Investor is not liable for past due assessments owed to the HOA by its predecessor in interest

The Westwood Gardens Homeowner’s Association (HOA) demanded that the investor who purchased two single-family residences at a foreclosure sale pay the HOA for all past due assessments, including those incurred by its predecessor in interest. The investor paid the HOA under protest, reserving all of its rights and remedies. The investor later brought suit against the HOA, seeking damages for breach of the declaration and declaratory judgment.

The investor argued that, according to the express terms of the Declaration of Covenants, Conditions and Restrictions (Declaration), any liens for past due assessments were extinguished by the foreclosure judgments. The HOA argued that F.S. §720.3085 amended the Declaration imposing liability on the investor, who is jointly and severally liable with the prior owner for all unpaid assessments. The investor responded by contending that, since nothing in F.S. §720.3085 indicates the legislature had any intent to override and/or amend the HOA’s existing Declaration, imposing the statute in direct contravention of the HOA’s Declaration would violate its constitutionally protected contractual rights. The trial court disagreed and granted the HOA’s cross-motion for summary judgment and the Investor appealed.

The statute at issue provides: “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.” F.S. §720.3085 (2)(b). [all emphasis supplied].

Further, F.S. §720.302(2) establishes the statute is not intended to impair previously acquired contractual rights and shall be applied prospectively.

In the case sub judice, the HOA Declaration conflicts with the statute. The Declaration clearly and unambiguously establishes that a subsequent owner of property will not be liable for any assessments owed by the prior owner and the obligations for delinquent assessment shall not pass to successors in title, unless the successor expressly assumes such liability.

The issue before the 4^th DCA was whether the terms of the Declaration exempting a future homeowner from liability for delinquent assessments owed by a previous owner was superseded by the enactment of F.S. §720.3085. The 4^th DCA opined that F.S. §720.3085 did not automatically amend the Declaration. The court explained that the Declaration must be amended following the procedures outlined within the Declaration and/or according to Chapter 720, which requires two-thirds approval of the homeowners. The subject Declaration specifically provided that it would only be automatically amended if the legislative action (i.e., new statute) clearly expressed its intent to override and/or amend existing HOA Declarations. The court further stated that nothing in F.S. §720.3085 requires HOAs to adopt this legislative action. Therefore, the HOA’s argument regarding automatic amendment is without merit.

Additionally, the court held that since the HOA did not follow the procedures to amend its Declaration to incorporate F.S. §720.3085, the statute does not supersede the terms of the Declaration.

According to F.S. §720.3085, the statute cannot be deemed to impair the parties’ contractual rights, rights that are also constitutionally protected by the federal and state constitutions. In Coral Lakes Cmty. Ass’n v. Busey Bank, N.A., 30 So. 3d 579, 584 (Fla. 3d DCA 2010) quoting Pomponio v. Claridge of Pompano Condo., Inc., 378 So. 2d 774, 780 (Fla. 1979), the 2nd DCA recognized that a third-party beneficiary to a contract has the same constitutional protections against impairment of contract rights as the original parties to that contract. Based on this premise, the 4^th DCA reversed the trial court and found that the investor was entitled to summary judgment because it is entitled to the constitutional protection of its contractual rights as contained in the HOA’s existing Declaration. Accordingly, the investor is not liable for the prior owners’ past due assessments to the HOA.

_{Case Law Alerts, 3rd Quarter, July 2015}

_{Case Law Alerts is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2015 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.}