Case Law Alerts
Florida Appeals Court holds that association is jointly and severally liable for past due assessments.
In July 2008, the Association initiated lien foreclosure proceedings against the owner of Unit 402 ("the Unit") in the Spiaggia Ocean Condominium. In July 2009, the Association obtained a default final judgment of foreclosure, and a foreclosure sale was scheduled for December 2009. In September 2009, the holder of the first mortgage on the Unit, the Bank of New York ("the Bank"), initiated foreclosure proceedings against the owner and named the Association as a defendant. The first mortgage far exceeded the value of the Unit.
At auction, the Association placed the sole bid and took title subject to the first mortgage held by the Bank. The Association proceeded to rent the Unit. The Bank subsequently obtained a final judgment of foreclosure, and a second foreclosure sale was scheduled for September 2010. Aventura Management (third party investor) was the successful bidder and obtained title to the Unit, at which point the Association released its ownership interest.
After Aventura Management acquired the Unit, the Association attempted to recover from Aventura Management the past due assessments, late fees and interest that had accrued since the original owner defaulted. The Association maintained that, as third-party purchaser, Aventura Management was liable under F.S. 718.116(1)(a), which provides in pertinent part: "A unit owner, regardless of how his or her title has been acquired, including by purchase at a foreclosure sale or by deed in lieu of foreclosure, is liable for all assessments which come due while he or she is the unit owner. Additionally, 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."
After receiving a demand for payment, Aventura Management claimed that it was not liable for the past due assessments. Rather, Aventura Management argued that as an intervening owner between the prior owner and Aventura Management, the Association was responsible for the assessments owed by the previous owner. Aventura Management brought suit against the Association seeking an interpretation of the statute, arguing that it was liable only for assessments accruing after it took title to the Unit. Both parties moved for summary judgment, and the trial court granted the Association's motion, ruling that the Association's lien did not merge with the certificate of title it was issued in connection with the foreclosure action and Aventura Management was obligated to pay all amounts owed on the Unit. The trial court further found the Association was not jointly and severally liable to Aventura Management for any amounts.
On appeal, the 3rd DCA reversed the trial court's ruling, holding that, as an intervening owner, the Association was also jointly and severally liable for the past due assessments when it was the owner of the Unit. The court further opined that 718.116(1)(a) did not provide an exception to the joint and several liability dilemma for associations who take title to delinquent unit owners' property. Accordingly, the Association was not permitted to collect the past due assessments, late fees and interest that had accrued since the original owner defaulted from Aventura Management. The initial reaction to this opinion from practitioners in the condominium/real property arena is that it will negatively impact associations' efforts to mitigate losses when confronted with a delinquent unit owner/property.
Case Law Alert - 2nd Quarter 2013