgage foreclosure.

 

But that is not the end of the story…

 

First, Spiaggia’s scope is limited.  The ruling was based on an interpretation of Chapter 718 and so it technically applies to condominiums only.  Secondly, being a Third District Court of Appeals ruling, it is only legally binding on the lower trial courts of the Third District (Miami-Dade and Monroe counties) and not the rest of the State.  However, most legal scholars agreed that the logic behind the decision would likely be followed by a subsequent court if faced with the same issue in another county and/or to an HOA case, as the ruling was based on an interpretation of the statutory language itself which is the same in both 718.116 and 720.3085.  This decision seemed destined to have a great impact on all associations’ ability to recover past-due amounts after assuming title through a lien foreclosure; therefore, it became a significant factor in determining whether filing for lien foreclosure was in an association’s best interest.

Fortunately for HOAs, the Florida Legislature clarified its intent with the joint and several liability provision of 720.3085 with the recent passing of House Bill 7119 which amended the language to specifically state that an association does NOT become part of the joint and several liability chain upon taking title.  So, for HOAs, the concerns of Spiaggia have now been put to rest.

 

What does this mean for condos?

 

The unfortunately reality right now is that this question is unanswered, it is a grey area in the law.  On one hand, a strong argument can be made that the logic behind Spiaggia should and will be followed by any other court which is forced to rule on the identical issue.  However, in our opinion, a stronger argument can be made that since the Legislature clarified that HOAs do not become liable under Chapter 720, that the same clarification should, and potentially will, be made to Chapter 718 as well.  But for the meantime, subsequent titleholders – primarily, banks upon mortgage foreclosure – have a valid argument to stand behind in refusing to pay even safe harbor.  We are advising our condo association clients NOT to write these amounts off, however, and have means of helping pursue it.

Murrell Law assists associations across the state in association matters such as these.  Contact Us today to learn more about how we can assist with your legal needs and delinquency issues.