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Association Developments
Third Quarter Volume XI
2000
a service provided by Clayton & McCulloh
RED ALERT!
Associations across the state apparently are being sued in a massive lawsuit!
All Associations need to be aware that a massive lawsuit has been filed against Associations regarding payment of Documentary Stamps. If you have not been served, there is a good chance you will be, especially if the Association has foreclosed on a lien for assessments, and either:
- a Certificate of Title has been issued in favor of the Association following a Foreclosure Sale; and/or
- the Association has sold a Unit to a third party.
Please remember, if your Association is served with a lawsuit, you only have twenty (20) days for your attorney to file responsive pleadings. Otherwise, a court could enter a judgment against the Association and your rights may be waived. Additionally, the judgment could be for a substantial amount of money. Given the above, if you are served with such a suit (or any suit), contact your attorney immediately! It also appears that in some situations the plaintiff(s) to such action are mailing a demand letter with a copy of the suit to Associations. Such letter(s) appear to offer to settle the plaintiff's claim provided the Association
see Lawsuit, pg 2
SIGN UP NOW FOR 2001 SEMINARS
We are now accepting reservations for our complimentary 2001 Community Association Law Seminar. This is a great time to get up to three hours, or more, free legal advice, free breakfast, a free gift, and meet the attorneys and staff of your community association's law firm. Make your reservation now for these extremely popular, humorous, and entertaining seminars.
This year's subject is "What's Hot - What's Not!" and includes such topics as:
Snooze! You Lose! (Architectural Control)
Victims of Harassment: Board Members
Liening for Fines! (Homeowner Associations)
The Legal ABC's of Web-Sites for Associations
Collecting from Deadbeat Owners
see Seminars, pg 2
3rd Quarter 2000 Page Two Volume XI
TOKARSKY AND SCHNEIDER JOIN C&M
We are pleased to announce that Clayton & McCulloh has added two new talented attorneys to our staff: Fred R. Tokarsky and Arnold W. Schneider.
Both of these attorneys bring a unique perspective to the firm. Fred is currently the president of his Orange County based homeowner association and Arnold is the former president and treasurer of his homeowner association.
Fred received his Juris Doctorate degree from
Cleveland-Marshall College of Law and has been
practicing law since 1980. His background
includes community association law, real property
law, litigation, business and corporate law, and
probate. He will be working primarily in our
litigation department.
Receiving his Juris Doctorate from Florida State
University, Arnold has been practicing law since
1999 and will be working primarily in our
Collections Department.
Lawsuit (from pg 1)
agrees to pay a significant amount of dollars. As such, we recommend, if you receive such a letter, that you likewise should contact your attorney as soon as possible.
FIND OUT THE LEGAL DO'S AND DON'TS OF ASSOCIATION WEB SITES
Seminars (from pg 1)
What to Do About those Pesky Satellite Dishes
Perilous Territory: Cable Contracts
Trash: The Hidden Expense
Short Term Rentals and the Evolving Law
Can You Restrict Leasing?
The seminars have been scheduled as follows:
Saturday, January 20 - Daytona Beach -
Plaza Resort & Spa
Saturday, February 10 - Melbourne -
Hilton Rialto at the Airport
Saturday, March 10 - Orlando -
Church Street Station
Registration begins at 7:45 a.m. and the program begins at 8:50 p.m. and ends at noon. A complimentary breakfast is served and as last year, a special gift will be included in each client's package who timely pre-registers. There will also be a special Client Registration Table.
You may sign up for these seminars via our web site - www.clayton-mcculloh.com. In the interim time period, you may reserve your seat by either faxing or mailing the enclosed application form or call any of our offices.
see Seminars, pg 3
3rd Quarter 2000 Page Three Volume XI
Seminars (from pg 2)
As a very special added bonus, Richard White, the syndicated newspaper columnist, will be our very special guest speaker. Mr. White's column, "Community Living" is featured in such prestigious newspapers as the "Orlando Sentinel" and the "Lakeland Ledger" among many other statewide newspapers.
Flyers to our clients in Brevard, Indian River, St. Lucie, Volusia, Flagler, St. John's Marion, and Putnam counties have already been mailed out. The flyers for our clients in Orange, Seminole, Lake, Osceola, Polk, Sumter, Hillsborough, and Hernando Counties will be mailed approximately January 10, 2001. However, as a client, you may register now if you so desire.
Don't delay. If you've been to one of our seminars in the past you know that we always have a large turnout. So, take your pick! You can register via phone (24 hours a day), via fax, or via our web site. Have it your way! See you there!
