Articles Posted in Foreclosures

LauraManningHudson.jpgFirm partner Laura M. Manning-Hudson wrote an article that appeared in today’s edition of the Daily Business Review, South Florida’s only business daily and official court newspaper, about the recent spate of decisions by the Second, Fourth and Fifth District Courts of Appeal with regard to whether the court in a mortgage foreclosure action retains jurisdiction to determine the amount of unpaid condominium and homeowners association assessments that a foreclosing lender must pay. Her article reads:

In July, the Fifth District Court of Appeal issued an opinion in Central Park A Metrowest Condominium Assoc., Inc. v. Amtrust REO I finding that the trial court lacked jurisdiction to decide a post-judgment issue – namely the amount of assessments owed by the foreclosing lender for the prior owner’s past-due condominium assessments. The lender’s complaint had averred that the condominium association “may claim some interest in or lien upon the subject property by virtue of [a] Claim of Lien.” The association answered the complaint and asserted a counterclaim for unpaid assessments. The appellate court, however, found that despite litigating the issue of past-due assessments in a counterclaim, the trial court did not have jurisdiction to determine the issue post-judgment where the final judgment merely provided that “[j]urisdiction of this action is retained to enter further orders as are proper including, without limitation, a deficiency judgment.”

For the Fifth DCA, the issue was not whether the assessments had been litigated in the underlying action, but whether the court had specifically retained jurisdiction in its final judgment to determine their amount.

However, in the two most recent opinions issued by the Second and Fourth District Courts of Appeal, the standards vary. But, there’s a lesson here.

In Citation Way Condominium Association v. Wells Fargo Bank and Leslie Linder, the Fourth DCA found that the lower court had retained jurisdiction to determine the post-judgment issue of past-due condominium assessments where “[t]he issue of unpaid assessments was raised in the underlying foreclosure action and the third-party purchaser, Fannie Mae, had a direct relationship with the plaintiff, Wells Fargo.”

Wells Fargo, as the servicing agent for Fannie Mae, had alleged in its complaint that “its lien was superior to any other claims against title and interest except for unpaid condominium assessments as provided in section 718.116, Florida Statutes.” Unfortunately, the opinion does not reference the language in the final judgment, but apparently it was sufficient basis for the appellate court to decide that the issue had been raised in the underlying action and therefore the lower court could retain jurisdiction.

However, in Grand Central at Kennedy Condominium Association v. Space Coast Credit Union, the Second DCA, citing the Central Park opinion, agreed with the association, concluding: “The trial court lacked jurisdiction because entitlement to assessments was neither litigated nor adjudicated and the trial court did not specifically reserve jurisdiction to determine the amount of assessments due pursuant to section 718.116(1)(b).” The underlying final judgment did not address the condominium’s assessments but merely “contained only a general reservation of jurisdiction.” Apparently, condominium assessments (pre- or post-judgment) were never considered in this case.

Laura’s article concludes:

As shown by these three rulings, the standard in each of the Second, Fourth and Fifth Districts varies as it pertains to post-judgment jurisdiction. While for some courts the issue depends on whether the assessments were litigated at the trial level (albeit, the extent of that litigation was not exemplified), for each of the courts the specific reservation of jurisdiction was key. In fact, the message could not be any clearer than it is in a footnote in the Second DCA’s opinion:

“This appears to be a prevalent issue in mortgage foreclosure actions to which homeowner or condominium associations are parties. In such cases, we would encourage the circuit courts to consider including in their final judgments specific language concerning the reservation of jurisdiction to address the issues of entitlement to and the amount of any unpaid assessments.”

Because attorneys typically submit proposed final judgments to the trial courts for consideration, these three opinions should serve as an instruction to practitioners to include specific language in their final judgments reserving jurisdiction to address the issue of unpaid assessments. Additionally, in order to ensure that the issue is “litigated” in the underlying case, association counsel should be similarly instructed to raise the issue of assessments (pre- and post-judgment) in their affirmative defenses to lender foreclosure cases.

For both the lenders and associations involved in foreclosure cases, it is almost always preferable that assessments be determined by the trial court as part of the foreclosure proceedings rather than via a separate action, thus saving the client both legal and court costs.

