Generally, liens, like any other recorded instrument, are deemed effective upon their date of recording. In other words, in Florida, lien priority is based on the notion of “first in time, first in right”. This means that the older liens have priority over more recently recorded liens. The older lien can “wipe out” junior, inferior liens – which are those liens which were recorded after the superior lienholder recorded its lien.
For example, should an unpaid electrical contractor record a lien against a lot within an association, then absent “relation–back” language set out in declaration (discussed below), the electrical contractor’s lien could have priority over the later recorded association assessment lien (which ultimately depends upon language within the documents). Hence, the need for inclusion of a very special provision in every declaration which will make the association’s lien superior to every other recorded lien, except to that of the first mortgagee. Of course, the only reason to give the first mortgagee’s lien superiority over that of the association’s lien is because, without such superiority, the lender would not loan its money to a purchaser of property within the association.
With the inclusion of special language in your community’s declaration, referred to as a “relation–back” provision, an assessment lien can relate all the way back to the date of the initial recording of the declaration. Such a provision, should it exist, is usually found within the section of the declaration pertaining to assessments and foreclosures.
The “relation–back” doctrine was crucial to the analysis of the very recent Fourth District Court of Appeal case, Jallali v. Knightsbridge Village Homeowners Association, Inc., decided January 4, 2017, which fully supplanted the prior appellate decision issued earlier in the same case and in which I am pleased to report that Kaye Bender Rembaum represented the Knightsbridge Village Homeowners Association, Inc. To understand the Jallali decision, we must first examine a prior appellate decision to provide the necessary context.
An earlier case decided in 2012, by the same District Court, U.S. Bank National Association v. Quadomain Condominium Association, Inc., stood for the principle that once a first mortgagee initiated its foreclosure proceeding against its borrower, an association was fully divested of its opportunity to foreclose an assessment lien, unless the association intervened in the lender’s foreclosure action within 30 days of the recording of a particular document in the public records, known as a lis pendens. The consequence of this decision was tantamount to a “death blow” to Florida’s community associations because it meant that, should the lender’s foreclosure litigation case stall for any reason, the association would be fully prohibited from filing an independent lawsuit to foreclose its own assessment lien, even if the assessment obligation did not exist until after the time to file a claim had expired – a very unfair result.
Well, with the issuance of the January 4, 2017 Jallali decision, the Quadomain decision was finally, fully and forever distinguished and quashed meaning that Florida’s community associations can once again bring their own assessment foreclosure cases at any time, even if there is a pending first mortgagee foreclosure lawsuit pending against the same owner. The lawyers at Kaye Bender Rembaum are very proud to have helped make this possible for the benefit of all community associations in the State.
In Jallali, in 2007, the first mortgagee filed its foreclosure action and then several years later, the Knightsbridge Village Homeowners Association filed its lien foreclosure lawsuit against the same owner. The association was first successful in its foreclosure and, later, the lender was successful in its foreclosure. Thereafter, the owner, relying in part, on the Quadomain decision, argued that the association’s foreclosure should be vacated. The District Court disagreed and also noted that it was because the association’s lien related back to the date that the Knightsbridge Village declaration was initially recorded, the association was not trying to foreclose an interest that did not exist when the lender initiated its foreclosure. It was because the association’s lien related back to the date that its declaration was initially recorded that was used as the justification to prove that the association was foreclosing its already existing lien interest in the property.
With all of the above in mind, should your association find itself in need of foreclosing its own assessment lien when a lender has already commenced its mortgage foreclosure action against the same owner, then absent the “relation–back” language set out in the association’s declaration, the association might likely not be in a position to be able to do so. Therefore, it is extremely important that every community association’s declaration contain a provision which makes it patently clear that all association assessment liens relate back to the date of the initial recording of the declaration.
To verify whether your association has this necessary and important language, the board should discuss this with its legal counsel. In addition, amongst the many other provisions which should be reviewed when amending and restating the declaration of covenants, a relation-back provision should be included, if not otherwise already present.