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socrateaser, Lawyer
Category: Real Estate Law
Satisfied Customers: 38910
Experience:  Attorney and Real Estate broker -- Retired (mostly)
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My wife and I recently bought a property in West Palm Beach,

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My wife and I recently bought a property in West Palm Beach, Florida through a foreclosure auction (foreclosed by first lien holder) for around $220k. A few days after the purchase we were informed by the president of the HOA that there are five years of unpaid HOA fees plus legal fees, interest etc. (altogether $30k). We have since read Florida Statute Chapter 720 and understand that per the Florida statutes we are jointly and severally liable for the HOA fees that were incurred when the property was owned by the previous owner. The property was rented for part of the time (until 2012), but the HOA did not collect any of the rent from that tenant to satisfy its claims. What is our best way to proceed? Is it common to negotiate with the HOA for a partial forgiveness of the HOA-fees or legal fees or payment over time? Can we argue that fees incurred by the HOA trying to force foreclosure by the first lien holder and interest are not the responsibility of the new owner? (Excerpts of the covenants and restrictions of the community have been inserted below) Have courts have held in favor of purchasers?

About three years ago, Robert Bilsky from Jacksonville, FL asked a very similar question on this site.
Your help is greatly appreciated.


Excerpts from covenants and restrictions of the community:

All assessments for Association Expenses, including special assessments for same, and all installments thereof and all costs of collection, including reasonable attorneys' fees and costs, at trial level, appellate level, or otherwise (collectively, the "assessments"), with interest thereon, are hereby declared to be a charge and a continuing lien upon the lot against which such assessments are made. Each assessment against a Lot, together with such interest thereon at the highest rate allowed by law and costs of collection thereof, including attorneys' fees, shall be the personal obligation of the Owner of the Lot assessed. Said lien shall be effective only from and after the time of recordation in the Public Records of Palm Beach County, Florida, of a written, acknowledged statement by the Association setting forth the amount due to the Association as of the date the statement is signed. Upon full payment of all sums secured by that lien and costs and fees accrued, the party making payment shall be entitled to a recordable Satisfaction of Lien.

An Owner, regardless of how his title to the Lot has been acquired, including by purchase at a foreclosure sale or by deed in lieu of foreclosure, is liable for all assessments that come due while he is the Owner of the Lot. The Owner's liability for assessments may not be avoided by waiver of suspension of the use or enjoyment of any common area or the abandonment of the Lot subject to such assessments. The Owner is jointly and severally liable with the previous Owner for all unpaid assessments that came due up to the time of transfer of title, subject, with respect to a first mortgagee or tis successor, or an assignee, as a subsequent holder of the first mortgage, who acquires title by foreclosure or by deed in lieu of foreclosure, to the limitations of Section(NNN) NNN-NNNN2)(c), Florida Statutes, as amended from time to time. This liability is without prejudice to any right the present Owner may have to recover any amounts paid by the present Owner from the previous Owner.

You've obviously already reviewed the law. The botXXXXX XXXXXne here is that you are now on the hook for the assessments, and if you don't pay, the association can foreclose your interest in the property. So, if the property is worth more than what you paid plus the assessments, then you could "flip it" and avoid payment, and perhaps make a profit. Otherwise, your only recourse here is to pay the assessments (and/or negotiate an installment payment plan or other settlement with the association), and the sue the former owner for the association fees.

Ordinarily, under Section 523(a)(16) of the U.S. Bankruptcy Code, the homeowners association fees would be nondischargeable in bankruptcy. So, even if the former owner were to file bankruptcy, the association would still be able to collect them, if at any time the homeowner acquires any assets or income to pay.

However, when you pay off the association debt, you will be relieving the former owner of his/her debt to the association, and as result, the owner can bankrupt out of any liability to you. So, what you want from the association, no matter what, is for the association to maintain the debt against the former owner. The way to do this would be for you loan the fees to the association, with a contingency that if you are unable to collect the debt from the former owner within the next 10 years (or for whatever period you believe is negotiable and reasonable), that the loan would be forgiven and the association's lien against your property would be released. Then, you would pay the association's legal fees to pursue the debtor in and out of bankruptcy, as necessary, so that the debtor's debt remains nondischargeable.

If the association won't agree to something like this, then you are probably wasting your time suing the former owners, because they will just file bankruptcy, and you will be SOL (as the old saying goes).

Please let me know if I can be of further assistance.
Customer: replied 3 years ago.

Dear Socrateaser --

Thank you very much for your response. Very insightful....

Just to clarify:

Can we argue that fees incurred by the HOA trying to force foreclosure by the first lien holder and interest are not the responsibility of the new owner? (Excerpts of the covenants and restrictions of the community have been inserted above) and

Have courts held in favor of purchasers?

