Florida - automatic collection of one year of HOA/POA assessments in arrears at foreclosure

Hi All,

Subject property in our neighborhood of 314 single family homes. Bank foreclosing, but stayed by owner filing Chapter 13 bankruptcy. The Ch 13 is odd, as the owner continues to state the bank owns the property and to stop talking to them. We continue to send them notices. Ch 13 hearing set for this month.

Previous president decided to not file lien for the two years of owed assessments, as the house was in foreclosure - not sure why the previous board waited so long to file a lien. In any case, he said he was because attorney said we would not get anything due to the value vs what was owed. I'm cool with this as a strategy, given the condition of the house, etc.

Then the previous president said the property manager said if there was money left after the bank took the house, the HOA/POA would receive a year's assessment automatically.

This doesn't sound reasonable - on the other hand, I'm new to this part of the game.

John,

My thought, as well, but given what we apparently know, there will be zip money left over.

However, setting that aside, I would looking for comments on the property manager's response that the association would automatically get one year if funds are available.

It's the "automatic" component - meaning without a lien, just based on the estoppel letter.

The PM might have a point. There is case law that has awarded a Florida Condo monies left over to cover assessments, based on provisions of 718 stating that Florida condos already have a statutory lien in place based on the recorded on the initial CCRs. It may hold true for homeowner association under 720 depending on when the CCRs were initially recorded.

I thought that once an owner filed for bankruptcy, all collection activity has to cease. ????

When a bank filed for foreclosure on a home in my community, we had our attorney file a cross claim (basically a legal notice that the association had a claim on any money that was left after the bank was paid off). I don't think that the association would automatically be paid without this notice.

See the 3rd point in my earlier post.

Unless you have verbiage in your Declaration to the contrary, that comment is likely accurate.

Look at Section 720.3085(2)(a)-(c), Fla. Stat., George. It currently provides that:

//(2)(a) A parcel owner, regardless of how his or her title to property has been acquired, including by purchase at a foreclosure sale or by deed in lieu of foreclosure, is liable for all assessments that come due while he or she is the parcel owner. The parcel owner’s liability for assessments may not be avoided by waiver or suspension of the use or enjoyment of any common area or by abandonment of the parcel upon which the assessments are made.
(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. For the purposes of this paragraph, the term “previous owner” shall not include an association that acquires title to a delinquent property through foreclosure or by deed in lieu of foreclosure. The present parcel owner’s liability for unpaid assessments is limited to any unpaid assessments that accrued before the association acquired title to the delinquent property through foreclosure or by deed in lieu of foreclosure.
(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.
The limitations on first mortgagee liability provided by this paragraph apply only if the first mortgagee filed suit against the parcel owner and initially joined the association as a defendant in the mortgagee foreclosure action. Joinder of the association is not required if, on the date the complaint is filed, the association was dissolved or did not maintain an office or agent for service of process at a location that was known to or reasonably discoverable by the mortgagee.//

But also know that the date the mortgage against the home was entered determines the version of that statute that applies (and if the mortgage was entered into before the initial version of the statute was enacted, you default back to Florida common law).

Bit of an update...

Spoke with our attorney, again ... concur with comments re Ch 13 ... odd to chose Ch 13, but who knows what the owner’s attorney recommended.

Supposed to go to court end of this month ... but likely will just set timeline for negotiations. There may be more than one property in the Ch 13, and our POA’s property may have more than one loan on it. In any case, the largest of the loans is greater than the value of the house.

And .... and ... the property is being taken to a special county magistrate because of its condition - overgrowth, hole in roof ($500k plus house), supposed evidence of mold, etc.

I think all this nets to a loss for the POA ... a shame, but a bit our fault for not liening earlier.

I’m working on a lien policy, that is based on a date certain ... we bill first of December, assessments due NLT January 1, two months of gravy, six months with fees and interest, then turn over to counsel for collection on August 1 of same year. Previous boards discussed with owners, came up with $50 a month payment plans (most failed quickly) waited for two full assessment cycles, then started the lien process at about 20 months after the first assessment was not paid.

Thanks, Melissa.

Yep - agree and understand.

Given the timeline on this and the inability to gain access to the property, there won't be a short sale. Given the likely continuing degradation of value, and the likely time extension as the legal arguing moves forward, I suspect whatever sale there is will be after the bank gets the property and repairs it.