Florida Tax Deeds vs. HOA or Condo Association Liens and Assessments

I am unsure how this came to pass, but lately I’ve become something of a resident expert on disputes between condominium and homeowners’ associations and property owners within their developments. Whether the sour economy has them reaching for every dollar, or whether their business practices are simply a logical extension of the personality types that normally inhabit condo and HOA boards, is unclear. But whatever the cause, associations have become increasingly aggressive in the collection of past due balances.

I never sought out this area of law, actually I represent a couple of HOAs, which I generally advise against becoming involved in disputes like these for good reason. But during the past year, I’ve taken in several clients who purchased properties at foreclosure sales or tax deed sales, only to find that the association demanded immediate payment from them for the past due debts of the former owners. This is often an astronomical sum of money, involving several years’ worth of past due balances. Any questions are usually met with threats of further penalties, interest, late charges, and the association’s attorney’s fees.

Many (more like almost all) attorneys who represent associations will argue that F.S. 720.3085 and F.S. 718.116 create personal obligations that survive any form of title transfer, making any successor-in-title liable for all past due balances owed to the association. Their outlook is certainly understandable, given that the condo and HOA attorneys, together with their lobbyists, wrote the legislation. However, that position is often completely incorrect.

Faced with these demands, most folks simply pay the bill and call it a day. The ones who fight these battles usually tend to be banks or investors who don’t live in the association. I suspect this is because most folks don’t like the concept of suing their neighbors. Personally, I take the view that if your neighbors need suing, well then that’s hardly your fault. I don’t live in an HOA myself, and nor would I, after seeing what I’ve seen. But I digress.

To get to the nuts and bolts of two disputes in particular, one involved a condominium association arguing that its claims against my client for the past due debts of the former owners survived a tax deed, and the second involved a homeowners’ association arguing that its claims against my client for the past due debts of the former owners survived a mortgage foreclosure sale.

To start first with the tax deed, the association argued there is an inherent conflict between Chapters 197 and 718, where 718.116 contains language stating that any successor in title is personally liable for any debts the former owners owed to the association, ”regardles of how his or her title has been acquired” which, it argued, must include tax deeds.

The problem is, that really doesn’t apply to tax deeds. F.S. 197.552 plainly states that the survival of any debt or lien through a tax deed is governed exclusively by Chapter 197, and the legislature would have had to amend Chapter 197, not Chapters 718 or 720, in order to allow for the survival of association debts through tax deeds. The legislature did not do so, and any argument about any language contained in 718 or 720 somehow altering the survival of debts through tax deeds is inapplicable, where 197.552 established that Chapter 197 is the sole vehicle for determining the survival of debts through tax deeds.

Astonishingly there is no published case in Florida on this point of law. The closest thing is Sugarmill Woods Oaks Village Association, Inc. v. Wires, 766 So.2d 487 (5th DCA, 2000), which is distinguishable and involves a different fact pattern, and a different statute which at that time lacked the joint and several personal liability provisions found in 718.116 and 720.3085. I won this case before the very well-regarded Chief Judge of the 7th Judicial Circuit, which should at least clear this issue up within that territory. However, until one of these cases makes it to a district court of appeal, this issue will continue to be encountered on a case-by-case / circuit-by-circuit basis.

The second case involves a homeowners’ association which claimed that my client was liable for the past due balances owed by the former owner, after acquiring title at a foreclosure sale. The association filed a lien against the property and sued my client to recover these amounts. I responded by filing a counterclaim and moving for summary judgment on the association’s claims, which I won. My counterclaim for slander of title (the association’s lien and lawsuit cost my client a lost sale) and to recover my client’s attorney’s fees and costs remains pending.

The problem for the HOA in this second case was that it hadn’t bothered to read its own declaration of covenants and restrictions before filing suit against my client. I mean that literally, and far from being surprising, this is something I’ve seen occur repeatedly. Of course, I do read them, and unfortunately for the HOA, its declaration contains provisions that made any debt owed to the HOA subordinate to first mortgages (which the foreclosed mortgage was), and also provides that no debt owed to the association would “pass to any successor in title unless assumed by them.” Oops.

