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SOMETHING
TO THINK ABOUT BEFORE DEMANDING ASSESSMENTS FROM THE FORECLOSING BANK
By
Eric Glazer, Esq.
Published
October14, 2013
Foreclosures still dominate in many community associations
across the state. As
a result, frustration among Boards of Directors and residents
continue to mount, as many owners go years without paying their
monthly assessments. While
the frustration is clearly warranted, associations are wise to
stop and think first before taking legal action, instead of
taking the approach that everyone and anyone gets sued no matter
what. If they don't
look before they leap, the financial repercussions on an
association can put the association in an even worse financial
crisis than they may already be in.
Let's talk about a case that was ruled on by the 3rd District Court of Appeal in Dade County a few weeks ago. The name of the case is Ocean Bank v. Caribbean Towers Condominium Association. Now there's no question that the banks are greedy…….and of course I won't dispute that. However, in this case, the association tried to be greedy against the bank and got whacked by the appeals court for doing it.
Remember……..if a bank forecloses on a unit and obtains title, the bank only owes the association the lesser of one year of unpaid assessments or 1% of the mortgage they are foreclosing on. So by way of
example ... let's say the bank is foreclosing on a $200,000.00 mortgage. One percent of that mortgage is $2,000.00. So…… the bank owes the lesser of $2,000.00 or one year of assessments. Let's say the assessments are $300.00 per month. Well….. 12 months is
$3,600.00… that's more than 1% of the mortgage, so the bank only has to pay the lesser amount of $2,000.00.
Despite the law being clear, in 2 different cases, the association demanded more than 9x what the bank was obligated to pay and demanded more than 13x what the bank was obligated to pay. As a result, the banks were unable to sell these units to third party buyers. So…. flipping things on their head, the banks took the association to court. The trial judges ruled for the banks and one judge referred to the association's position as "frivolous." The trial judges however wouldn't hit the association with an attorney's fee award, so the banks appealed. On appeal, the 3rd District Court of Appeal said that the banks were the owners of these units and the Florida Condominium Act clearly awards attorney's fees to the winner in cases between the association and the owner. Therefore, the association must pay all of the bank's attorney's fees now for demanding fees from the bank in excess of the 1% the bank had to pay. This will turn out to be a lot of money.
Lesson: Be careful about demanding too much from the bank. Look what happened to this association. Beware of promises from others to get your association more than what they are entitled to by law. You know the saying……if it sounds to good to be true……..
Next week we'll discuss another recent foreclosure case that both community association managers and associations need to be aware of.
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