A Stitch in Time – 2018 Legislative Edition

“A stitch in time saves nine”. This is a well known phrase which implies that a little work now, will save you from a lot of work, later. Remembering this phrase can go a long way in the management and operation of your community association. The Florida Legislature has amended numerous statutes affecting our community associations. This third article in our 2018 Legislative Update Series will address changes to Chapter 712, Florida Statues, a/k/a The Marketable Record Title Act and section 197.582, Florida Statutes, regarding surpluses resulting from tax deed sales.

The Marketable Record Title Act (“MRTA”):

If you live in a homeowner’s association that is nearing its thirtieth (30th) anniversary, then you should be aware of MRTA. It was created to help title examiners of real property determine which “interests, claims, estates, or other charges” were still effective against the property. MRTA is used to help eliminate restrictions recorded prior to what is referred to as the “root of title”. The “root of title” is determined by looking back at least 30 years to identify a deed or other muniment of title that meets certain statutory criteria set out in Chapter 712, Florida Statutes. In other words, MRTA operates to eliminate restrictions so as to prevent real property from being so overly burdened with covenants that the property is no longer marketable. MRTA also helps shorten the period of review a title examiner must examine during the conveyance of real property.

In a simplistic explanation, MRTA operates such that covenants recorded more than 30 years earlier can begin to expire on a lot by lot basis unless such covenants fit squarely into one of the exceptions to MRTA or unless action is otherwise taken to preserve the covenants from being extinguished. Under MRTA, the homeowner’s association would file the statutorily required notice and filings pursuant to section 712.06, Florida Statutes to preserve the HOAs’ declaration from MRTA’s negative effect.

Effective October 1, 2018, the Florida Legislature expands the methods for protection from the effects of MRTA pursuant to section 712.05(2)(b), Florida Statutes, to include instances in which the homeowner’s association records an amendment to the declaration of covenants and restrictions that is indexed under the legal name of the homeowner’s association and references the proper recording information of the covenant or restriction to be preserved. In other words, and in plain English, the new MRTA legislation allows extends the 30 year MRTA deadline with every amendment to the association’s declaration of covenants and restrictions. Therefore, the recording of an amendment to the association’s declaration serves the dual purpose of enacting the underlying amendment and also extends the life of the declaration. A homeowner’s association may also record a new, shorter notice of preservation, to preserve its covenants and restrictions. A copy of the notice must be included in the next notice of meeting or other mailing sent to all members.

I am also very pleased to report that for the first time ever, commercial property owner associations can also avail themselves of preserving and revitalizing their covenants and restrictions, too. While it took an army of people, several years and review of one draft Bill after another to get this accomplished, I am proud to have assisted in this worthwhile endeavor.
TAX DEED SURPLUS:

From time to time, community associations are served with a notice from the Clerk of Court that a unit or lot owner has not paid their property taxes and, as a result, the home will be sold at a sale with open bidding. By way of over simplification, delinquent tax obligations are auctioned to buyers that pay the delinquent tax on behalf of the owner and charge the owner interest. The buyers receive what is known as a tax certificate. After several years, the tax certificate holder can apply for a tax deed. The tax certificate holder can bid at the tax deed sale in the amount of the delinquent tax.

If the winning bid at the tax deed sale is in excess of the tax certificate holder’s bid amount, then any excess amount of surplus proceeds, after the tax certificate holder is made whole, will be held by the Clerk of Court. The Clerk of Courts must now issue, to all known lienholders, a notice to file a claim for the surplus. The Clerk of Court determines the priority of the claims based on the information provided by the claimants and pays out from the surplus accordingly. A new hard deadline of 120 days from the date of the Clerk of Court’s notice of surplus is now imposed to file a claim for surplus funds, except for claims by a property owner. (Believe it or not, there was no such deadline in the past.) The new requirement will apply to tax deed applications filed on or after October 1, 2018. Since many declarations impose a lien for assessments, it remains to be seen whether an association will need to record an assessment lien to ensure entitlement to surplus, or if the declaration itself will suffice for receiving notice of surplus.

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