This one really makes you wince. As a lawyer, I can’t imagine a worse “oh $h#%” moment; The thought of finding oneself in a situation like that is the kind of thing that keeps you up night in this profession. With that being said, this particular HOA and its former attorney (since replaced by insurance defense counsel who behaves professionally) truly deserved it. This was one of the most unnecessarily acrimonious cases I’ve ever had the displeasure of handling, from opposing counsel screaming in one depo, to his spending most of another depo trying to insult the witness with not-so-subtle remarks about his sexual proclivities, to refusing to comply with discovery requests or anything else, even after the judge had already ordered sanctions, the opposing side’s behavior really ran the whole gamut. It was more of a lengthy temper tantrum than anything else. What did any of it have to do with HOA liens, you might ask? Well you got me there. I suppose we’re back to that well-deserved stereotype regarding personality types and HOAs and condo associations.
The moral of this post is that, if you’re presented with some threatening demand or another from an HOA or a condominium association, especially one involving the past-due debts of the former owner or Florida stautes 720.3085 or 718.116, then you ought to look into what your options are before simply paying up. Or I am happy to handle it for you anywhere in the state. The way these associations behave, which is to say with total disregard for the rights of the affected property owner, is rapidly becoming a pet peeve of mine.

Quite often, the association is just flat out wrong in its interpretation, or is proceeding without regard to the property owner’s rights as established in its own declaration. In Florida, you have the ability to waive most common-law and statutory rights by contract, and though we’re used to this always being slanted in someone else’s favor, the fact is that this sword cuts both ways. If the declaration conflicts with the statute, then the declaration will almost certainly control for one of two reasons, either A) The declaration was recorded prior to the enactment of the joint and several liability statutory sections, and the statute cannot unconstitutionally alter a pre-existing contract that runs with the land from the date it was recorded (the declaration would need to be amended to make the statute operative), or B) If the declaration was recorded after the enactment, and contains provisions contrary to the association’s claims, then it operates as a voluntary contractual waiver of the association’s statutory rights. When you really get into these disputes, more often than not the declarations contain some provision or another that expressly provides that the foreclosure of a first mortgage would extinguish the association’s claim, or otherwise provides that such debts do not pass to successors in title.

I have been surprised to discover just how often these associations are simply acting however they wish, without regard for the property owner’s contractual rights under the declaration. As a side note, each of the clients in the two cases I mentioned expressed that they encountered serious difficulty in finding an attorney willing to accept their case at all, as apparently with few exceptions the attorneys who practice in this area tend to represent the associations, not disgruntled property owners. Which is fine by me, I happen to enjoy this kind of work. So all’s well that ends well.

Petitions for Injunction for Protection Against Domestic Violence

Let me state up front that, if you truly feel threatened, or you find yourself the victim of domestic violence, then a Petition for Injunction is a worthwhile and necessary avenue to take, and an option that will allow you to end the abuse cycle and move on to bigger and better things, including one hopes a person who values you as a partner and an equal, rather than as a target.

With that said, I recently spent two mornings in domestic violence court, and in watching several of these Petitions proceed before my case was called the first day, and the second day while I was waiting on copies after my case was called, it struck me that some people do not become aware of the potential repercussions until it may be too late. And these repercussions can be severe. I certainly do not want to discourage anyone who legitimately needs the protection afforded by an injunction. But what I am about to write happens to be the truth.

The fact is, I observed a number of people pursuing Petitions for Injunction in what appeared to be efforts to obtain an upper-hand in divorce or custody battles, or in situations where there were certainly hot tempers and name-calling, but no actual violence and little or no supporting evidence. The problem with these types of Petitions is that the respondent generally files a cross-petition seeking an injunction against the petitioner, and now both face the same fate. A fate which many people seem unaware of, and which brings me to the point of this post.

