Subscribe by Email

Articles Posted in Foreclosures

Maryvel-De-Castro-Valdes-002-200x300An article authored by firm shareholder Maryvel De Castro Valdes is featured as the “Board of Contributors” guest commentary 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 “Ruling Proves Community Associations Need to Revise Own Governing Documents,” focuses on a recent ruling by Florida’s Third District Court of Appeal that added to the growing string of decisions in recent years illustrating how an old and outdated provision in HOA and condominium association declarations is preventing some communities from collecting what they would be owed under the current state law from purchasers in foreclosure actions.  Her article reads:

. . . The ruling came in the case of Old Cutler Lakes by the Bay Community Association v. SRP SUB, LLC. The LLC took title to a unit within the community via a mortgage foreclosure auction and subsequently filed an action for declaratory relief seeking to determine its liability for the association assessments that accrued prior to acquiring title.

dbr-logo-300x57While Florida law holds that a parcel owner is jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of title, including by purchase at a foreclosure sale, the LLC was apparently well aware that the association’s declaration contained a provision that essentially extinguished its liability for the past-due assessments owed by the previous owner.

Continue reading

RobertoBlanch_8016-200x300An article authored by firm shareholder Roberto C. Blanch was featured as the HOA View expert guest commentary column in the Business Monday section of today’s Miami Herald.  The article, which is titled “HOAs, Condo Boards Should Brace for a Slowdown in Dues and Tread Carefully,” focuses on the strategies that community associations should deploy in response to the financial strains created by unit owners who become unable to pay their monthly dues.  His article reads:

. . . As they begin to consider their options, some associations are now giving thought to relaxing their collections by waiving late fees and interest on delinquencies, and perhaps also foregoing entire monthly payments for those who become unable to pay due to the economic standstill. While this may appear to be a reasonable response, association directors must not lose sight of the fact that they are fiduciarily obligated to pursue the uniform collection of all payments and delinquencies, so they may be limited in their ability to offer any special considerations or concessions for those experiencing financial difficulties.

Payment waivers for the economic casualties of the COVID-19 pandemic could also open the door to future requests by unit owners for similar concessions related to other financial setbacks.

MHerald2015-300x72Instead, associations could borrow a page from the playbook of previous economic downturns and consider sanctioning a uniform payment plan to assist owners who become delinquent. With the help of qualified legal counsel and financial professionals, they could create a payment plan that is uniformly available to assist all the unit owners who suddenly become unemployed.

Continue reading

Michael-Hyman-srhl-lawThe firm’s Michael L. Hyman authored an article that was featured as the “Board of Contributors” guest commentary 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 “Owner Who Sells During Foreclosure Litigation Still Entitled to Legal Fees,” focuses on a recent case illustrating how associations can become liable for the attorney fees and costs of unit owners who prevail in foreclosure actions for past-due assessments even if the owners sell their unit during the pendency of the litigation.  His article reads:

. . . In Victor Tison v. Clairmont Condominium F Association, the Fourth District Court of Appeal reversed the lower court’s final order denying Tison’s motion for attorney fees and costs. The appellate panel found that as the prevailing party in a lawsuit brought against him by his condominium association for unpaid assessments, Tison was indeed entitled to recover prevailing party attorney fees even though he sold his interest in the condominium unit during the pendency of the foreclosure action.

dbr-logo-300x57The case began in December 2015 when the association filed a lawsuit against Tison and another defendant seeking to foreclose on an assessment lien against their residence and recover damages for unpaid assessments. The defendants responded by filing an answer with affirmative defenses, which they later amended, and they alleged that they would be entitled to recover attorney fees and costs.

More than a year later in March 2017, the trial court denied the association’s motion for summary judgment, and the defendants sold the residence. Another entire year after that, the trial court entered a final order dismissing the action for lack of prosecution.

Continue reading

Firm partner Michael E. Chapnick authored a guest commentary column that appeared in today’s Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article, which is titled “Condo Associations Don’t Need to Record Lien to Collect From Tax Sale Proceeds,” focuses on a recent appellate court ruling which found that condominium associations do not absolutely need to record a lien in order to collect from the surplus funds after a tax sale.  Michael’s article reads:

In Calendar v. Stonebridge Gardens Section III Condominium Association, the Fourth District Court of Appeal concluded that the association was not required to actually file a lien in order to be entitled to priority over the unit owner in the distribution of surplus funds generated by the tax sale of her residence.

MC-article-5-18-300x220In upholding the trial court’s order that surplus funds from the tax sale of the owner’s residence be disbursed to the association based on its claim for unpaid assessments, the Fourth DCA found that Section 718.116 of the Florida Statutes implies that a claim of lien against a unit owner for assessments becomes necessary only in cases in which a mortgagee is also asserting a claim. Therefore, recording a claim of lien is not an absolute prerequisite to the enforcement of a lien for unpaid assessments.

