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Safe Harbor & Lender Liability for Florida Homeowner’s Association and Condominium Association Assessments

Safe Harbor & Lender Liability for Florida Homeowner’s Association and Condominium Association Assessments

Despite lenders and buyers working proactively to resolve Homeowner’s Association (“HOA”) and Condominium Association (“COA”) liens, assessment liability is rarely clear, and the process is still time consuming and costly.

Lenders should carefully review HOA estoppel letters and their corresponding ledgers for accuracy. Typical fees include past due assessments, interest, late fees and attorneys’ fees.  Interest should only be applied to the past due amounts. Lenders should also be aware that their liability does not extend to costs other than regular and special assessments, which includes interest, late fees, collection costs and attorneys’ fees. Florida Statutes §720.305 governs remedies at law or in equity and the levy of fines. Any payments are first applied to attorneys’ fees, interest and late fees.

Florida Statute §720.305 provides in relevant part:

(1) The prevailing party in any such litigation is entitled to recover reasonable attorney’s fees and costs. A member prevailing in an action between the association and the member under this section, in addition to recovering his or her reasonable attorneys’ fees, may recover additional amounts as determined by the court to be necessary to reimburse the member for his or her share of assessments levied by the Association to fund its expenses of the litigation. This relief does not exclude other remedies provided by law. This section does not deprive any person of any other available right or remedy.

(2) The association may levy reasonable fines of up to $100 per violation against any member or any member’s tenant, guest, or invitee for the failure of the owner of the parcel or its occupant, licensee, or invitee to comply with any provision of the declaration, the Association bylaws, or reasonable rules of the Association. A fine may be levied for each day of a continuing violation, with a single notice and opportunity for hearing, except that the fine may not exceed $1,000 in the aggregate unless otherwise provided in the governing documents. A fine of less than $1,000 may not become a lien against a parcel. In any action to recover a fine, the prevailing party is entitled to reasonable attorney fees and costs from the non-prevailing party as determined by the court.

Lenders should also note that pursuant to Florida Statutes § 720.3085(1) and § 718.116(5)(a)), the lien is effective from and after the date the HOA or COA records the lien in the public records in the county where the property is located.

In order for lenders to obtain the limitation on first mortgagee liability set forth in Florida Statute §720.3085 (2)(c) (“Safe Harbor”), lenders must name the HOA as a defendant in the mortgage foreclosure action in the initial foreclosure complaint.  Lenders that assign their final judgment of foreclosure to a wholly-owned subsidiary, may not obtain Safe Harbor protections, which limits the first lender’s monetary liability to the Florida HOA.  Safe Harbor does not apply to subsidiaries of a first mortgagee or an assignee of a final judgment. It only applies to first mortgagees or a subsequent holder of a first mortgage.  See Bay Holdings, Inc. v. 2000 Island Boulevard Condominium Ass’n, Inc., 895 So.2d 1197 (Fla. 3d DCA 2005). Accordingly, lenders seeking Safe Harbor protection should consider assigning their mortgage to a subsidiary prior to the entry of final judgment of foreclosure.

The Law Office of Eleni C. Pantaridis, P.A. represents lenders in reviewing and resolving HOA and COA disputes.

Eleni C. Pantaridis, P.A.