In Willoughby Estates v. BankUnited, 23 Fla. L. Weekly Supp. 84a (Fla. 15th Cir. Ct. 2015) a court recently ruled against an association in a dispute over unpaid assessments where the bank failed to name and foreclose the association’s lien in its mortgage foreclosure.
BankUnited argued that although it failed to foreclose the association’s lien it was not liable for unpaid assessments prior to acquiring title because the association’s declaration absolved it from such liability. The association countered that in order for BankUnited to benefit from declaration’s subordination clause, BankUnited needed to join the association as a defendant in its foreclosure action.
In its ruling, the Court acknowledged the basic principle that in order for a junior lien to be wiped out as a result of a senior lien foreclosure, the senior lien holder must join the junior lien holder as a defendant to the senior lien foreclosure action and a failure to do so leaves the junior lien intact and in the same position as if no foreclosure took place. The Court then abruptly ignored this long standing tenant of foreclosure law by declaring that tenant did not contradict the declarations provision absolving first mortgagees from liability.
There you have it folks – subordination clauses now self-execute to foreclose association liens. This serves as another reminder that every community association should have their attorney review and amend their governing documents to maximize the ability of the association to recover unpaid assessments from a purchaser at a foreclosure sale.