Continue reading

The 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.

Continue reading

MTobacksrhl-law2-thumb-120x179-96777The 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 was titled “Rulings Clarify Application of Safe Harbor Caps on Association Dues,” focused on a couple of recent Florida appellate court rulings that brought additional clarity to the application of the criteria for foreclosing lenders and servicers to qualify for the caps that limit their liabilities for association dues.  Michael’s article reads:

In Brittany’s Place Condominium Association v. U.S. Bank, the Second District Court of Appeal settled some lingering questions as to whether a lender or servicer that takes title to a residence via a mortgage foreclosure must also be the current owner of the first mortgage when the final judgment of foreclosure is issued.

The case stems from a 2009 mortgage foreclosure action filed by U.S. Bank against the unit owner and all interested parties, including the association. The bank alleged that it was both the holder and servicer of the note and mortgage, acting on behalf of and with the authority of the owner. It was in possession of the note endorsed in blank, but the Federal Home Loan Mortgage Corp., better known as Freddie Mac, owned the note and mortgage.

After securing a final judgment of foreclosure and acquiring title to the property via the foreclosure sale, U.S. Bank requested an estoppel letter from the association to determine the amount of past-due assessments. The parties could not agree on the extent of the lender’s liability, and the association eventually filed a lien foreclosure complaint against the lender, which then filed a counterclaim to seek compliance with the safe harbor caps.

dbr-logo-300x57The trial court found that there were no genuine issues of material fact and U.S. Bank met the statutory requirements entitling it to the limited liability provisions provided by the safe harbor caps, so the court granted the bank’s motion for summary judgment.

In the subsequent appeal, the association contended that U.S. Bank did not satisfy the safe harbor statute, which requires the entity acquiring title to have also been the first mortgagee or its successor or assignee. The association interpreted “first mortgagee or its successor or assignees” as necessitating ownership of the loan.

Continue reading

Jonathan Mofsky Gort photoThe firm’s Jonathan M. Mofsky authored an article that appeared as a guest column in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article, which was titled “Important Ruling for Associations Seeking to Foreclose in Advance of Lenders,” focused on the clarity that was created by a recent appellate ruling over some lingering questions involving community association foreclosures.

Jonathan’s article reads:

The decision by the Fourth District Court of Appeal in Jallali v. Knightsbridge Village Homeowners Association clarifies the applicability of a 2012 ruling on association foreclosures by the same appellate court in U.S. Bank v. Quadomain Condominium Association. This prior ruling was being incorrectly applied to assert that associations were barred from filing foreclosure actions based upon a claim of lien recorded after the recording of a notice of lis pendens by a lender.

The language utilized in Quadomain created confusion for cases involving association lien foreclosures, which has become one of the primary remedies for associations to address the inequities caused by mortgage foreclosure cases that take years to complete. By filing and quickly prosecuting separate foreclosure actions based on liens for unpaid assessments, associations have been able to acquire and rent properties embroiled in prolonged mortgage foreclosure proceedings.

dbr logo-thumb-400x76-51605The ruling created a substantial hurdle for associations to overcome against homeowners who raised the Quadomain defense, which in some cases enabled the owners to defeat or delay association foreclosure actions and remain in their residences without paying monthly dues or mortgage installments while the lenders’ foreclosure cases languished.

Continue reading

Associations have been counseled for the last several years to move quickly to foreclose on units in cases of prolonged lender foreclosures so that they could utilize these residences to reap rental income while the bank cases languish. However, a recent ruling by the Fourth District Court of Appeal serves as a reminder of the pivotal importance of properly undertaking required procedural steps and executing service of process on all of the owners and other defendants in foreclosure cases prior to moving on to trials and judgments.

The appellate panel in the case of Frank Reilly v. U.S. Bank National Association found in favor of the defendant Reilly and reversed the lower court’s final judgment of foreclosure. It found that the case was not yet “at issue,” meaning ready for disposition, when the Broward circuit court issued a final judgment for the lender because the lender had not obtained a default against Reilly nor had Reilly filed an answer. Accordingly, the final judgment as to Reilly was reversed, and the case was sent back to the circuit court for further proceedings.

The appellate court also confirmed that Reilly must be allowed to raise his service of process challenges against the lender because they had not been considered by the circuit court. pserverHis service of process challenge stemmed from the lender’s claims that it attempted to find him but he was dodging its process servers, so it served him by publication. Had these issues simply been presented to the circuit court in the original proceedings, the challenge by Reilly and associated delays may have been avoided.

