Court Of Appeal Reaffirms Ruling Making Condominium Association Foreclosures More Costly

Last week, the Florida Third District Court of Appeal dealt the final blow to an often-used strategy by condominium associations. In the second iteration of Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc., Case No. 3D13-1437, the Third DCA confirmed its prior ruling that a third-party purchaser who takes title to a condominium unit previously foreclosed upon by a condominium association is not liable for the unpaid assessments of the original owner. Pursuant to Florida Statute 718.116, the ultimate purchaser is only responsible for “any unpaid assessments of the immediate prior owner.” The new opinion comes as no surprise after the Third DCA’s ruling in the first iteration of the same case last year.

The Spiaggia case revolves around a condominium unit, the original owner of which defaulted on both his mortgage payments and his condominium association fees. Under Florida Statute 718.116, the owner’s failure to pay his condominium fees created a lien in favor of Spiaggia, and Spiaggia foreclosed against the owner. Spiaggia took title to the unit, subject to the bank’s rights under the mortgage, and was the owner of the unit until the bank completed its foreclosure proceedings.

Condominium Association, Not Third-Party Purchaser, is Liable for Unpaid Assessments

Aventura purchased the unit at the foreclosure sale. Spiaggia then sued Aventura for the past-due assessments of the original owner. Aventura argued that its liability extended back only as far as the date upon which the last owner (Spiaggia) took possession, a position which the Third DCA has now twice affirmed. The case cycled back up through the Third DCA when, according to the appellate court, the trial court misinterpreted its January 23, 2013 ruling and declared the initial owner, Spiaggia, and Aventura to all be jointly and severally liable for the unpaid assessments.

The latest decision rejects the trial court’s pronouncement, and once again holds that, as intervening owner of the unit, it is the condominium association (Spiaggia) and not the ultimate purchaser who is jointly and severally liable with the original owner for his or her past due assessments, late fees and interest. The Third DCA’s decision effectively forecloses any possibility for condominium associations to seek recoupment of unpaid assessments from third-party foreclosure sale purchasers after a condominium association forecloses on a unit. Condominium associations therefore must carefully weigh the costs and benefits associated with foreclosing a lien before taking ownership of a unit subject to a bank mortgage.

Published In: Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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