I am unsure how this came to pass, but lately I’ve become something of a resident expert on disputes between condominium and homeowners’ associations and property owners within their developments. Whether the sour economy has them reaching for every dollar, or whether their business practices are simply a logical extension of the personality types that normally inhabit condo and HOA boards, is unclear. But whatever the cause, associations have become increasingly aggressive in the collection of past due balances.
I never sought out this area of law, actually I represent a couple of HOAs, which I generally advise against becoming involved in disputes like these for good reason. But during the past year, I’ve taken in several clients who purchased properties at foreclosure sales or tax deed sales, only to find that the association demanded immediate payment from them for the past due debts of the former owners. This is often an astronomical sum of money, involving several years’ worth of past due balances. Any questions are usually met with threats of further penalties, interest, late charges, and the association’s attorney’s fees.
Many (more like almost all) attorneys who represent associations will argue that F.S. 720.3085 and F.S. 718.116 create personal obligations that survive any form of title transfer, making any successor-in-title liable for all past due balances owed to the association. Their outlook is certainly understandable, given that the condo and HOA attorneys, together with their lobbyists, wrote the legislation. However, that position is often completely incorrect.
Faced with these demands, most folks simply pay the bill and call it a day. The ones who fight these battles usually tend to be banks or investors who don’t live in the association. I suspect this is because most folks don’t like the concept of suing their neighbors. Personally, I take the view that if your neighbors need suing, well then that’s hardly your fault. I don’t live in an HOA myself, and nor would I, after seeing what I’ve seen. But I digress.
To get to the nuts and bolts of two disputes in particular, one involved a condominium association arguing that its claims against my client for the past due debts of the former owners survived a tax deed, and the second involved a homeowners’ association arguing that its claims against my client for the past due debts of the former owners survived a mortgage foreclosure sale.
To start first with the tax deed, the association argued there is an inherent conflict between Chapters 197 and 718, where 718.116 contains language stating that any successor in title is personally liable for any debts the former owners owed to the association, ”regardles of how his or her title has been acquired” which, it argued, must include tax deeds.
The problem is, that really doesn’t apply to tax deeds. F.S. 197.552 plainly states that the survival of any debt or lien through a tax deed is governed exclusively by Chapter 197, and the legislature would have had to amend Chapter 197, not Chapters 718 or 720, in order to allow for the survival of association debts through tax deeds. The legislature did not do so, and any argument about any language contained in 718 or 720 somehow altering the survival of debts through tax deeds is inapplicable, where 197.552 established that Chapter 197 is the sole vehicle for determining the survival of debts through tax deeds.
Astonishingly there is no published case in Florida on this point of law. The closest thing is Sugarmill Woods Oaks Village Association, Inc. v. Wires, 766 So.2d 487 (5th DCA, 2000), which is distinguishable and involves a different fact pattern, and a different statute which at that time lacked the joint and several personal liability provisions found in 718.116 and 720.3085. I won this case before the very well-regarded Chief Judge of the 7th Judicial Circuit, which should at least clear this issue up within that territory. However, until one of these cases makes it to a district court of appeal, this issue will continue to be encountered on a case-by-case / circuit-by-circuit basis.
The second case involves a homeowners’ association which claimed that my client was liable for the past due balances owed by the former owner, after acquiring title at a foreclosure sale. The association filed a lien against the property and sued my client to recover these amounts. I responded by filing a counterclaim and moving for summary judgment on the association’s claims, which I won. My counterclaim for slander of title (the association’s lien and lawsuit cost my client a lost sale) and to recover my client’s attorney’s fees and costs remains pending.
The problem for the HOA in this second case was that it hadn’t bothered to read its own declaration of covenants and restrictions before filing suit against my client. I mean that literally, and far from being surprising, this is something I’ve seen occur repeatedly. Of course, I do read them, and unfortunately for the HOA, its declaration contains provisions that made any debt owed to the HOA subordinate to first mortgages (which the foreclosed mortgage was), and also provides that no debt owed to the association would “pass to any successor in title unless assumed by them.” Oops.
This one really makes you wince. As a lawyer, I can’t imagine a worse “oh $h#%” moment; The thought of finding oneself in a situation like that is the kind of thing that keeps you up night in this profession. With that being said, this particular HOA and its former attorney (since replaced by insurance defense counsel who behaves professionally) truly deserved it. This was one of the most unnecessarily acrimonious cases I’ve ever had the displeasure of handling, from opposing counsel screaming in one depo, to his spending most of another depo trying to insult the witness with not-so-subtle remarks about his sexual proclivities, to refusing to comply with discovery requests or anything else, even after the judge had already ordered sanctions, the opposing side’s behavior really ran the whole gamut. It was more of a lengthy temper tantrum than anything else. What did any of it have to do with HOA liens, you might ask? Well you got me there. I suppose we’re back to that well-deserved stereotype regarding personality types and HOAs and condo associations.
The moral of this post is that, if you’re presented with some threatening demand or another from an HOA or a condominium association, especially one involving the past-due debts of the former owner or Florida stautes 720.3085 or 718.116, then you ought to look into what your options are before simply paying up. Or I am happy to handle it for you anywhere in the state. The way these associations behave, which is to say with total disregard for the rights of the affected property owner, is rapidly becoming a pet peeve of mine.
Quite often, the association is just flat out wrong in its interpretation, or is proceeding without regard to the property owner’s rights as established in its own declaration. In Florida, you have the ability to waive most common-law and statutory rights by contract, and though we’re used to this always being slanted in someone else’s favor, the fact is that this sword cuts both ways. If the declaration conflicts with the statute, then the declaration will almost certainly control for one of two reasons, either A) The declaration was recorded prior to the enactment of the joint and several liability statutory sections, and the statute cannot unconstitutionally alter a pre-existing contract that runs with the land from the date it was recorded (the declaration would need to be amended to make the statute operative), or B) If the declaration was recorded after the enactment, and contains provisions contrary to the association’s claims, then it operates as a voluntary contractual waiver of the association’s statutory rights. When you really get into these disputes, more often than not the declarations contain some provision or another that expressly provides that the foreclosure of a first mortgage would extinguish the association’s claim, or otherwise provides that such debts do not pass to successors in title.
I have been surprised to discover just how often these associations are simply acting however they wish, without regard for the property owner’s contractual rights under the declaration. As a side note, each of the clients in the two cases I mentioned expressed that they encountered serious difficulty in finding an attorney willing to accept their case at all, as apparently with few exceptions the attorneys who practice in this area tend to represent the associations, not disgruntled property owners. Which is fine by me, I happen to enjoy this kind of work. So all’s well that ends well.