Quarterly Newsletter – Spring 2014

Foreclosure Community Association

Spring is a time of growth and I am pleased and grateful to announce that The Ruggieri Law Firm, P.A. is growing quickly. I want to express my sincerest thanks to all of you for the support. I am pleased and excited to announce the addition of Tracy Durham to our team. As many of you know, Tracy is an accomplished Community Association Manager who has always had a keen interest in the law. Tracy will be our Director of Operations, a fancy phrase for “anything and everything” that needs to get done! She will be assisting me with collections, taking on administration such as banking, and bringing her unique ability to network and market the firm to our team.

I also wanted to take the opportunity to update you on some recent developments in the law affecting Community Associations. The first article is a discussion regarding the growing tendency and willingness that banks have to dispute not just their liability for assessments that accrued before they took title in their foreclosure, but also the safe harbor amounts. Associations and their law firms may be exposed to significant liability for both damages and attorney’s fees and costs should erroneous demands be made upon a bank for delinquent assessments or the safe harbor amounts. My second article addresses an appellate decision from 2012 that may have a significant impact on covenant enforcement. The instances in which this case has been raised as a defense by homeowners has only increased since the decision was first released in 2012.

Continued success to you as we approach the Summer and be sure to call us with any of your legal needs.

Be Careful What You Ask For

In July of 2010, the Florida legislature modified both Chapters 718 and 720, altering a bank’s liability for assessments when they take title to the property in their foreclosure proceedings or by obtaining a deed from the homeowner in lieu of foreclosure. Effective July 1, 2010, banks which have issued a purchase money mortgage on either a condominium unit or a single family residence are limited to paying twelve (12) months of assessments or one percent (1%) of the face value of the mortgage, whichever is less. The Condominium Act was amended in 1992 in a similar fashion, limiting a bank’s liability to six (6) months’ worth of assessments or one percent (1%) of the face value of the mortgage, whichever is less. Banks were quick to challenge the statutory change and were successful in doing so.

Our State’s Constitution prohibits the adoption of legislation which is applied retroactively to modify a contractual right that existed on the date the Statute was adopted. The banks argued that, because their mortgages were written prior to the 1992 change to the Condominium Act, the Statute could not be applied retroactively to make them liable for assessments which they were not previously required to pay. I knew it was a matter of time before banks would challenge the 2010 changes to the Statute.

Several appellate decisions have been issued indicating that the 2010 change to the Statute cannot be applied to mortgages which existed and were written prior to the effective date of the Act (July 1, 2010).

Some associations have taken a “it can’t hurt to ask” approach and have either demanded all of the delinquent assessments that accrued prior to the time that the bank took title or the safe harbor amount of twelve (12) months or one percent (1%) from banks whose mortgages were written prior to the effective date of the Statute.

The Federal Fair Debt Practices Act prohibits attempts to collect improper amounts from a debtor, can trigger liability for punitive damages, and entitles the debtor to recover their attorney’s fees and costs incurred in connection with a violation of the Act. It has been increasingly common for banks to seek a Declaration of their rights, challenging the Association’s attempts to collect pre-certificate of title assessments or the safe harbor amount. They are likewise requesting an award of their attorney’s fees and costs pursuant to the Declaration and State Statute. I have also witnessed banks challenge associations when they voluntarily paid the amount, seeking a refund of those monies. Consequently, in a situation where a bank has voluntarily paid, this doesn’t mean “the case is closed.”

In summary, caution should be used in making demand upon banks whose mortgages were written before July 1 of 2010. Consult your legal counsel regarding a bank’s liability in a particular circumstance and be certain that you are demanding the correct amounts.

Is Self-Help Mandatory

In January 2012, the Florida Second District Court of Appeals issued an opinion titled Alorda v. Sutton Place Homeowners Association, Inc., 82 So. 3d 1077 (Fla. App. 2nd DCA 2012). The homeowners association filed suit against the homeowner seeking an injunction ordering the homeowner to obtain insurance as required by the terms of the Declaration. The homeowner ultimately purchased the insurance while the lawsuit was pending. Consistent with applicable caselaw, the association was deemed the prevailing party for purposes of attorney’s fees and costs and a judgment was entered against the homeowners for the attorney’s fees and costs incurred by the Association. The homeowner appealed and the Second District Court of Appeals overturned the trial court’s ruling, holding that the association’s lawsuit should have been dismissed, and further ruled that the Association was therefore not the prevailing party.

In order for a party in a lawsuit to obtain an injunction or injunctive relief, one of the items it must establish is that it has no adequate remedy at law. Injunctive relief is deemed to be an “equitable remedy” which differs from a legal remedy. The homeowner argued that the association had an adequate remedy at law, namely the right under the Declaration to purchase the insurance where a homeowner fails to do so, and to lien and foreclose if necessary if the homeowner fails to pay.

The Second District Court of Appeals has created a dangerous precedent with their decision. Most, if not all, Declarations allow the Association to enter onto a homeowner’s property if necessary, fix the violation, and lien the property to recover the costs incurred. Based upon the Second District Court of Appeals’ decision, are homeowners associations always required to exercise self-help, as opposed to filing a lawsuit to compel the homeowner to cure the violation? I have always counseled my community association clients not to exercise self-help by going onto a homeowner’s lot unless the property is vacant. I believe that going onto a homeowner’s property to mow the lawn or cure any other maintenance violation can lead to confrontations and other liability concerns. This is despite the fact that self-help provisions universally contain language which specifically allows the association to go onto the homeowner’s property to cure the violation and that this is not deemed a trespass.

This argument has been raised as a defense on behalf of homeowners on several occasions in cases which I have litigated, and I see no indication that this trend will slow. Despite the Second District Court of Appeals’ decision, the Firm continues to recommend to its community association clients that self-help not be exercised unless the property is vacant.

As always, consult your Association’s counsel before taking action to enforce your restrictive covenants.

Ask the Attorney

Have a legal question? Need an attorney? Don’t know what to do?

Then ask the attorney! The Ruggieri Law Firm is pleased to announce this new feature to our quarterly newsletter. You can now submit general questions regarding Community Association Law via our facebook page or website under the “Ask the Attorney” tab and select questions will be answered in our next newsletter. The Ruggieri Law Firm is here to assist and educate you in effectively managing your community. So don’t wait…ask the attorney today!