The real estate market has seen a tremendous influx of large companies purchasing multiple units and lots within an association, and addressing delinquencies that began prior to transfer of title can be complicated. Just as Florida statutes layout the process by which associations can collect unpaid assessments from current owners, it also regulates how outstanding delinquent assessments may be collected against new owners following transfer of the property.
On February 4, 2022, the Fifth District Court of Appeals (“ 5th DCA”) clarified statutory language concerning just this issue in Trident Asset Management, LLC v. 2050 Contdotel Inn Condominium Association Inc. et al. The matter, on appeal from Ninth Circuit Court for Osceola County (“9th Circuit”), focuses on the appropriate interpretation of Section 718.116(1)(b), Florida Statutes, as it relates to delinquent assessments owed to the association prior to the transfer of title to a property by deed in lieu of foreclosure.
In this instance, 2050 Condotel Inn Condominium Association, Inc. (“Association”) filed Claims of Lien against the prior owners of several condominium units between July 2018 and February 2019. In February 2019 56 of the units were deeded to Trident Asset Management, LLC (“Trident”) and secured by a single mortgage of $300,000.00. However, none of the Claims of Lien were satisfied prior to transfer of the properties.
As you likely know, associations must follow a very particular process when collecting delinquent assessments. In this case, the Association complied with all the requirements, including amending the Claims of Lien upon learning Trident was the new owner. In reviewing the Association’s foreclosure matter against Trident, the 9th Circuit found that the Amended Claims of Lien survived the transfer of title by deed in lieu of foreclosure and Trident, as the new owner, was responsible to pay the amounts owed the Association for each unit.
The problem came in the 9th Circuit’s application of Section 718.116(1)(b)1.b., Florida Statutes, which determines the liability of a mortgagee who acquires title to units in the same manner as Trident. The section limits the new owner’s monetary obligation to either the total delinquent expenses and regular assessments that accrued against the unit for the 12 months prior to transfer of title (718.116(1)(b)1.a.) or one percent of the original mortgage debt (718.116(1)(b)1.b.).
The Final Judgement of Foreclosure filed in the 9th Circuit, without further elaboration, found that Section 718.116(1)(b)1.b., Florida Statutes, calculates the amount owed against each individual delinquent unit, instead of the single mortgage securing the total number of delinquent units. Therefore, the lower court found that Trident owed the Association $3,000.00 for each of the 56 units, totaling $168,000.00.
On appeal the 5th DCA reversed this decision arguing the “clear and unambiguous language” of the statute cannot support the calculation of the amounts owed under the Final Judgement. Specifically, the court focuses on the failure of the legislature to use “the unit” as a term when discussing the percentage of the original mortgage debt owed. A general tenant of legal interpretation is “where the legislature includes working in one section of a statute and not in another, it is presumed to have been intentionally excluded.” Section 718.116(1)(b)1.a. includes this language. Therefore, the 5th DCA concluded that Section 718.116(1)(b)1.b. specifically did not intend the amount owed by a subsequent owner to be calculated on a per unit basis where multiple units are secured by single mortgage. If this calculation were to stand Trident would be required to pay “more than 50% of the original mortgage” which would be in “direct conflict” with the Legislature’s intent to limit liability.
With the face of the real estate market in Florida shifting so quickly, it is important for associations to understand how they may collect delinquent assessments and what they may be entitled where ownership changes. As always, when questions arise about the collections process, it is important to reach out for advice from the association’s counsel.