Our firm congratulates Laura for sharing her insight into these important new appellate decisions with the readers of the Daily Business Review.

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LauraManningHudson.jpgFirm partner Laura M. Manning-Hudson wrote an article that appeared in today’s edition of the Daily Business Review, South Florida’s only business daily and official court newspaper, about the recent decision by the Fifth District Court of Appeal in the case of Central Park A Metrowest Condominium Association v. Amtrust REO I. Her article reads:

As part of the condominium association’s apparent strategy to aggressively pursue its collections for the previous owners’ debts, the association issued an estoppel to Amtrust REO demanding the full amount of past-due assessments totaling more than $30,000.

In turn, Amtrust REO responded by demanding that the association apply the safe-harbor liability limits set forth in the state Condominium Act, and it also filed a motion to determine amounts due in the foreclosure action seeking to have the same judge who had entered the final judgment determine the amount that it now owed to the association. The foreclosure court considered the motion and ruled that the agent was entitled to the statutory safe-harbor limits, and the association appealed.

The Fifth District Court of Appeal agreed with the association’s position that the trial court’s order must be reversed because it lacked jurisdiction to decide a post-judgment issue that was not a part of the lender’s foreclosure case, to wit the amount which the agent owed to the condominium association for past due assessments.

Laura’s article concludes:

However, while the association won on the technical issue regarding the post judgment jurisdiction of the trial court, it apparently lost the argument that an agent or servicer of a first mortgagee is not entitled to the safe-harbor protections afforded under the Condominium Act. Section 718.116(1)(b), F.S., provides that the liability of a first mortgagee “or its successor or assignees” which acquire title to a unit by foreclosure is limited to the lesser of 12 months of assessments or 1 percent of the original mortgage debt.

The Fifth District opinion also concluded: “Although the trial court appears to have correctly interpreted the substantive law at issue, the trial court lacked continuing jurisdiction to issue a ruling on that matter.”

Accordingly, while the trial court’s decision was quashed due to lack of jurisdiction, the opinion appears to have interpreted that an “agent” or “servicer” is the same as a “successor or assignee” and is therefore entitled to safe-harbor protection.

If the association now continues to demand the full amount of past-due assessments owed on the unit, the agent/servicer will be required to file a new action to determine its rights. If that is the case, the servicer could very likely seek — and be awarded — its attorney fees from the association.

Our firm congratulates Laura for sharing her insight on this new appellate decision with the readers of the Daily Business Review. Click here to read her complete article in the newspaper’s website (registration required).

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JeffreyBerlowitz.jpgThe firm’s Jeffrey S. Berlowitz, who has focused much of his work on helping community associations to contend with unit owners who attempt to wipe away association liens by filing for bankruptcy, was quoted extensively in an article in today’s edition of the Daily Business Review on the implications of the recent ruling by the U.S. Supreme Court in the case of Bank of America v. Caulkett. The court ruled that homeowners who are underwater on their first mortgage cannot void second mortgages by filing for Chapter 7 bankruptcy, and the ruling also appears to apply to other secured lienholders including community associations.

The article reads:

Jeffrey Berlowitz is optimistic that within the risky realm of second mortgages, the Supreme Court’s ruling may help refresh the lending stream that dried up in the market crash.

“You may see second mortgages being extended if there’s equity,” said Berlowitz of Coral Gables-based Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, which represents community associations.

Still, a divisive footnote in the decision suggests if only the debtors had asked the court to overrule its 1992 decision in Dewsnup v. Timm, the court would have obliged. Three justices didn’t join Thomas’ footnote, meaning they could be outvoted 6-3 if the right case came along.

Dewsnup rejected one form of lien-stripping. The footnote quotes Thomas’ concurrence in a 1999 opinion: the “methodological confusion created by Dewsnup has enshrouded both the Courts of Appeal and … Bankruptcy Courts.”

Berlowitz said, “Thomas’ comments could lead us to believe the court could overrule Dewsnup down the road.” Then lien-stripping would be available in Chapter 7 cases, allowing debtors to void wholly unsecured mortgages. And partially unsecured mortgages could be stripped down to the property’s market value.

