Condominium Associations Foreclosing Out Liens for Past Assessments

On January 23, 2013, the 3rd District Court of Appeals rendered a decision in a case called Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc. Case No. 3D11-2545,. In this case, a condominium association foreclosed its lien for past due assessment and began renting out the unit prior to the first mortgagee’s foreclosure of its mortgage lien. Upon the first mortgagee completing its foreclosure, an investor (Aventura Management- hereinafter called “new owner”) acquired the unit at the foreclosure sale. The association attempted to collect from the new owner all the past due assessments etc. that had accrued from the original unit owner, maintaining that as a third party purchaser, the new owner was responsible for all past due assessments that were owed from original owner. The new owner objected to the association’s attempt to collect these monies and sued. The result: The 3rd DCA ruled that the condo association upon taking title to the property through its own foreclosure became an intervening owner and was therefore also jointly and severally liable for the past due assessments during the time it was the owner. Accordingly, the new owner was not required to pay the past due assessments and fees that had accrued since the time the original owner defaulted.

TIP. The law has now changed – if you are an association, you may no longer be made whole by foreclosing on your lien. Therefore think twice before going down that path and discuss with your attorney the risks of foreclosing out your assessment lien. This recent case has now established that when an association takes title to a unit via its own foreclosure, the association will now become jointly and severally liable for past-owed assessments and cannot collect the past due assessments from the new owner.

The facts of this case are limited to a new owner’s obligation to an association for past due assessments when the association acquires title to that property prior to new owner. However, when the association does not first acquire title to the property, the general rule that a third party purchaser at a mortgagee’s foreclosure sale is liable to the community association for all past due assessments accrued through the date the Certificate of Title remains unchanged. It is also unclear from this ruling if a mortgagee acquires title to the property after the association already owns it, would the mortgagee be subject to the ruling of this case and not owe past dues.

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Posted by: marvinkatz on March 25, 2013