A New Defense to an Association Assessment Foreclosure?

Posted On: May 9, 2011 , By Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel

For some time now an association assessment debtor was precluded from arguing that their failure to pay assessments which led to their association's foreclosure of the debtor's unit (or lot) was due to the association's failure to maintain the common areas. In other words, an owner's failure to pay assessments could not be justified on the basis of the association's failure to perform its duties. In far simpler terms, the courts have held that the ol' "tit for tat" argument was not sufficient to avoid paying assessments.

In the 1987 case of Abbey Park HOA v. Bowen, the 4th District Court of Appeal held just that. In this seminal case, Bowen failed to pay her monthly assessments, which resulted in Abbey Park HOA filing an action to foreclose its claim of lien against Bowen. In response, Bowen filed an answer, affirmative defense and counter claim. The affirmative defense asserted that Bowen was not liable for the assessments because Abbey Park failed to maintain the common elements as per the declaration of covenants. The counter claim sought a mandatory permanent injunction to compel Abbey Park to maintain the common elements and damages for Abbey Park's alleged breach of the declaration.

In reliance on an earlier 1980 4th DCA opinion, Sandles v. Sheridan Lakes, the 4th DCA held that the affirmative defense of failure to maintain the common elements "is inadequate as a matter of law." Since then, courts have routinely held that an association's failure to maintain common elements is not a viable excuse to avoid paying assessments.

4th DCA photo.jpgFast forward to a brand new decision, E. Qualcomm v. Global, issued April 27, 2011: In this very recent 4th DCA case where the court's opinion is still wet on the page and the parties still have time to appeal, the assessment debtors alleged as an affirmative defense that their association failed to maintain the common areas and, as a result, the owner was entitled to a "set-off." The owner also raised a counter claim for the association's alleged failure to maintain the common areas.

You're right if you think this sounds familiar to the Abbey Park case. So why did the 4th DCA reverse the trial court's summary judgment ruling entered in favor of the plaintiff/association? Some might argue that this new case eviscerates Abbey Park.

Whoaa... slow down!

The E. Qualcomm v. Global holding is not at all contrary to the long standing principle that a counter claim for failure to maintain common areas is not a viable defense to an association assessment foreclosure. In this recent case, while it's true the appellate court reversed the summary judgments that were granted by the trial court in favor of the association as to possible damages due to the defendant as a result of the counter claim and the association's assessment foreclosure, the appellate court did not reverse the assessment foreclosure summary judgment because the association failed to maintain the common areas. Rather, it did so because the association had not properly refuted the set off counter claim used as an affirmative defense.

The court did not even mention its own prior holding in the landmark Abbey Park case. Perhaps the court didn't do so because it wasn't necessary. Here, the appellate court reversed the partial summary judgment of foreclosure in favor of the association because it found the association had not properly refuted them. Maybe if the association had argued the rationale of Abbey Park during its summary judgment hearing, then if the trial court had included a detailed discussion of the effect of Abbey Park in its resulting order, perhaps at least the partial summary judgment of foreclosure entered on behalf of the association would have survived?

In any event, during the appeal, the defendant paid its assessment deficiency. The debtor's decision to pay the back assessments due and owing could also be the reason why the appellate court did not rely on its prior Abbey Park decision. It did not have to, as the issue was mooted by the debtor's payment (or, could it be the result of the fact that the lawyer who initially lost the trial court portion of the Abbey Park case is now a sitting judge on the 4th DCA?). Sadly, this also means that we'll never get the needed clarity, and this case will, no doubt, be misconstrued to mean something contrary to what it actually does mean. Nevertheless, the decision does highlight yet another reason for associations to properly maintain the common areas/elements.