For now, Berlowitz is happily sharing the ruling with his condo board clients. They’ve been frustrated by homeowners who fail to pay their fees through months or years of foreclosure and bankruptcy while the association maintains the community.

“There’s such animus for the folks who aren’t paying while their neighbors are,” he said. “I had to explain to our clients this is the law, I’m not making it up.”

Our firm congratulates Jeffrey for sharing his insight into this ruling and its implications for community associations with the readers of the Daily Business Review, which is South Florida’s exclusive business daily and official court newspaper. Click here to read the complete article in the newspaper’s website (registration required).

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The firm’s Lindsey Thurswell Lehr wrote an article that appeared in today’s edition of the Daily Business Review, South Florida’s only business daily and official court newspaper, about the implications of the recent decision by the Fourth District Court of Appeal in the case of Pudlit 2 Joint Venture v. Westwood Gardens HOA. Her article reads:

. . . Pudlit had acquired two lots in the Westwood Gardens community via foreclosure, for which the association demanded payment for the past-due assessments that had accrued while Pudlit held the titles to the properties as well as all assessments due from the prior owner, as stipulated under Florida law.

Pudlit made the payment to the association but filed suit against the association seeking its money back by claiming that it was exempted from liability for the prior owners’ association debts due to the express language contained in the association’s own declaration of covenants, which read:

“The lien of the assessments provided for herein shall be superior to all other liens save and except tax liens and mortgage liens, provided said mortgage liens are first liens against the property encumbered thereby (subject only to tax liens). Sale or transfer of any lot which is subject to a mortgage as herein described, pursuant to a decree of foreclosure thereof, shall extinguish the lien of such assessments as to payments thereof which become due prior to such sale or transfer. No sale or transfer shall relieve such Lot from liability for any assessments thereafter becoming due or from the lien thereof.”

Lindsey’s article concludes:

The appellate panel found that the state law (Florida Statute §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 state’s constitution. The appellate court found that as a successor to the mortgage holder, Pudlit is a third-party beneficiary of the HOA’s declaration and the protections which it provides.

The court also noted that the language under 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 in this case.

. . . In assessing the implications of this ruling, community association directors and managers should bear in mind that most 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 the Pudlit case. In addition, most association governing documents include a provision stating that all new state laws governing condominiums and homeowners associations are deemed to be expressly incorporated into their declarations.

However, this new appellate opinion, which is the first of its kind at the appellate level in the state, should serve as a notification to all community associations in Florida to review their declarations in order to determine if the language that was at issue in this case is found in their governing documents. If it is, they would be well-served to seek the guidance of qualified legal counsel in order to amend their governing documents through the membership meeting and voting process.

Our firm congratulates Lindsey for sharing her insight on this important new appellate decision with the readers of the Daily Business Review. Click here to read the complete article in the newspaper’s website (registration required).

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LisaLerner.jpgThe firm’s Lisa A. Lerner contributed a guest column in the Friday, March 13, 2015 edition of the Daily Business Review that focused on the changes that have taken place with some of the practices of South Florida community associations as a result of the foreclosure crisis and the investor-fueled recovery.

Lisa’s article reads:

. . . For all of these growing numbers of associations, things are quite different today than they were 10 years ago at the height of the area’s condominium and housing boom. After the national meltdown in the housing market and bursting of the condominium bubble in South Florida, the associations have adapted by becoming considerably more forceful in their collections practices, especially in cases involving prolonged foreclosures against their delinquent unit owners. Also, for many of the new condominium properties that are owned primarily by investors from abroad, the challenges caused by having so few full-time residents who are willing to take on the responsibilities of serving on the board of directors or even voting at the membership meetings are being met with novel and creative solutions.

One of the most significant changes in today’s community association practices entails foreclosures by the associations against their delinquent unit owners. The practice was virtually unheard of 10 years ago, as the lenders would almost always move quickly with their own foreclosures against these owners, and the first-mortgage liens are superior to those of the associations. However, today it has become fairly common, as the lenders have proved to be anything but efficient and expeditious in the prosecution of their foreclosure cases while they wait for the housing market to recover.

