About 2 ½ years ago I wrote about a case involving the Wellesley at Lake Clark Shores HOA which lost out on collecting close to $2,000 in interest and late fees and also lost out on collecting a whopping $10,000 in attorney’s fees due to bad record keeping. The Court, in that case, said that the association’s accounting methods were “woefully inadequate” to collect money as a result of the Claim of Lien filed against the property. Don't let your association lose money because of sloppy bookkeeping.
Another case with a similar result was recently issued by the Fourth District Court of Appeal. In that case, Plaza 3000 had problems with a particular owner over the years. Maintenance assessments were rarely, if ever, paid on time and they were always arguing what was actually due and owing. The lot owners complained that Plaza didn’t credit checks on a timely basis and that resulted in improper interest charges against the account. Meanwhile, the owners often marked checks with a restrictive endorsement (i.e. “paid in full”). Plaza wound up recording a claim of lien and commencing foreclosure proceedings against the owners. It claimed there was approximately $26,000 due on the account, some of which for interest charges.
The owners filed several counterclaims in response as well as raised many affirmative defenses. One of the counterclaims was for Slander of Title. Slander of Title occurs when someone falsely alleges an ownership interest in the property of another, or when someone disparages the property interest of another. The elements of slander of title claims are:
(1) Defendant communicated to a third person;
(2) A statement disparaging plaintiff’s title;
(3) The statement is untrue; and
(4) Defendant’s communication caused plaintiff to suffer actual damages.
The owners claimed that the claim of lien recorded in the public records and the lis pendens recorded as a result of the foreclosure slandered title to their property. The trial court (lower court) dismissed this counterclaim because they found that the owner failed to allege actual damages (element #4). The appellate court disagreed and found that if the lien prevented the owners from obtaining a conventional loan that meant they had to pay higher loan costs and higher interest. The owners also claimed that they lost a contract to sell the property, couldn’t rent out the property and suffered from credit problems. These were all special damages that supported the counterclaim.
The appellate court reversed an award for attorney’s fees for Plaza 3000, since the trial court didn’t make a finding that the counterclaim was “completely frivolous or entirely lacked merit”.
In the end the appellate court found that Plaza 3000 didn’t prove it was owed any portion of the $26,000 it included in the claim of lien and since Plaza refused to accept payments tendered by the owners (even with the restrictive endorsement) it couldn’t collect interest or attorney’s fees on any assessments that came due after the claim of lien was filed.
This case again shows the importance of crossing “t’s” and dotting “i’s” when it comes to accounting records and the obligation to accept payments on account, even if for less than the full amount due.