When Does Interest Accrue on Delinquent Assessments?
The ability to collect interest for delinquent assessments is found in a community associations governing documents and is also recognized in Fl. Stat. Chapters 718 for condominium associations and 720 for homeowner associations. Specifically, section 718.116(3), Florida Statutes for condominium associations provides in part that unpaid assessments shall bear interest from the due date until paid. Section 720.3085(3), Florida Statutes for homeowner associations provides in part that assessments and installments on assessments that are not paid when due bear interest from the due date until paid.
Most community association documents allow unpaid assessments, interest, late fees, the cost of collections and reasonable attorney fees and costs to become liens against the property. In addition, Chapters 718 and 720, Florida Statutes, recognize that a claim of lien not only secures unpaid assessments but also secures interest, late fees, costs of collections, attorneys fees and costs.
Typically when there is a transfer of ownership due to a foreclosure the new owner contacts the association upon receiving title to the property to resolve any outstanding balances. However, sometimes disputes arise as to the amounts due prior to the new ownership.
That is exactly what occurred in Sterling Villages of Palm Beach Lakes Condominium Association, Inc. v. Joel Lacroz, 4D17-1385 (Fla. 4th DCA September 12, 2018). Lacroz purchased the unit at a foreclosure sale. Sterling Villages demanded pre-foreclosure sums from Lacroz, who then sued the prior homeowner and Sterling Villages in a five-count complaint. Lacroz sued Sterling Villages seeking an accounting, injunctive relief and for damages since he could not sell or rent his unit due to the unpaid assessments. Sterling Villages filed a counterclaim seeking damages and to foreclose on the unit for unpaid assessments prior to and after Lacroz acquired title to the unit. The trial court found in favor of Sterling Villages and awarded damages to Sterling Villages for unpaid assessments, plus prejudgment interest from the date the claim of lien was recorded. Sterling Villages requested that the court correct the date it calculated interest to include interest from the dates the unpaid assessments became due rather than the date the claim of lien was recorded. The Court declined and an appeal ensued.
The Fourth District Court reversed the trial court finding the interest ran from the initial default – not from the date the claim of lien was recorded. The Court relied upon the ruling in First Equitable Realty III, Ltd. v. The Grandview Palace Condo Assoc., Inc., 246 So.3d 445 (Fla. 3d DCA 2018). In Grandview Palace, the Third District Court of Appeals, recognized section 718.116(3) which specifically addresses when interest shall become due and the statute plainly and unambiguously provided for the recovery in interest from the due date until paid. As a result, it was error for the trial court to reduce the interest upon “equitable considerations.”
So what should a community association take away from these lines of cases? Interest is calculated from the due date until paid as recognized by Chapters 718 and 720, Florida Statutes.