The prolonged lender foreclosures caused significant financial strains for the associations, and many of their attorneys responded by helping them to complete their own foreclosure actions in advance of the banks in order to acquire and rent the residences before the lenders’ foreclosures are finalized. Since many of the lenders have been taking years to complete their foreclosures, the revenues from these rentals have helped to allay a great deal of the financial difficulties that the associations have faced.

Other major changes in how today’s condominium associations operate have to do with the nature of the current recovery in the market for new luxury condominium developments in South Florida. The predominant type of buyer for a great deal of the area’s largest and most expensive new offerings are investors, many of whom primarily live abroad and use their local condominiums as a second or third home. Typically, a considerable majority of these unit owners do not take part in the matters involving their condominium associations. Many of them do not even bother to vote in the annual elections for their association’s board of directors, let alone taking on the responsibilities of serving as a director.

For all of these new luxury South Florida condominium developments, it takes a greater level of outreach and communications by their associations and property managers in order to conduct all of their elections and association business as prescribed under Florida law. For example, Florida law requires that at least 20 percent of eligible voters cast ballots in order to have a valid election at the annual meeting, but even that modest percentage can be difficult to achieve for many of these properties.

For votes on material alteration projects and other issues that may require even greater participation rates, the associations and their attorneys have had to get creative in order to secure the necessary involvement. For example, several of my condominium association clients have developed and used password-protected websites that were designed to showcase to the unit owners all of the renderings and descriptions for proposed renovation projects, and these sites helped to facilitate the participation of owners who are not residing at the properties. The sites, which also included the paperwork and instructions for the owners to vote by limited proxy in order to approve or reject the renovations, enabled the properties to achieve the necessary votes.

Finally, perhaps the most important and positive change for community associations today is the increased level of informational resources that are available to enable association directors and members to cope with all of the difficulties that they have had to overcome. Blogs on association issues such as the one by our firm as well as those from other community association attorneys are constantly updated with timely and helpful information on the most pressing matters affecting associations, and there are also a number of publications and their corresponding websites that are devoted exclusively to community associations. With these resources and the help of experienced legal counsel, condominium and homeowners associations are implementing the necessary changes to overcome the challenges of today’s investor-fueled recovery.

Our firm congratulates Lisa for sharing this article on some of the changes that have taken place at South Florida community associations in recent years with the readers of the Daily Business Review, which is the South Florida region’s only daily business newspaper.

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For years our firm’s community association attorneys have been counseling and working with our association clients to complete their own foreclosures in advance of the lenders, which have often been slow to act on their foreclosure cases. The recent decision by the First District Court of Appeal reinforces that associations which complete their own foreclosures and acquire a certificate of sale via foreclosure auctions cannot be forced to sell the property back to the original owner due to the owner’s right of redemption.

The Florida law that governs the right of redemption reads:

At any time before the later of the filing of a certificate of sale by the clerk of the court or the time specified in the judgment, order, or decree of foreclosure, the mortgagor or the holder of any subordinate interest may cure the mortgagor’s indebtedness and prevent a foreclosure sale by paying the amount of moneys specified in the judgment, order, or decree of foreclosure, or if no judgment, order, or decree of foreclosure has been rendered, by tendering the performance due under the security agreement, including any amounts due because of the exercise of a right to accelerate, plus the reasonable expenses of proceeding to foreclosure incurred to the time of tender, including reasonable attorney’s fees of the creditor. Otherwise, there is no right of redemption.

The statute applies to lender foreclosures as well as association foreclosures.

In the recent case of Waterview Towers Yacht Club Owners’ Association v. Saeid C. Givianpour et. al., the association filed an appeal to challenge the trial court’s ruling that granted the delinquent unit owner who had lost his property to foreclosure the right of redemption. On April 9, 2013, the association filed a suit to foreclose a claim of lien for condominium assessments owed by the unit owner, and on March 7, 2014, it was granted a final judgment ordering the property owner to pay the total amount owed or the property would be sold at public auction. Subsequently, on April 11, 2014, the clerk of court filed a certificate of sale, and the unit was sold at public auction to the association.

