Appellate Court Tries To Clarify Prior Ruling In Spiaggia Case Involving Issue Of “Joint And Several Liability” Under The Statute

The Third District Court of Appeal has attempted to further define the principle regarding what resulted in the protection of certain third party purchasers at lender foreclosure sales involving condominium units and affecting condominium associations, initially set forth in the case of Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc. early in 2013. However, the latest decision seems to have made the issue less clear and upon careful reading, may not be in accordance with the provisions of the relevant Statute on this topic.

In Park West Professional Center Condominium Association, Inc. v. Londono, Case No. 3D13-770 (November 27, 2013), the Association there had foreclosed on its lien against a unit in the Condominium during the pendency of a lender foreclosure, and the Association was the successful bidder at the Association foreclosure sale, becoming the owner of the property. Some time later, the lender finished its foreclosure and Londono, a third party, was the purchaser at the lender foreclosure sale. As often happens in this situation, there was then a dispute between the Association and Londono regarding what Londono was to pay to the Association for unpaid assessments, which was initially decided in the trial court and then appealed by both parties.

In attempting to further explain its earlier decision in Spiaggia (which held that the third party purchaser did not owe anything to the association prior to the third party purchaser acquiring title, see Legal Morsel article from January 30, 2013, at (www.kbrlegal.com/third-dca-decision-negatively-impacts-associations-that-have-foreclosed-and-taken-title-to-a-unit/ ) the Appellate Court ruled that the Association was jointly and severally liable with the prior owner of the unit that was foreclosed upon by the Association for all sums due before the Association took title to the time that the prior owner acquired title to the unit, and that the third party purchaser was “responsible for unpaid assessments back to the time when [the Association] took title to the subject property.” The Court seemingly ignores the Statutory issue of whether Londono is jointly and severally liable with the Association for the sums which had been due on the unit prior to the Association taking title. In essence, the Court in Park West has indicated that “joint and several” liability should only be applied to sums owned by the owner that immediately precedes the current owner and we would not look any further back from there to sums owed by other owners in the chain of title.

It is important to note that this decision is now only applicable for condominium associations since Section 720.3085 of Florida Statutes was amended for homeowners associations in 2013 to clarify that homeowner associations are not “prior owners” for the issue of “joint and several liability” for assessments. The Statute also limits the recovery of homeowners associations in such cases to only the assessments that had accrued on the property prior to the association taking title in its foreclosure sale, and does not include interest, late fees, attorney’s fees and costs incurred by the association prior to taking title.

For condominium associations that are addressing assessment delinquencies on units that are also believed to be delinquent in mortgage payments, the issue of the possible negative impact of a third party purchaser taking title at a lender’s foreclosure sale is one of several factors that should be considered by the board of directors in deciding whether or not to pursue the lien and foreclosure process. However, the issue should not be the primary basis for the determination and should only be given the weight that is appropriate in the overall circumstances. This is mainly due to the fact that there are likely only a limited number of situations in which this will occur which will then be to the detriment of the association. So long as the amounts due on unpaid mortgages significantly exceeds the fair market value of the units, the likelihood of a third party purchaser bidding at a lender sale on such a property is relatively low. As such, the board may not need to place significant weight on this issue in deciding whether or not to foreclose. Since most every case has unique factors, consultation with the association attorney is recommended prior to making the final decision on whether or not to pursue foreclosure against a delinquent owner.