Sometimes bizarre results occur from otherwise mundane laws. The arena of a lender’s mortgage foreclosure versus an association’s foreclosure of its assessment lien can certainly be characterized as one such example. Nothing is worse than a lender who refuses to take their foreclosure to final judgment and sale, or a litigious homeowner who knows how to use the legal system to stall the lender’s foreclosure case. In both cases, it is the association that suffers greatly because, more likely yet than not, the owner is not paying assessments during the pendency of the lender’s foreclosure action. Because of the owner’s failure to pay assessments, the association should be permitted to foreclose, especially when the lender’s foreclosure case is dragging on and on. Right? Well, not according to a few recent appellate cases.
As a prerequisite to filing a lawsuit over real property, a lis pendens is recorded in the county’s public records, the purpose of which is to place the public on notice of the pending litigation so that if the property is sold, the new owner knows that they have acquired the property subject to the outcome of the pre-existing litigation. According to section 48.23, Florida Statutes, once the lis pendens is recorded, any person with an unrecorded interest or lien against the property, must intervene in the lawsuit within 30 days of the recording of the lis pendens or else they are time barred from doing so. This can have a significant chilling effect on an association’s right to otherwise lawfully collect the past due assessments that accrued against the property through the date the lis pendens was recorded. Sadly, it gets worse.
The problem is not in the appellate court’s application of the law, but rather the problem lies within the law itself. As things stand today, if a lender forecloses and the association does not bring its assessment foreclosure case by intervening in the lender’s foreclosure within 30 days of the date of the lender’s filing of its lis pendens, then the association is barred from bringing its assessment foreclosure lawsuit that includes assessments due up to the time of the recording of the lender’s lis pendens.
Recall that an association must first send its intent to lien and intent to foreclosure letters to the non-paying owner before it can foreclose. What if the owner timely paid assessments right up until the commencement of the lender foreclosure? This means that the association cannot timely intervene in the lender’s foreclosure because it is statutorily prohibited from filing an assessment foreclosure until the time periods for both the intent to lien and intent to foreclose letters have fully run. The real world consequence of this “mishigas” (legal word for crazy nonsense) is that the association is left with no legal remedy, cannot foreclosure and must, at least for the time being, allow the dead-beat to remain in the association because it is legally prohibited from foreclosing the association’s assessment lien, unless it did so within 30 days of the lender’s recording of its lis pendens, which the association cannot do unless it sent both the intent to lien and foreclose letters and waited the statutory prescribed times by which time the 30 days in which to bring the association’s claim has expired.
In U.S. Bank National Association v. Quadomain Condominium Association Inc., decided in 2012 by Florida’s 4th District Court of Appeals, the Court held that the lower court presiding over the lender’s foreclosure action which created the lis pendens had exclusive jurisdiction to adjudicate any interest in the subject property from the date the lis pendens is recorded to the date it enters final judgment. Therefore, to foreclose the association’s lien, the association was statutorily required to intervene in the lender’s foreclosure case within 30 days of the lender’s recording of the lis pendens and not by way of foreclosing in a different court. Since the association had foreclosed in a different court, its previous successful foreclosure was reversed.
On January 27, 2015 the 4th DCA, in Jallali v. Knightsbridge Village HOA, Inc., again ruled against an association who did not move to intervene in a lender’s stalled foreclosure within 30 days of the lender’s recording of its lis pendens and reversed a different lower court’s judgment in favor of the association. That said, in this case, the association’s claims did not accrue for more than three years after the lis pendens was recorded, so how could the Association comply with the statutory requirement? Attorney Robert Kaye adds, “this is an unjust, inequitable result relative to innocent associations when lenders do not timely complete foreclosures.”
It is hard to fathom that the legislature intended this strange and financially devastating consequence, especially when both the Condominium Association Act and the Homeowners’ Association Acts, Chapters 718 and 720 of the Florida Statutes, respectively, provide for joint and several liability for the recovery of assessments against a new owner that were not paid by the predecessor owner. A simple solution to this complex problem can be found by excluding association assessment lien foreclosures from the requirements of section 48.23, Florida Statutes. When Florida’s legislature takes the time to enact this simple cure, then associations will have the lawful right to once again foreclose their assessment liens without regard to the lender’s stalled foreclosure action pending against the same property.