Surprisingly, on April 16, just five days after the foreclosure sale, the property owner obtained a loan for the full amount of the judgment and sought to pay it to the association, which refused the offer. 1dca.jpg The former owner then filed a motion to enforce redemption of the property and, apparently without explanation, the trial court granted the motion to enforce redemption.

The appellate opinion reads:

Here, in accordance with section 45.0315, Florida Statutes, the final judgment provided that the property owner’s right of redemption in the property was extinguished upon the filing of the certificate of sale. As such, the right to redeem was extinguished when the certificate of sale was filed on April 11, 2014. There is no evidence that the property owner tendered payment to the Appellant at any time before April 11, 2014. In fact, the property owner admits he did not obtain the money to satisfy the judgment until April 16, 2014. At this point, the right of redemption was extinguished.

The court concluded that “the property owner fails to cite any authority for its proposition that the trial court properly acted when it granted the motion to enforce redemption after the time period for redemption had expired.” The lower court’s ruling was reversed, and the association will now retain its title to the property pending any outstanding liens by the first-mortgage holder.

Our firm’s other community association attorneys and I write regularly in this blog about important court rulings and other issues for associations, and we encourage association directors, members and property managers to submit their email address in the subscription box at the top right of the blog in order to receive all of our future articles.

In another appellate ruling on a case involving significant delays by a bank in a residential foreclosure, the First District Court of Appeal has reversed a lower court’s decision that awarded first-priority lien rights to a condominium association in Destin, Fla. over those of the lender due to the bank’s dilatory tactics.

In the case of U.S. Bank National Association v. Nicholas Farhood, the First DCA reversed the trial court’s final summary judgment of foreclosure and remanded the case back to the circuit court. The appellate panel found that the lower court’s use of its “equitable power and authority to fashion a sanction for unspecified delays in this case constituted an abuse of discretion which must be reversed.”

U.S. Bank had originally filed its complaint for foreclosure in this case with the circuit court on July 15, 2007, but then it progressed very slowly with the litigation for the ensuing four years. On September 1, 2011, upon U.S. Bank’s motion to dismiss the association’s counterclaim and upon an unrecorded hearing on that motion, the circuit court found that U.S. Bank had delayed the case and failed to act upon it, and as a “sanction” it ordered the lender to pay $2,500 to the association.

1dca.jpgThe litigation proceeded and in early 2012 U.S. Bank filed its motion for summary judgment of foreclosure, which included allegations that its mortgage was superior to the association’s lien. The association responded with its own motion to dismiss and for sanctions against U.S. Bank for additional delay tactics, and it asked the court to issue a summary judgment on its counter claim for foreclosure for the past-due assessments and alleged that its lien was superior to any interest of U.S. Bank and the borrowers. Based upon the circuit court’s equitable powers, the court declared the association’s lien superior to U.S. Bank’s first mortgage. U.S. Bank appealed the order and the appellate court reversed, finding that the circuit court exceeded its authority.

The appellate opinion concludes:

Even if the court correctly found that U.S. Bank or counsel had engaged in sanctionable delay tactics, the court had no need to resort to its equitable powers to create the sanction in this case. Appropriate remedies to address any willful and deliberate delay in the litigation are already established. See § 57.105(2), Fla. Stat. (award of attorney’s fees and costs caused by opposing party’s deliberate delays); Fla. R. Civ. P. 1.420 (dismissal of all or part of an action); 1.440 (setting action for trial); Fla. R. Jud. Admin. 2.545(e) (continuances should be few, good cause is required).

Not only did the court unnecessarily invoke equitable powers to create a remedy for delay, the order declaring the Association’s lien superior to U.S. Bank’s lien as a sanction for such delay exceeded the court’s authority. ‘[C]ourts of equity have no power to overrule established law.’ . . . The court’s declaration of lien priority as a sanction impermissibly overlooks the common law and encroaches on the Legislature’s codification of well-established property rights.

. . . Contrary to its assumption in the order imposing the sanction, the circuit court did not have ‘equitable power and authority to give [the Association] first lien priority in this matter,’ without regard to the statutes governing such lien priorities. The imposition of sanctions which contravene the recording and lien priority statutes, or the statutes establishing time and amount limits for a mortgagee’s liability for condominium assessments, exceed a trial court’s discretion and require reversal.”

