Whether a third party is liable for HOA assessments after a foreclosure sale is a highly litigated issue in Florida. Often, the foreclosure purchaser seeks to sell the property before a determination on the merits as to their pre-foreclosure assessment liability. Once sold, questions arise whether the foreclosure purchaser maintains legal standing to continue challenging the HOA’s assessments. The issue was addressed by Florida’s Fifth District Court of Appeal in Real Estate Solutions Home Sellers, LLC v. Viera East Golf Course District Association, Inc., Case No. 5D18-3569 (Fla. 5th DCA, January 3, 2020).
The court analyzed whether a former parcel owner, Real Estate Solutions Home Sellers, LLC (“RESHS”), had standing to dispute an association assessment after it sold the property. RESHAS sought a determination of whether they owed $19,000.00 in assessments to the homeowners association, Viera East Golf Course District Association, Inc. (“HOA”).
RESHS acquired title to the property located in the HOA at a foreclosure auction. The HOA demanded assessments from RESHS that were owed by the prior property owner. RESHS argued the language in the HOA’s Declaration of Covenants extinguished the HOA’s lien and assessments owed to the HOA prior to the foreclosure sale. The HOA argued that RESHS was jointly and severally liable for the unpaid assessments of the prior owner. RESHS filed a declaratory action seeking a determination that it did not owe the assessments accruing prior to its acquisition of title. Two months after filing suit, RESHS sold the subject property to a third party. The HOA moved to dismiss the lawsuit as RESHS no longer owned the property. The lower court determined that RESHS no longer had standing to bring the action and dismissed the lawsuit.
RESHS appealed the lower court’s ruling. In reversing the lower court, the Fifth District Court of Appeal analyzed whether the controversy ceased to exist when RESHS sold the property to a third party. The Court determined that the dispute continued to exist as Florida Statute §720.3085(2)(b) holds a parcel owner jointly and severally liable with the previous parcel owner and allows a present owner to recover from the previous owner. Therefore, the third party who purchased the subject property from RESHS is responsible for the amounts, if any, owed by RESHS to the HOA during the time RESHS owned the property, and the third party may be able to recover from RESHS the amounts it had to pay the HOA. Thus, a judicial determination was still necessary to ascertain RESHS’s liability, if any, thereby providing RESHS continued standing.
Determining liability for unpaid assessments after a foreclosure sale may be a complicated issue and should be analyzed by a community association’s legal counsel to determine the amounts owed and the obligation of the purchaser at the auction.