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Florida Court Reverses Order Allowing Adjudication of Past Due HOA Assessments After Foreclosure

The Florida Fifth District Court of Appeal recently quashed a trial court’s order that a mortgagee’s liability for past due HOA assessments was limited to the lesser of the 12 months of assessments prior to the mortgagee’s acquisition of title in connection with foreclosure, or 1 percent of the original mortgage debt, under the safe-harbor provisions of Fla. Stat. s. 718.116.

The Appellate Court held that, although the trial court had correctly interpreted the statute, it lacked jurisdiction to rule on the issue because it failed to specifically reserve jurisdiction to adjudicate the amounts due for HOA assessments in its final foreclosure order.

A copy of the opinion is available at:  Link to Opinion.

In this case, a mortgagee filed a foreclosure action to foreclose on a borrower’s condominium.  In the foreclosure complaint, the mortgagee named the borrower and the condominium association (HOA), among others, as defendants.   The HOA answered and counterclaimed to foreclose on its claim of a lien for past-due HOA assessments.

The parties stipulated to entry of foreclosure judgment and, following a trial, the court entered a final foreclosure judgment.  A foreclosure sale was scheduled.  In relevant part, the final foreclosure order stated that “[j]urisdiction of this action is retained to enter further orders as are proper including, without limitation, a deficiency judgment.”

The mortgagee bought the property four months later at the foreclosure sale.  The HOA then sent an estoppel letter to the mortgagee demanding $30,241.28 in past due HOA assessments.  The mortgagee responded by letter and invoked the safe-harbor provisions of Fla. Stat. 718.116.

Section 718.116 of Florida’s Condominium Act provides, in relevant part:

718.116. Assessments; liability; lien and priority; interest; collection

(1)(a) A unit owner, regardless of how his or her title has been acquired, including by purchase at a foreclosure sale or by deed in lieu of foreclosure, is liable for all assessments which come due while he or she is the unit owner.

(b)1. The liability of a first mortgagee or its successor or assignees who acquire title to a unit by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee’s acquisition of title is limited to the lesser of:

(a) The unit’s unpaid common expenses and regular periodic assessments which accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or

(b) One percent of the original mortgage debt. The provisions of this paragraph apply only if the first mortgagee joined the association as a defendant in the foreclosure action. Joinder of the association is not required if, on the date the complaint is filed, the association was dissolved or did not maintain an office or agent for service of process at a location which was known to or reasonably discoverable by the mortgagee. . . . .

(g) For purposes of this subsection, the term “successor or assignee” as used with respect to a first mortgagee includes only a subsequent holder of the first mortgage.

The mortgagee also filed a “Motion to Determine Amounts Due” with the foreclosure court.  In its motion, the mortgagee sought adjudication of the dispute between it and the HOA.  It moved the court for an order requiring the HOA to “provide a detailed accounting of all past-due assessments.”

The HOA opposed the motion, arguing that the mortgagee could not avail itself of the safe-harbor provisions in Section 718.116 because it was the former “servicer of the mortgagee,” and not “owner of the subject property.”  The HOA also argued that the trial court lacked continuing jurisdiction to rule on the mortgagee’s motion, because the court did not retain jurisdiction to rule on a section 718.116 claim in the final foreclosure judgment.

The foreclosure court rejected the HOA’s argument and held that the safe-harbor provisions in Section 718.116 applied to the mortgagee.  The HOA appealed, arguing the trial court lacked jurisdiction because it had not explicitly retained jurisdiction to adjudicate the safe-harbor provision issue in its final foreclosure order.

The Appellate Court agreed and reversed the trial court’s order.  The Appellate Court held that a trial court generally loses jurisdiction upon the rendition of a final judgment and expiration of the time allowed for moving to vacate or otherwise alter that judgment.  Moreover, it held that the court only otherwise retains jurisdiction “to the extent such is specifically reserved in the final judgment or to the extent provided by statute or rule of procedure.”

The Appellate Court held that, although the trial court’s order was substantively correct, it was procedurally invalid because the trial court failed to specifically retain jurisdiction (post-judgment) to do anything other than enter a “deficiency judgment.”

The Appellate Court held that under controlling precedent, the language “further orders as are proper including, without limitation…” in the foreclosure court’s final order was too vague to “specifically” include adjudication of the dispute between the HOA and the mortgagee.

Accordingly, the Appellate Court quashed the trial court’s post-judgment order for an accounting of past-due HOA assessments.

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