Appellate Court Decision Reaffirms That Community Association Liens Are Wiped Away by Tax Deed Sales

A decision last year by the Second District Court of Appeal clarified an issue that has caused some consternation and confusion among community association boards throughout Florida for many years. The court found that even though the Florida statutes under section 720 governing HOAs stipulate that new unit owners are liable for the unpaid assessments of prior owners, the statutes under section 197 governing ad valorem taxes supersede those under 720 in regards to whether liens for association assessments survive the acquisition of a property via the issuance of a tax deed.

In the case of Cricket Properties, LLC v. Nassau Pointe at Heritage Isles Homeowners Association, Inc., Cricket Properties filed a quiet title action after acquiring title to property that was part of the Nassau Pointe HOA, which raised an affirmative defense that Cricket was liable for all unpaid assessments that came due up to the time of the transfer of title. Cricket responded by arguing that because it had acquired title through the issuance of a tax deed its title was free and clear of association liens for unpaid assessments, as is provided under Section 197.573.

The HOA replied that its statutory right to lien and foreclose on its lien for past-due assessments under Section 720.3085 superseded and controlled the issue. The statute states that all new parcel owners are jointly and severally liable with prior owners for “all unpaid assessments that came due up to the time of transfer of title.”

2dca.jpgThe Second DCA panel’s unanimous opinion explained that the issue turns on whether the acquisition of property by a tax deed is considered a “transfer of title.” The court referenced prior case law stating that a tax deed does not represent a transfer of title but rather constitutes the commencement of a “new, original and paramount” title that “creates in the purchaser a new and original title entirely disconnected with that of the former owner.” The court therefore concluded that liens for unpaid assessments do not survive the issuance of a tax deed. In addition, because the language of the statute for condominium associations on this issue is nearly identical to that of the HOA statute, the ruling should also hold true for condominiums.

While this ruling essentially ensures that the issuance of tax deeds wipes out association liens for prior unpaid assessments in Florida, associations can at least find some solace in the fact that new property owners who acquire title through a tax deed sale are still bound by the association’s governing documents. They must begin paying all assessments incurred after gaining title to the property through the issuance of a tax deed, and the association’s covenants and restrictions governing the property remain in effect.