Who Picks Up the Tab for Delinquent Condo Owner Assessments?
While we are all starting to enjoy what is looking like a resurgence in condominium development and sales in South Florida, the courts are just getting to addressing issues that arose during the heart of the burst bubble, when unit owners were upside down, not paying their condominium associations’ assessments and not paying their mortgages.
For those of us that have not intentionally forgotten that time, there were many instances where condominium associations were running out of funds to cover even the basics as their owners stopped paying assessments and the owners’ lenders were in no hurry to foreclose. The associations were forced to a point of desperation as each month the bills rolled in, but the assessment dollars did not. There were some changes to the condominium act that provided help to the condominium associations – giving the associations the right to (i) suspend delinquent owners’ use of community recreational facilities, (ii) suspend delinquent owners’ voting rights, and (iii) collect from any tenant the rent that was being paid to the delinquent unit owner – but that was not always enough. In situations where the delinquency persisted, the unit was not rented, and the mortgage foreclosure was stalled or not otherwise moving quickly, the associations sought another way to improve their situations.
In two recent cases, the associations elected to foreclose on their condominium association liens and take title to the units while the mortgage foreclosure actions were still pending. By doing so, the association could get full control of the unit and could rent it out to try to get some cashflow from the unit while the mortgage foreclosure muddled through the legal process. Ultimately, when the mortgage foreclosure was completed, and the unit sold to satisfy the mortgage judgment, the associations sent an invoice to the new purchaser for all of the outstanding assessments owed by the delinquent unit owner/borrower under the foreclosed loan. That action seemed clear to the associations based on the language in 718.116(1)(a), which provides:
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. This liability is without prejudice to any right the owner may have to recover from the previous owner the amounts paid by the owner. [Emphasis Added]
The trial courts agreed with the associations and found that the new purchasers were liable for all delinquent assessments. But the new purchasers didn’t see things the same way that the associations did, and appealed. They focused on the fact that the prior owner of the unit was in fact the association, and not the delinquent unit owner/borrower under the foreclosed loan. If the new purchaser was liable for the delinquencies, then wasn’t the association as the prior owner also liable? The appellate courts agreed with the new purchasers and reversed the trial court decisions. The appellate opinions do not answer all of the questions, but they do certainly make an association think more carefully about whether it wants to take title to a delinquent unit.
See Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc., opinion issued January 23, 2013 (Fla 3rd DCA 2013) and Barnes v. Castle Beach Club Condominium Association, Inc., tentative opinion issued February 6, 2013 (Fla 3rd DCA 2013).