Everyone is talking about it, the meaning of the Third District Court of Appeal’s January 23, 2013 opinion in Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc. This ground-shattering, ill reasoned case will negatively affect thousands of community associations throughout Florida. For years, we have known that the winning bidder at a lender’s foreclosure sale (other than a first mortgagee lender entitled to the safe harbor protection, meaning the lesser of one-percent of the initial mortgage or 12 months back assessments) remains fully liable to the association for past due assessments. Maybe, not anymore.
This case, one of the worst rulings in years, favors investors and lenders, over the already financially cash strapped associations throughout the state. To make matters worse, it is already being misconstrued by winning bidders of foreclosure sale auctions who wrongly assert that, based on the Aventura case, they have no liability for past due assessments. With that in mind, let us begin our analysis by looking at what the Third District Court of Appeals did NOT say. The Court did not proclaim that every third party bidder who acquires title to an association unit as a result of a lender’s foreclosure auction has no liability at all for past due assessments. Rather, it merely reversed the trial court’s summary judgment order initially issued in favor of the Association.
In the Aventura case, the Association foreclosed its assessment lien before the first mortgagee foreclosed its mortgage, and as a result, the Association owned the unit for a while, subject of course, to the first mortgage. Soon after, the first mortgagee lender foreclosed its interest in the unit which divested the Association of its title to the unit in favor of the third party winning bidder at the court ordered foreclosure auction. Afterwards, the Association, relying on the joint and several liability provisions set out in Section 718.116, Florida Statues, demanded all of the back assessments from Aventura Management, the third party bidder and auction winner. While the trial court had agreed with the Association at summary judgment, the Third DCA reversed the trial court’s order in favor of the third party bidder. This means, the matter at issue is anything but fully decided as either side can file a renewed motion for summary judgment. Moreover, it will be some time before the matter is heard at trial.
Upon closer examination, the Third DCA reversed the trial court’s summary judgment ruling which required Aventura to pay past due assessments that included the period of time the unit was owned by the Association. However, nowhere in the Aventura opinion did the Third DCA order that a third party purchaser has no prior assessment liability, whatsoever. Rather, by reversal of the trial court’s summary judgment, the Third DCA, pointed out that Aventura, as the winning bidder was not liable to the Association for the amounts due as claimed by the Association.
Importantly, the Third DCA also pointed out that the Association’s lien still survives, but failed to explain the practical effect of the lien’s survival. This is a very important distinction that leaves open the possibility that an association who owns a unit as a result of its assessment foreclosure, in addition to being able to sue the prior owner(s) for assessment deficiencies, may still be able to make demand upon the third party winner of the lender’s foreclosure auction so long as past due assessments, late fees, and interest that came due during the period of association ownership of the unit are omitted. Of course, there are a great many other considerations to take into account such as the amount in controversy and the association’s risk tolerance which should be discussed with the association’s legal counsel, in advance.
The Aventura decision is not binding until the 30-day deadline to appeal has past. If neither party appeals then, unless a different district court of appeal issues a contrary opinion to Aventura, or the legislature enacts a new law to stifle its effect, we are stuck with this decision, but, at least in the short term, ONLY as applied to situations that mirror the facts of the Aventura case.