Florida Safe Harbor Provision Limits Association Assessments Due From Subsequent Non-Mortgage Holder Purchaser

The Fourth District Court of Appeals (“Fourth DCA”) recently affirmed the lower Court’s holding which extended the safe harbor protection provided under the Florida Homeowners Association statute[i], to a non-mortgagee/non-mortgage holder. [ii] The Homeowners Association statute addresses property assessments imposed by Florida homeowners’ associations. Under the pertinent provisions of this statute, if the associations’ governing documents allow for assessments, a parcel owner is liable for all assessments that come due while it is the parcel owner[iii]. Additionally, if the parcel owner sells or transfers its ownership interest, it is “jointly and severally liable with the [new] parcel owner for all unpaid assessments that came due up to the time of transfer of title.” [iv]

The statute provides certain limitations on the amounts that can be assessed against an owner where the owner is “a first mortgagee or its successor or assignee” that acquired title to a parcel by foreclosure or by deed in lieu of foreclosure.[v] Under this provision, the amount a mortgagee or mortgage holder owes to an association is limited to the lessor of twelve months of assessments that became due immediately preceding the acquisition of title or 1% of the original mortgage debt.

In Villas of Windmill Point, CitiMortgage held a first mortgage on real property which was subject to unpaid association assessments. CitiMortgage successfully foreclosed its mortgage and named the property owners’ association, Villas of Windmill Point II (“the Association”), in its foreclosure action. At the foreclosure sale, CitiMortgage placed the successful bid and became the title owner of the property. After taking title, CitiMortgage deeded the property to Fannie Mae. The Villas Association and Fannie Mae disagreed on “whether Fannie Mae was entitled to the protection of the safe harbor provision of section 720.3085(2)(c)” to limit the amount of unpaid assessments. Fannie Mae’s servicer, Nationstar, sued the Association on behalf of Fannie Mae to compel the Association’s compliance with the safe harbor provision of section 720.3085(2)(c), Fla. Stat. The Association argued Fannie Mae “was not a first mortgagee (or its successor or assignee) that acquired title to the parcel by foreclosure or by deed in lieu of foreclosure.”

The trial court ruled in favor of Nationstar and limited Fannie Mae’s liability to the Association to 1% of the original mortgage plus monthly assessments which accrued after CitiMortgage took title. The Association appealed that ruling. The Fourth DCA agreed with the lower Court, finding that Fannie Mae, although not a first mortgagee or a subsequent mortgage holder, still “indirectly” benefited from the safe harbor provision of the Homeowners Association statute because of the joint and several liability clause in that statute. The Fourth DCA pointed out that the Association incorrectly read § 720.3085(2)(c) “in isolation” and overlooked that Fannie Mae’s liability was “coextensive with that of CitiMortgage for all unpaid assessments that were due up to the time of the transfer of title.” The Court noted the parties did not dispute the fact CitiMortgage was entitled to the safe harbor provision.

The Court explained: “…CitiMortgage’s entitlement to the safe harbor protection of section 720.3085(2)(c) is relevant to determining the amount of Fannie Mae’s ‘joint and several liability’ with CitiMortgage.” The Court concluded: “[W]hen Fannie Mae acquired title to the property from CitiMortgage, it became jointly and severally liable with CitiMortgage for all unpaid assessments owed by CitiMortgage at the time of transfer of title, that is, 1% of the original mortgage amount, or $1036.00.” The Fourth DCA’s holding in Villas of Windmill Point is well-reasoned and should expedite the REO process on units which are subject to unpaid association assessments.

Florida Condominium Associations are governed by a very similar, but different Statute[vi] which provides similar protections. The § 720.3085(2)(c), Fla. Stat. The Villas of Windmill Point case will provide precedent to the Condominium statute. This case is a sensible interpretation of the intent of Florida Association Law and provides servicers clarity of expectations regarding Association Safe Harbor.

[i]   §720.3085(2)(c), Fla. Stat.

[ii] Villas of Windmill Point II Prop. Owners’ Assoc., v. Nationstar Mortgage, Case No. 4D17-2128, 2017 Fla. App. LEXIS 15415 (Fla. 4th DCA October 25, 2017).

[iii] §720.3085(2)(a), Fla. Stat

[iv] § 720.3085(2)(b), Fla. Stat.

[v] § 720.3085(2)(c), Fla. Stat.

[vi] § 718.101 – 718.71, Fla. Stat.