The lesson here for associations and lenders pursuing foreclosure cases is that their judgments can be completely undone if they fail to undertake required procedural steps or cut corners in the servicing of process for owners or other defendants in these lawsuits. Associations must rely on qualified and highly experienced process servers to properly service foreclosure lawsuits to owners, who oftentimes do everything in their power to evade them and avoid being served with the suit. In some cases, this may require retaining the process servers to stake out an owner at their work or residence, and it may take several attempts before the process servers are able to serve a defendant with the lawsuit as prescribed under Florida law.

These expenses should be considered part of the cost of doing business in the prosecution of foreclosure actions by associations, which should take note of this and other similar appellate rulings and avoid cursory and unsuccessful service processing in favor of service by publication. Otherwise, they are risking the very real possibility of increased legal and administrative costs by having their foreclosure rulings overturned and remanded for further proceedings.

In Florida, not all foreclosure cases are the same for the state’s more than 47,000 community associations, as a recent ruling by the Fourth District Court of Appeal illustrated.  The ruling serves as a reminder that community associations must look to their own declaration and governing documents in cases involving the foreclosure of mortgages.

The ruling reversed the lower court’s decision and found that a lien by the homeowners association for the Pipers Landing community in Palm City, Florida, did not have priority over a mortgage issued by U.S. Bank. The appellate panel based its decision on the fact that the HOA’s declaration did not include the necessary language specifying that its liens take priority over mortgage liens and relate back to the date of the filing of the community’s declaration.

4dcaThe Fourth DCA based its opinion on the ruling by the Supreme Court of Florida in Holly Lake Association v. Federal National Mortgage Association in 1995. That ruling held that “in order for a claim of lien recorded pursuant to a declaration of covenants to have priority over an intervening recorded mortgage, the declaration must contain specific language indicating that the lien relates back to the date of the filing of the declaration or that it otherwise takes priority over intervening mortgages.”

Because Pipers Landing’s declaration did not contain any such language giving the association’s lien priority over that of the lender, the appellate panel reversed the lower court’s ruling.

Obviously, this ruling deals a blow to associations that may wish to attempt to assert lien priority in cases involving the foreclosure of older mortgages.

However, the ruling does serve as an important reminder for associations and their legal counsel to double-check the language in an association’s governing documents for cases involving the foreclosure of mortgages, as it is possible that the declaration may contain the necessary language as required by the Holly Lake ruling for the lien to be found to be superior over the lender’s mortgage lien.

Foreclosures by community associations against their delinquent unit owners were virtually unheard of 10 years ago, as lenders would almost always move quickly with their own foreclosures against these owners, and their first-mortgage liens are superior to those of associations. Today, the practice has become the prudent approach for cases involving lenders that try to place their mortgage foreclosures into a holding pattern while they wait for the housing market to make a complete recovery.

Many community association attorneys now counsel their clients to complete their own foreclosure actions in certain cases in advance of the banks in order to acquire and rent the residences before the lenders’ foreclosures are finalized. With so many lenders taking years to complete their foreclosures, the revenues from these rentals have helped to relieve a great deal of the financial strains that some associations have faced.

Last year, the state legislature added some clarity to the law governing the liabilities of foreclosing lenders to associations for the prior owners’ association debts. The banks had argued in a number of cases that associations which foreclose in advance of mortgage lenders have effectively put themselves in the position of the prior owner, which is not entitled to collect any past-due fees. An amendment to the law fixed this loophole, and now lenders are still held liable for the safe-harbor liability caps to associations that have completed their own foreclosure in advance.

As such, the question for associations facing lender foreclosure cases that appear to be dragging on is when they should pull the trigger and foreclose their outstanding lien held on the property for unpaid past-due assessments. The answer requires qualified legal counsel to carefully review the case file along with the property appraiser website, tax collector website, court dockets and official records. Considerations that always have to be taken into account include the amount that is owed under the first mortgage, if there is also a second mortgage on the property, the exact status of the mortgage foreclosure case, and the status of the tax records on the property.

MT2.jpgIn addition to these universal considerations, some cases may also include issues involving the deterioration of the unit itself. Associations will need to carefully consider their options involving residences that will require major renovations in order to prepare them for rental. This is very important, as associations cannot rely on third parties to purchase these properties via the foreclosure sales but rather they must prepare to take title to the units.

Another important aspect of these prolonged foreclosure cases is that they can set the tone for associations that wish to take a firm and uniform stance on their collections and payment-enforcement efforts. Sending a demand letter and recording a claim of lien but going no further, even when a foreclosure that should take only a few months to complete begins to approach the one-year mark, is probably not the ideal precedent for associations to set.

While the banks are beginning to move their mortgage foreclosures a bit quicker, oftentimes they are still moving far too slowly for associations which are being burdened by the property’s outstanding unpaid assessments. Together with qualified legal counsel, associations should carefully weigh all of the above-mentioned matters and considerations to determine whether to move forward with their own foreclosure actions in advance of lenders or to wait to enforce their liens.

Contact Information