If a Petition for Injunction is granted by the court, the order then becomes a public record, which will almost certainly appear in any background check or employment screening process. This can be a career-killer, especially in fields where a respondent works with minors, or in professions involving law-enforcement or military servicemembers, where the respondent is routinely entrusted with deadly force. This also carries over to the private sector, which must consider the potential liability in hiring or retaining an employee who, courtesy of the Injunction, they now have actual knowledge may have violent propensities. In this already-flooded job market, that hardly adds to an employee’s competitive advantage. An Injunction also curtails certain rights, for example a respondent is generally forced to declare and surrender all weapons/firearms, and will have violated the injunction if one is found in his/her possession, regardless of whether it had anything to do with the petitioner or the injunction. This obviously presents a problem for LEOs and servicemembers.

My client’s situation was not strategic, however after understanding the risks and potential downsides involved, the parties in my case realized it was better to leave each other alone willingly, and we reached an agreement to dismiss the cross-petitions. This was truly the best outcome for my client, who worked in a field where this would have significantly limited future career growth. In fact, many of the cases where both sides have attorneys tend to be resolved this way, as once someone sits down and explains the long-term risks and downsides involved, anger tends to subside and rational choices can be made, where the parties have all of the information necessary to make an informed decision.

My worry is for the large number of pro se parties who proceed with cross-Petitions, and which Petitions are oftentimes granted against both parties, without any understanding of the long-term effects it may have on their future and career choices. If you are a victim of abuse, or are truly in fear for your safety, then filing a Petition for an Injunction for Protection may well be a life-saver, and you should not hesitate. But if your situation does not involve physical violence or a legitimate threat to your safety, then the downside risks really must be carefully weighed and considered.

Banks Finally Catching on to Collection of Deficiency Judgments

I ran across this article in the Wall Street Journal the other day, entitled “The House is Gone but the Debt Lives On:”

http://online.wsj.com/article/SB10001424053111904060604576572532029526792.html
Which raises a rather disconcerting point that I have long been worried over; A staggeringly large segment of the population of the State of Florida has suffered through a mortgage foreclosure in the past 5 years, and during that same time the economy and local real estate markets collapsed. The combination of these factors meant that virtually every single one of these foreclosed properties sold for less (often far less) than its mortgage value at the judicial sale, leaving a balance owed by the foreclosed homeowner.

Lenders have, thus far, been sleeping on their rights when it came to collecting these deficiencies, due to a variety of factors, not the least of which is that most of them were TARP recipients and only avoided collapse with the aid of bailouts from the same taxpayers they were foreclosing on. So they were in something of a public-relations catch-22 when it came to playing hardball. But 2008 is now a fading memory, at least in the eyes of Washington and the media, and time has marched on. Many banks failed, and the ones that remain ultimately repaid their government bailout funds.

With banks no longer bound by many of the same public relations concerns, they are now beginning to go about collecting on these outstanding mortgage deficiencies. Some are selling the debts to collection agencies or junk debt buyers, and others are beginning to go after homeowners directly. As always in credit and collections law, those with salaries and personal property to garnish and attach are the most likely targets of collection efforts. Another wrinkle is mortgage insurors, who additionally may have the right to collect on a mortgage deficiency.

I suspect that, as 2012 arrives, many people who were forced to walk away from a home or investment property, and who have thought that heart-wrenching period of turmoil was over, are going to wind up with a nasty surprise, as this appears to be the new hot-ticket item for collectors and junk debt buyers. Thankfully, these deficiencies are dischargeable in bankruptcy, and because of the sheer size of the obligation (deficiencies often run several hundred thousand dollars) the former homeowners are more likely to qualify for a Chapter 7, wherein the deficiency can be completely eliminated. Even so, it strikes me that just when people thought they were moving forward, out pops another roadblock, courtesy of the financial crisis.