Our other community association attorneys and I will continue to monitor foreclosure cases and their impact on community associations. We write about important legal and administrative issues for Florida HOAs and condo associations in this blog on a regular basis, and we encourage association directors, members and managers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.

Nick Siegfried 2013.jpgThe firm’s recent win before the Third District Court of Appeal in an important decision for Florida community associations was the subject of an article in today’s edition of the Daily Business Review. Nicholas Siegfried, who represented the community association in the case together with Steven Siegfried and wrote about the decision in the preceding blog article below, was interviewed and quoted by the newspaper.

The report reads:

The case shows the “negative consequences that lenders can face if they go too far with their delay tactics in foreclosure cases,” condo association attorneys Nicholas and Steven Siegfried said in a statement.

The case was Deutsche Bank Trust Co. Americas v. Harry Beauvais, a borrower who defaulted on his mortgage within months of securing it in early 2006.

Loan servicer American Home Mortgage Servicing Inc. filed suit in January 2007, demanding accelerated payments for the full $1.44 million.

Ironically it was this move for upfront payments that would unravel the lender’s case and cost the bank the million-dollar property, because the condo association successfully argued the demand started a five-year clock for resolving the foreclosure.

Statute of Limitations

The court booted American Home Mortgage’s case without prejudice when the servicer failed to attend a hearing.

That dismissal led the condo group to start its own efforts to claim outstanding fees on the penthouse.

“Like a lot of associations, this one was waiting to see what would happen with the foreclosure action,” said Nick Siegfried, shareholder at Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel in Coral Gables. “But since the bank didn’t proceed and the case was dismissed, the association had no choice but to proceed on its own.”

Aqua Master Association won control of the penthouse in 2011, but its claim remained subject to the mortgage.

When Deutsche Bank took over American Home’s foreclosure suit in December 2012, Aqua said the clock had already been ticking for five years and was about 11 months outside the statute window.

The bank argued the earlier dismissal “decelerated” the loan, but a judicial panel disagreed.

In an opinion issued Dec. 17, judges Frank Shepherd, Kevin Emas and Edwin Scales barred Deutsche Bank from pursuing the foreclosure. They found the bank never withdrew the original demand for accelerated payments, and so had to abide within the five-year window.

Our firm congratulates Nicholas and Steven for prevailing in this case for the association for Aqua Allison Island in Miami Beach and drawing the attention of the Daily Business Review. Click here to read the complete article in the newspaper’s website (registration required).

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Our firm’s founder, Steven Siegfried and I are very pleased to have prevailed on behalf of one of our community association clients before the Third District Court of Appeal in the opinion filed this Wednesday, Dec. 17, in the case of Deutsche Bank Trust Company Americas v. Harry Beauvais et. al. The appellate panel affirmed the Miami-Dade Circuit Court’s summary judgment that I had secured earlier this year barring Deutsche Bank from foreclosing on its $1.43 million first-mortgage on a penthouse at the Aqua Condominium in Miami Beach which the association had acquired ownership of in 2011 through its own foreclosure action. Since the bank failed to file its foreclosure action within the five-year statute of limitations period, it was barred from seeking to collect the amounts due under the mortgage (click here to read the blog article that I wrote on the circuit court’s decision).

At the trial court level, we successfully argued that the bank had “started the clock” for the filing of its foreclosure action in January, 2007 when its loan servicer filed the initial foreclosure suit and accelerated the amounts due under the mortgage. The foreclosure was dismissed when the lender’s attorneys failed to appear at the initial case management conference in December, 2010. For unexplained reasons, the bank then waited until December, 2012 to file its second foreclosure action, nearly a full calendar year after the five-year statute of limitations had expired. The circuit court granted our motion for summary judgment declaring the first mortgage held by the lender unenforceable, null and void and discharged of record from the penthouse unit.

