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Ashley Dietz Gray, VP Marketing Jan 9, 2018 6 min read

Rembaum’s Association Roundup: The Assessment Liability Of A Subsequent Owner After A Lender Foreclosure – It May Not Be What You Think!

foreclosure3For those not yet introduced to the phrase “statutory safe harbor,” in the context of community associations, it limits the past due assessment liability of a first mortgagee, along with its successor or assignee of the mortgage to who acquires a condominium unit or a HOA parcel as a result of foreclosure of its first mortgage or by deed in lieu of foreclosure, to the lesser of one percent (1%) of the original mortgage debt or the unpaid assessments that accrued during the 12 months before the first mortgagee, its successor or assignee, obtained title. A number of cases regarding the application of the statutory safe harbor have been decided with the past few years regarding the extent and reach of statutory safe harbor, most of which have benefited the lender or its successor or assignee of the mortgage.

In today’s Roundup, we look at the liability of a subsequent owner who acquired tittle from the lender who had previously successfully foreclosed, but failed to pay the statutory safe harbor prior to transferring the title. The question of whether an owner who acquired title subsequent to the first mortgagee is entitled to the statutory safe harbor on the delinquent assessments due when the first mortgagee failed to pay the statutory safe harbor prior to their transfer of title to a new owner was addressed in the October 25, 2017 opinion of Florida’s Fourth District Court of Appeal in the case of Villas of Windmill Point II Property Owners’ Association, Inc. v. Nationstar Mortgage, LLC.

In this case, CitiMortgage held the first mortgage on a parcel, then foreclosed on the mortgage and obtained title to the parcel as a result of the foreclosure. After obtaining title to the parcel, CitiMortgage deeded the parcel to Fannie Mae. A dispute arose as to whether or not Fannie Mae was entitled to the application of the statutory safe harbor upon the delinquent assessments due to the Association prior to obtaining title. The Association argued Fannie Mae owed all of the prior assessments due and Fannie Mae argued that it was entitled to the benefits of the statutory safe harbor. This dispute resulted in a lawsuit brought by Fannie Mae’s agent, Nationstar, against the Association, seeking application of the statutory safe harbor provisions, declaratory relief, and damages.

At trial, the trial court determined that Fannie Mae was entitled to the application of the statutory safe harbor in the amount of one percent (1%) of the original mortgage debt. On the Association’s appeal of the trial court’s decision, the Association argued that Fannie Mae was not entitled to the statutory safe harbor provisions of section 720.3085(2)(c), Florida Statutes, because Fannie Mae was not a first mortgagee, or its successor or assignee, that acquired title to the parcel by foreclosure or by deed in lieu of foreclosure. However, the Appellate Court did not agree with the Association’s argument.

The Appellate Court held that, although Fannie Mae was not a first mortgagee, or its successor or assignee, that acquired title to the parcel by foreclosure or by deed in lieu of foreclosure, Fannie Mae does indirectly benefit from the statutory safe harbor provisions because Fannie Mae is jointly and severally liable with CitiMortgage, the prior owner, for all unpaid assessments due up to the time of transfer of title, pursuant to section 720.3085(2)(b),Florida Statutes, and CitiMortgage did qualify for the application of the statutory safe harbor provisions. In other words, it would appear that the Association tried to argue that because the foreclosing lender failed to pay the statutory safe harbor prior to its sale to a new owner, the new owner should be jointly and severally liable for all of the past assessments due without regard to the statutory safe harbor provisions. In effect, both the trial court and Appellate Court held that the new owner did acquire the joint and several liability of the prior owner, and since the prior owner was the foreclosing lender and since it was entitled to the statutory safe harbor and even though the lender did not pay it to the Association prior to their transfer of title to the new owner, nevertheless, the new owner was only jointly and severally liability up to the amount of the predecessor owner. Since, in this instance, the predecessor owner was entitled to the benefits of the statutory safe harbor, then so too, was new owner.

While this case was with regard to the statutory safe harbor provisions applicable to homeowners’ associations under Chapter 720, Florida Statutes, it is likely that this decision will also be applicable to condominium associations under Chapter 718, Florida Statutes, due to the substantial similarity in the statutory safe harbor provisions of each of these chapters.

Jeffrey Rembaum, Esq. of Kaye, Bender, Rembaum attorneys at law, legal practice consists of representation of condominium, homeowner, commercial and mobile home park associations, as well as exclusive country club communities and the developers who build them. He is a regular columnist for The Condo News, a biweekly publication and was inducted into the 2012, 2013 & 2014 Florida Super Lawyers. He can be reached at 561-241-4462.

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Ashley Dietz Gray, VP Marketing

I graduated Summa Cum Laude from Florida Atlantic University in 2010 with my BA in Communications. Upon graduating, I honed my skills in the field by working as a Media Assistant at WPBF-25 and at ESPN760. I began working at City County Credit Union in 2011 as the Marketing Coordinator. Currently, I handle the marketing at Campbell Property Management.