Article by Michael Toback in Today’s Daily Business Review: “Association Documents Override State Law in Previous Owners’ Assessments”

MTobacksrhl-law2-200x300The firm’s Michael Toback authored an article that appeared as a “Board of Contributors” guest column in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article, which is titled “Association Documents Override State Law in Previous Owners’ Assessments,” focuses on the growing consensus among Florida’s district courts of appeal that community associations’ existing governing documents, including their declaration of covenants, override existing Florida law assigning liability to new unit owners for the previous owners’ unpaid maintenance assessments.  His article reads:

The latest ruling reaffirming this holding came in late May from the Third District Court of Appeal in the case of Beacon Hill HOA v. Colfin Ah-Florida 7. The association appealed the final summary judgment in favor of Colfin, which had acquired a unit in the community via foreclosure sale, finding that the company was not liable for any amounts owed by the previous owners of the property due to the language in the association’s recorded declaration.

During the trial court proceedings, the association argued that language in its declaration allowing it to exercise any powers afforded to a corporation amounted to what is referred to as “Kaufman” language, which refers to a clause indicating that the declaration is subject to the applicable Florida laws “as amended from time to time.” The association asserted that the declaration incorporated future changes in the law, and thus the joint and several liability provision assigning liability to subsequent owners for previous owners’ assessments that was adopted into the state’s HOA laws in 2007 was included under the declaration.

However, the appellate panel disagreed with the association’s contention and affirmed the lower court’s ruling. Its opinion cited a 2015 holding by the Fourth District Court of Appeal in Pudlit 2 Joint Venture v. Westwood Gardens Homeowners Association.

dbrlogo-300x57In the Pudlit case, the Fourth DCA found that Florida Statute Section 720.3085 could not impair or supersede a pre-existing declaration provision, as that would infringe on the prohibitions against the impairment of contract rights and freedom to contract under the Florida state constitution. The appellate court in Pudlit found that as a successor to the mortgage holder, Pudlit is a third-party beneficiary to the provisions of the governing documents. The court also noted that the language in Chapter 720 of the Florida Statutes indicating that it is “not intended to impair such contract rights” that were “effective before the effective date of the act” made the existing law inapplicable.

Michael’s article concludes:

In addition, the appellate court in Pudlit was not swayed by the association’s assertion that the adoption of the statute had served to amend its own declaration of covenants. Since the association’s declaration did not contain a provision incorporating changes in the state’s HOA laws (Kaufman language), the court rejected this contention and held that the declaration, as a contract between parties, governed the liability for assessments.

In comparing the Beacon Hill case to Pudlit, the Third DCA panel concluded: “The case before us is exactly on point with Pudlit. The joint and several liability of Section 720.3085(2)(b) was not incorporated into the terms of the Association’s Declaration. Accordingly, under the language adopted by the Associations in their declaration, Colfin was not liable for any past due assessments, attorney fees, or costs of the prior owner when it purchased the property in question at the foreclosure sale, for the reasons set forth in Pudlit.”

The vast majority of community associations do not have the restrictive language in their declarations nullifying a successor’s liability for the previous owner’s fees that was at issue in these cases. In addition, many association governing documents include the Kaufman language provision codifying that all new state laws governing condominiums and homeowners associations are deemed to be expressly incorporated into their declarations.

Our firm salutes Michael for sharing his insights into the ramifications of these recent appellate decisions for Florida community associations with the readers of the Daily Business ReviewClick here to read the complete article in the newspaper’s website (registration required).