Over the past few years, a large number of community associations throughout Florida have taken what had been previously considered an aggressive approach to the collection of delinquent assessments in the face of pending lender foreclosures. Due to the extended time lenders have been taking to complete foreclosures (if they complete them at all), the boards of many associations decided to continue with their own efforts to collect and have foreclosed on properties within the community. Thereafter, when lenders have ultimately completed their own foreclosures, there have been many instances in which a third party purchased the property at the lender foreclosure sale.
Over the past 18-24 months, a growing trend among such third party purchasers has been to refuse to pay sums indicated as due by associations, claiming that as a prior owner of the property, the association is “jointly and severally” liable with the new owner for sums which came due on the property prior to the new owner taking title. The basis for this position is found in Sections 718.116 and 720.3085 of Florida Statutes. The contrary position of associations has been that the intent of the statutory provisions is not to include associations in the definition of a “prior owner”, as that would, in effect, punish an association for exercising the only truly effective available remedy to address a non-paying owner, as well as be entirely inequitable. The lower courts have not been consistent to date in the decisions made on this issue. The Florida 3rd District Court of Appeal has now issued its opinion on the side of the third party purchasers.
In the case of Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc., Case No. 3D11-2545, decided on January 23, 2013, the Association there had foreclosed on the unit in question in 2009. In 2010, the lender completed it’s own foreclosure sale and a third party, the Aventura Management, LLC (“Aventura”), was the successful bidder at the sale. As with any other third party purchaser at a lender foreclosure, the Association informed Aventura that it was obligated to pay all sums that had accrued on the unit prior to Aventura taking title. Aventura objected to the claim, relying on the provision of Section 718.116(1) F.S., which states in pertinent part: ” . . . 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.” (The same language is contained for homeowners associations in Section 720.3085 F.S.) The lower court found for the Association and ordered Aventura to pay, which decision Aventura appealed to the 3rdDCA. A majority of the 3-panel judge for the 3rd DCA decided that the language of the Statute applies to a unit owned by an Association and reversed the decision.
The result of this decision is that the only published appellate court case in Florida on involving the monetary obligations of a third party purchaser at a lender foreclosure sale to an association, after an association had previously taken title through its own foreclosure, currently provides that the third party purchaser is only responsible to pay assessments that come due after the third party purchaser took title. All prior unpaid sums fall to the association to bear in this situation. The third member of the court wrote a dissenting opinion which recognizes the absurdity of this result and how it was never the intent of the Legislature that an association be considered a “prior owner” as contemplated in this Section, or to penalize associations in this fashion for exercising what amounts to the only option available to the association when an owner fails to pay assessments. The dissenting judge also points out that the equities of this circumstance should not result in associations being punished this way.
While the issue may be pending in other Districts in Florida, until such time as another Court of Appeal issues a decision to the contrary (perhaps recognizing the position set forth in the dissent), the matter is appealed to the Florida Supreme Court and reversed there, or there is a change in the Statute adopted in the upcoming Legislative session, it is likely that the lower courts will apply this ruling when faced with these facts. Although the vast majority of lender foreclosures that are completed do not result in a third party purchaser, it does occur with some frequency.
During the upcoming Legislative session, this topic will be included in at least one bill. For anyone who considers this result to be unduly negative to associations, you are urged to contact your Florida Legislators to make your feelings known.