3rd district court of appeal.jpgThe bank appealed the circuit court’s judgment. Along with our co-counsel Todd Wallen, we successfully countered the bank’s contention before the appellate panel that its second filing represented a new foreclosure action. The Third DCA determined that the initial foreclosure suit triggered the commencement of the statute of limitations and, thus, the filing of the subsequent action, after expiration of the statute of limitations, was therefore barred. As a result, the Third DCA affirmed the circuit court’s order that the lender was barred from foreclosing on its mortgage, but it reversed the court’s finding that the bank’s mortgage was null and void. The end result is that although the mortgage remains on the property until its expiration, the lender is precluded from taking any action to collect the debt, thus allowing the association to continue to rent the unit without fear of an eventual foreclosure action by the lender.

This opinion is emblematic of the ultimate negative consequences that lenders are facing due to their failure to timely enforce their rights. After years of suffering due to the dilatory tactics of lenders, an association has finally caught a break and will benefit by this ruling. Every citizen of this state is bound by the applicable statute of limitations, and the Third DCA made it clear that banks are no exception. The ruling represents the first appellate opinion on a decision barring a lender from foreclosing on its mortgage due to the expiration of the statute of limitations, and it is likely to be considered by the Florida Supreme Court which is set to hear a similar case.

Michael Hyman srhl-law.jpgThe firm’s Michael Hyman provided some insight into a recent decision by the Fifth District Court of Appeal in an article in today’s edition of the Daily Business Review. The appellate ruling, which was also the subject of the preceding blog article by firm partner Nicholas Siegfried, affirms that subsequent mortgage assignees of the original first mortgage of a property are entitled to the “safe harbor” limitation for unpaid association dues of the lesser of twelve months of assessments or one percent of the original mortgage debt.

The article reads:

“It’s really a better decision for the lending industry than it is for the community association industry,” said Michael Hyman, who is not involved in the Beltway case but knows the issue.

“It certainly doesn’t help the associations in trying to capture as much of their delinquencies as they can,” he said.

Hyman’s firm, Coral Gables-based Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, has hundreds of condo association clients; he got his first one in 1970.

Over the years Hyman has watched the push-pull of the two industries in the courts and the Legislature.

“Safe harbor was a result of the banking industry years ago going to the Legislature and convincing them that lending would be in peril if a first mortgagee didn’t have priority over a condo assessment,” he said. “It was instituted so that a lender could always be in a position of priority over an association lien.”

Before the condo statutes were amended to add safe harbor, many of the older associations had governing documents that failed to address the liability or assessments post-bank foreclosure. Or they had provisions that would entirely extinguish the liability for assessments incurred before a bank received title through foreclosure.

Condo associations having a pretty strong lobby of their own, the point was taken that they were losing barrels of money. The resulting compromise added the 12 months or 1 percent provision for first mortgagees.

“It was sort of a bone that was thrown to the condo associations by the banking industry to prevent a catastrophe,” Hyman said.

Since the mortgage meltdown, however, the bone has lost meat. There were so many foreclosures and they took so long that associations found themselves “upside down” and suffering, he said.

“We had associations that had a large portion of their units in foreclosure and the associations had to change their operational motifs and pass special assessments because they didn’t have enough money to pay their bills,” Hyman said.

Most recently, the Legislature changed the safe harbor rules effective July 1 to help aggressive associations that beat out lenders in the competition to foreclose.

The banks argued that by foreclosing, an association would put itself in the position of the prior owner who isn’t entitled to collect any past-due fees. An amendment provided clarity, Hyman said.

“Now if the association takes title, the bank coming behind them on the bank’s foreclosure still has to pay the 12 months or 1 percent,” he said.

. . . Hyman has his own take on how Beltway came to be a case of first impression.

“The issue has never been brought up because nobody would have thought to argue it was even controversial,” he said. “It was never teed up for determination.”

Lawyers for the condo association used a creative defense against application of the safe harbor law that swayed the trial judge.

“Then the appellate court kind of straightened it out,” Hyman said. “The court basically said, ‘Hold on, you’re not looking at this in the appropriate way.’ “

Our firm congratulates Michael for providing his expert analysis of this ruling for the readers of the Daily Business Review. Click here to read the complete article in the newspaper’s website (registration required).

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