Thanks again!

The law does not state that attorney's fees represent assessment fees for the purposes of joint and several liability of a subsequent owner. However, the law concerning collection of assessments permits attorney's fees and costs from the former owner.

There is no case law interpreting this issue. So, yes, you could argue that the fees are not included. However, the cost of litigating the question would probably exceed the costs already accrued. This could make the issue a net loser to pursue.

BotXXXXX XXXXXne, if attorney's fees are a big chunk of the assessment charge, you may be able to argue that the fees are unreasonable in view of the amount of work actually done by the association's law firm. That may be the better argument. But, without a judge involved, you won't know what would be successful.

What you need to do at this point, in my opinion, is to stop the bleeding, by bringing the assessments current. You can only negotiate for so long, before the association starts trying to collect against you, and then you're under a bigger burden than before, because the association will claim attorney's fees against you directly.

Hope this helps.
socrateaser and other Real Estate Law Specialists are ready to help you
I'm very flattered by your interest but I'm retired, and not taking cases at this time.

For a competent lawyer referral, see this link.

Hope this helps.
Customer: replied 3 years ago.

My husband and I bought a property at a foreclosure auction (first lien holder) in Florida. After the sale we became aware that pursuant to Florida Statute(NNN) NNN-NNNNwe would be jointly and severally liable for unpaid HOA assessments that had accrued. The HOA fees are for five years, the amount is substantial.


We read the case Coral Lakes Community Association vs. Busey Bank, in which it was held that the Statute would not apply as the HOA documents included specific provisions regarding payment of HOA dues for properties acquired through foreclosure. Our situation is very similar to the one described in that case; however, the HOA Declaration of our community is silent with respect to purchasers other than first mortgagees. The relevant provision reads as follows


“When any first mortgagee obtains title to a lot as a result of a foreclosure of mortgage or deed (or assignment) is given in lieu of foreclosure, such acquirer of title, his successors and assigns, shall not be liable for the share of assessments pertaining to such lot or chargeable to the former owner which became due prior to the acquisition of title as a result of the foreclosure or deed in lieu of foreclosure, unless such share is secured by a Claim of Lien for assessments and recorded prior to the recordation of a mortgage. Such unpaid share of assessments for which a Claim of Lien has not been recorded prior to the recording of the foreclosed mortgage or deed given in lieu of foreclosure shall be deemed to be assessments collectable from all lots, as the necessity may arise in the discretion of the Board.”



Although the HOA Declaration does not refer to a person other than the first mortgagee obtaining title to a lot as a result of a foreclosure, could we still argue that we should be covered by the HOA Declaration rather than the Statute for the following reason:


The first mortgagee is an intended third-party beneficiary of the Declaration. It is detrimental to a first mortgagee if a buyer that acquires the property in foreclosure auction is held liable for assessments chargeable to the former owner. That is, because a reasonable person acquiring a property in foreclosure will reduce the amount offered to the first mortgagee for the property by the amount of unpaid assessments payable to the HOA. In order not to undermine the protection afforded to the first mortgagee by the HOA Declaration, the provision of the Declaration (i.e., no liability for unpaid assessments) should be extended to any person obtaining title to property pursuant to the foreclosure of a first mortgage.


In other words, although the HOA Declaration is silent with respect to persons other than first mortgagees acquiring a property in foreclosure, it can be presumed that the intention of the parties at the time of execution of the HOA Declaration was to include persons other than first mortgagees.

The court in Coral Lakes Community Association, Inc. v. Busey Bank, N.A., 30 So.3d 579, 584 (Fla. 2d DCA 2010), concluded that the enactment of “section(NNN) NNN-NNNNcannot disturb that prior, established contractual relationship" created by the declaration of covenants.

Consequently, the express terms of the covenants control, and if those terms only grant an exemption from the HOA fees to a first mortgagee, then that is the limit of the exemption.

I have run a Westlaw® search on the Coral Lakes case, and I find no subsequent case law that would modify the court decision to permit you to argue that you should be entitled to an implied benefit, based upon what was express in the association covenants.

Contracts are interpreted to carry out the objective intent of the parties, as evidenced by the express contractual language. The covenant language that you disclose here does not seem to me to provide any expression of an intent that someone other than the first mortgagee should receive an exemption from the requirement to pay the HOA fees.

So, while you can certainly argue that you should be treated similarly to a first mortgagee, I do not believe that argument would prevail in court. Just as important, are you prepared to spend the money to have the matter resolved by a court? Because this could easily burn $10,000 or more in legal expenses -- and, if you lose, then you will still owe the HOA fees.

Hope this helps.
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