UNDERSTANDING COLLECTION RELATIONSHIPS
Our Collections Department is often asked how an Association collects delinquent assessments from a homeowner when a mortgage lender begins foreclosure proceedings against the homeowner's property. Another situation that arises from time to time is where the County Tax Collector notices the homeowner's property for auction due to delinquent property taxes. This article attempts to explain the relationship between a Florida Community Association, a Florida County Tax Collector, and a mortgage lender when each are proceeding against the property of a delinquent homeowner within an Association. An understanding of how delinquent property taxes or a mortgage foreclosure action interferes with an Association's ability to collect delinquent assessments should ease, or at least clarify, some of the confusion and frustration that is commonly experienced by board members when faced with these situations.
Association board members should understand that an Association is a "secured creditor" by virtue of the consensual lien that is formed when a homeowner accepts a deed to property within the Association. By accepting the deed, the homeowner agrees to be bound by the Association's governing documents, usually a Declaration of Covenants, Conditions and Restrictions. A Declaration is recorded in the County Public Records and gives record notice to all who purchase property within an Association that a set of rules binds all property owners within the Association. The Declaration secures the payment of assessments by authorizing the Association to file liens against the property within an Association and ultimately, to foreclose on the lien to satisfy the obligation to pay assessments. It should be noted that there are some slight, but important, differences between the manner that Florida law governs Homeowner's Associations the same property within the Association, the Association's and Condominium Associations with respect to liens and lien foreclosure, but a
see Understanding, pg 4
3rd Quarter 2000 Page Four Volume XI
UNDERSTANDING (from pg 3)
comprehensive discussion of the specific differences is beyond the scope of this article, and will have to be addressed in another article.
Like Community Associations, mortgage lenders and County Tax Collectors are also considered "secured creditors" under Florida law. All of these creditors have a lien interest in property which provides that the property may be sold upon default in order to satisfy an obligation owed by a homeowner to the creditor. In many cases, a homeowner, who is not paying their Association assessments, may not be able to pay other bills as they come due, such as their mortgage payments or property taxes. If so, a mortgage lender may take legal action against property within an Association, seeking to foreclose on the property to satisfy the debt. In a similar manner, if property taxes are not paid, Tax Certificates will be sold to the public, and if such are not redeemed (i.e., paid) within a two year period, the holder of the Tax Certificate is entitled to apply to the County to have the property sold at a Tax Sale to satisfy the debt. Thus, if property taxes are not paid within the statutory period the property will be sold at a Tax Sale in the manner outlined in Chapter 197, Florida Statutes.
Generally, the security interest of a mortgage lender and County Tax Collector are superior to that of an Association. Most Declarations for Community Associations in Florida provide that the lien or the security interest of certain mortgage lenders, particularly, institutional first mortgages, is superior to the lien of the Association. Furthermore, Florida law subordinates all liens and other security interests in property to that of the County for property taxes. Therefore, an Association's lien rights against property subject to its governing documents is usually inferior to the security interest of mortgage lenders and always inferior to the County Tax Collector's right to collect property taxes.
In the event a homeowner does not pay his or her regular mortgage payments, and the mortgage lender proceeds to foreclose upon the property, the Association's security interest, whether a lien is filed or not, will be extinguished. It should be noted that a special situation occurs in the case of mortgage foreclosures of condominium units in Florida. Upon foreclosure of a mortgage on a condominium unit, a Condominium Association may be entitled to recover from the lender up to six months of delinquent assessments or 1% of the original mortgage debt, whichever is less, according to Chapter 718.116, Florida Statutes. Homeowner's Associations are not similarly protected under Florida law. After a mortgage lender forecloses or property is sold at a tax sale, the new owner is obligated to pay future assessments as same come due, beginning at the date the new owner, including the mortgage lender, takes title.
Therefore, an Association which finds itself competing for priority with other secured creditors, risks losing not the only delinquent assessments, but also the attorney's fees and costs incurred by the Association in its effort to collect the delinquent assessments. Understanding an Association's position before a competition begins can lessen the blow to the Association. The Association may discuss its options with an attorney to balance its fiduciary duty against a business decision if it is competing with other secured creditors against property within the Association. In conclusion, Association board members should remember that a delinquent homeowner probably has failed to pay several creditors, not just the Association. If secured creditors simultaneously proceed against security interest may be extinguished. While its inferior position to mortgage lenders and County Tax Collectors may frustrate budget conscious board members, budgeting to include uncollectible assessments and attorney's fees can soften the blow to an Association's bottom line. Consult an Association attorney to discuss the Association's options if an Association is competing with other secured creditors against property within the Association.