In my last blog we discussed the role children play in the attorney’s craft of estate planning. As we turn the corner and approach Way Point #3, we need to discuss the related issue of minor children and, more importantly, to whom the testator would want to entrust the care of his and her most prized possessions … their minor children … in the event of the untimely death of mom and/or dad.

An Association forecloses on a vacant lot in the neighborhood and takes title after foreclosure. The scenario is not uncommon; especially in neighborhoods that are developing, expansive, affluent, or newly built. But if the Association holds record title to a vacant lot, must the Association still pay assessment dues on said vacant lot? The answer most likely is yes.   

HOA’s and Association Attorney’s in Florida are watching closely the outcome of the Appellate Case Pudlit vs. Westwood Gardens HOA, Case No.: 4D14-1385.  The 4^th DCA on May 27, 2015 provided an opinion that basically blew homeowner’s associations out of the water.  In this case the 4^th DCA opined that the governing documents of an association that has an extinguishment clause in it regardless of when the mortgage was originated trumped the Florida Statutes.  What this means is that the Association is not entitled to ANY assessments or other charges that came due prior to the transfer of title due to mortgage foreclosure.

As you may be aware, this year’s Florida legislative session ended with an unprecedented early adjournment of the Florida House. As a result of an early adjournment, the most consequential bill for community associations, Senate Bill 736/ House Bill 611, was not approved.  If this bill had been approved, and signed by the Governor, your community association could have lost all ability to collect delinquent assessments if an estoppel (e.g., request by a purchaser /title company for a statement as to delinquent assessments) was not returned on time, or any portion of the assessments actually owed should the estoppel not reflect the entire amount owed. Moreover, we believed that the increased burden for compliance set forth in this bill would have caused association assessments to increase. We believe that this bill may surface again next year, and as such, your Association should be mindful as to this potential legal issue.

A homeowner has fallen behind on his Association dues.  The Association proceeds with collections, getting as far as filing a complaint with the Court.

But then the homeowner’s mortgage lender comes along and files a complaint of its own.  Despite reports that portend the end of the foreclosure crisis, according to RealtyTrac’s most recent findings, the average foreclosure completed in the first quarter of 2015 took 975 days.  Now that the game has become more complicated (and potentially longer), should the Association continue to pursue the homeowners, or wait for the lender to complete its mortgage foreclosure and recover its assessments from the bank?

Big winds usually grab the headlines. But as recent mega-storms such as Katrina and Sandy and the Texas deluges have shown the real punch of these storms comes in the form of rising water and water damage.  Very few property insurance policies provide flood/rising water coverage outside of a separate FEMA endorsed flood policy.  We all understand this fact.  But how many of us are aware that the new trend in property coverage is to exclude backup/overflow coverage?  Backup/overflow describes not water damage resulting from a broken pipe or a plugged drain within the property, it describes water damage to the property resulting from water backing up and overflowing inside the property where the cause of the backup is outside the property.

Typically, when we think of the priority of recorded documents in the public records, we believe that whoever records their document first has priority.  While this is typically the case, when it comes to mortgages and promissory notes, that is not necessarily the case.  In Florida, the mortgage follows the promissory note, not the other way around.  So just because there is an assignment of mortgage, that does not mean the assignee of the mortgage can foreclose, especially if the assignee of the mortgage does not have possession of the promissory note. 

Amenities can define a community.  If golf or nature or other features attract residents, both residents and their guests take advantage of the opportunities such features offer.  In some communities, certain activities may be open to the public or facilities may be rented out for events. 

These same amenities that bring positive attention to a community also invite liability.  Poorly putted golf balls, improperly connected wiring for speakers, and even wildlife mishaps are some of the many unintended consequences that can wreak financial havoc for a community. 

We now arrive at our second way point in our journey through the maze of estate planning, i.e. children, and the role they play in the attorney’s craft of estate planning.

From time immemorial, children have been a major motivation of thoughtful estate planners. Ancient Hebrew scripture consistently accents the doctrine of ‘inheritance’ to the Hebrew elders. Moses wrote ... “And ye shall take them as an inheritance for your children after you, to inherit them for a possession” [Lev 25:46]; and wise Solomon instructed the Hebrews when he wrote ... “A good man leaveth an inheritance to his children's children” [Prov 13:22]. Yes, a GOOD person leaves an inheritance to their descendants.

HOA and COA’s may finally see some relief in the Safe Harbor nightmare that they currently are faced with.  The Florida Statutes, as they are currently written, require Banks, who are the foreclosing first mortgagee, to pay an Association the lessor of 12 months of assessments prior to the issuance of the certificate of title in their name or 1% of the principal mortgage amount.  It is not that cut and dry, but in most cases that is all the Association is entitled to recover when the bank is the highest bidder.  If you are an Association, it is imperative that you have an Attorney review the case to make sure that you correctly identify whether safe harbor applies and that the entity who took title is in fact a first mortgagee as contemplated by the Florida Statutes.