Community associations depend on collecting assessments from unit owners to ensure they have sufficient income to continue operating. Unit owners in foreclosure often have not paid their assessments to the association. Both condominium and homeowners’ associations face these collection issues. The Florida legislature has limited the liability of mortgagees who hold the right to enforce the first mortgage on a property. For homeowners’ associations, a first mortgagee who acquires a title by foreclosure has the lesser of 12 months of unpaid assessments or 1 percent of the original outstanding mortgage. For condominium associations, a first mortgagee has the lesser of six months of past-due assessments or 1 percent of the original mortgage debt.

In some instances, the holder of a first mortgage will fail to take actions, which will expose the first mortgagee to past-due assessments beyond the statutory limitations. For example, a first mortgagee that fails to name the community association in a foreclosure action will be responsible for all past-due assessments. Even when the mortgagee names the governing association, the mortgagee may still be responsible for all past-due assessments. After a mortgage company forecloses on a property, the property is sold at a public auction. A mortgage company may, after the foreclosure but before transfer of title, assign its right to bid on the foreclosed property to a new entity. Whether these new entities receive the protection of the limitation on liability remains an open question in the courts.

Only certain bidders are entitled to such protection under the law, and the law does not necessarily protect these new entities just because they received an assignment of bid. Careful attorneys will be able to monitor foreclosure cases and the official records to ensure that such new entities are not receiving protections for which they are not entitled. An association may be able to recover from these new entities all of the assessments, interest, costs and attorney’s fees due to the association. It is important to consult with a qualified attorney who can properly monitor the transfer of title to mortgage companies to ensure that the association’s rights are protected.

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Author Name: Peter Sachs

Peter S. Sachs is the managing director with Sachs Sax Caplan in Boca Raton, Fla.

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