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No Lien Required for Condominium Association to Collect Surplus Tax Deed Sale Proceeds

tax deed sale proceeds

Condominium associations’ rights to collection unpaid assessments received a boost from the Fourth District Court of Appeals. In Calendar v. Stonebridge Gardens Section III Cd’m Ass’n, Inc., Case No. 4d 16-3393 (Fla. 4th DCA, December 13, 2017), the Appellate Court tackled the issue of whether a claim of lien or judgment needs to first be recorded to exercise any lien rights to recover unpaid assessments.

In Calendar, Ms. Calendar was the former owner of a condominium unit governed by the association.  She did not pay property taxes and as a result, a tax deed sale took place.  The high bidder at the tax deed sale paid more than the balance due on the unpaid taxes, which resulted in the Broward County’s tax collector holding surplus funds.

Broward County’s tax collector filed an action with the court asking the court to determine who among the different individuals with an interest in the condominium unit the surplus funds should be paid. Ms. Calendar and the Association made claims on the surplus funds held by Broward County’s tax collector in the lawsuit.  The trial court ruled that the association was entitled to the surplus funds based on the unpaid assessments owing for the condominium unit at issue even though it had not yet recorded a claim of lien or obtained a judgment for the unpaid assessments.

Ms. Calendar appealed the trial court’s ruling to the Fourth District Court of Appeals on the grounds that the association was not entitled to the surplus because the Association had not yet recorded a claim of lien or obtained a final judgment capturing the unpaid assessments.  The appellate court disagree and affirmed the trial court’s ruling asserting, despite not recording a claim of lien or obtaining a judgment for the unpaid assessments, Section 718.116(5)(a), Florida Statutes, gives the Association a statutory lien for all unpaid assessments.  Interestingly, the opinion issued by the court supporting its holding relied on the dissenting opinion Aventura Management, LLC v. Spiaggia Ocean Condominium Association, 105 So.3d 637, 640 (Fla. 3d DCA 2013).

The opinion issued by the appellate court in Calendar recited portions of the dissenting opinion in Aventura, which follow:

The majority opinion . . . . first concludes, correctly in view, that [the] Condominium Association’s statutory lien afforded by section 718.116(5)(a), Florida Statutes (2008) survives the foreclosure.”  Maj. Op. at 5; see also Lassiter Kaufman, 581 So. 2d 147, 148 (Fla. 1991); Contos v. Lipsky 433 So. 2d 1242, 1245-46 (Fla. 3d DCA 1983). . . .  

. . . .

. . . [I]t is apparent the fundamental purpose of the Legislature in promulgating section 718.116 was to assist condominium associations to be made whole in the collection of past due assessments, while at the same time not unduly impairing the value of collateral held by first mortgagees. In furtherance of this design, the Legislature has given condominium associations a statutory lien on each condominium unit over which it has jurisdiction, to secure payment of assessments without the necessity of filing a claim of lien in the public records, with the single exception of first mortgagees, where record notice is required. § 718.116(5)(a).

The Calendar court agreed with the Aventura dissent.  Therefore, the association was not required to have recorded a claim of lien or obtained a judgment capturing the unpaid assessments due to it from the former owner prior to making its claim on the tax deed surplus.

This ruling is important to condominium associations since it further establishes their lien rights and expands the situations when condominium associations are entitled assert their lien rights even if they have not yet recorded a claim of lien.  It also provides condominium associations with another argument to support efforts to recover unpaid assessments when lien rights and lien priority are at issue.  These issues frequently arise when the courts are holding surplus funds after a superior lienholder sells a property through foreclosure or tax sale.

The Calendar decision involved the surplus proceeds for a tax deed sale, but the result of the trial court’s and appellate court’s ruling would have been different if a first mortgage holder had been involved.  The holding in Calendar did not remove condominium associations’ need to record a claim of lien.  Condominium associations are encouraged to seek advice of their legal counsel on when to record a claim of lien and how the holding in Calendar can be applied to their cases.

In Calendar, the Association was a condominium association operating under Chapter 718, Florida Statutes, and it remains undecided whether the foregoing would apply to a homeowners’ association operating under Chapter 720, Florida Statutes.  Although there is similar language in Chapter 720, Florida Statutes, there remain differences between the application of Chapters 718 and 720, Florida Statutes, which may yield a different result.  Stay tuned!

Posted in Community Association
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