SOLVE YOUR HOA LIEN PROBLEM

 

Stripping Homeowners Association and Condo Association Liens

 

Under recent current Florida law appellate rulings, whereby the value of the property securing the First Mortgage is less than the secured mortgage, it may be possible to strip the HOA lien in a Chapter 13 bankruptcy reorganization and keep your home. If you are “underwater” in your current home and the HOA is threatening a foreclosure action or has an action against you please give us a call to determine your options.    

 

One of the hot topics in Florida now is the stripping of subordinate liens of homeowners associations and condominium associations on homesteads.   The associations had been initially alleging that the liens were covenants running with the land, and not subject to motions to strip or value.   It appears all the decisions are rejecting this argument.  The most extensive analysis of this argument was in Judge Williams very recent  decision in In re Plummer. 2013 WL 163479 (Bankr. M.D. Fla. 2013).  While the Bankruptcy Code does not separately discuss association liens, it defines liens broadly as either a judicial lien, a security interest, or a statutory lien.  Assessment liens could be either described as a security agreement pursuant to the acceptance of a deed with constructive notice of the lien provision in the covenant; or a statutory lien under §718.116 of the Florida Statutes.   In either case the assessment lien falls within the Code's definition of liens which are subject to the application of §506.  Congress has given special rights to landlords under §365 and utilities under §366, and given priority status to various creditors under §507, yet has declined to give special status to prepetition association liens.  While association liens are given special status under §523, this status is limited to assessments that become due and payable after the bankruptcy filing.

  

Fla. Stat. Ann. § 718.116 (West)

  

   Since this section limits its applicability to first mortgages that are recorded prior to the lien, it cannot be applied to give priority of the assessment lien over that of the mortgage.  This is in accordance with the notice provisions under Florida real estate law.   Where the declaration of covenants, recorded prior to the mortgage, does not contain a provision that the lien relates back to the date of the filing of the declaration, the mortgage cannot be charged with constructive notice of the association's lien.  In re Holly Lake Ass'n v. Fed. Nat'l Mortgage Ass'n, 660 So.266, 267 (Fla. 1995).  As many declarations contain a specific provision subordinating the liens to the first mortgage on the property (thereby making it easier for potential owners to finance the purchase of the property) it would seldom allow the associations priority over the first mortgage.

 

Another provision of §718.116 is also cited by the condominium associations as giving them a lien that takes priority over first mortgages.  §718.116(b)(1) provides

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.

 

 

Fla. Stat. Ann. § 718.116 (West)

 

  Judge Williamson rejected this argument except where the claim of lien is filed prior to the date the mortgage is recorded.  This simply gives the association to counterclaim against the mortgage holder under this statute upon entry of a foreclosure by the mortgage.  The same conclusion was reached by Judge Cristol in In re Gonzales, 2010 WL 1571172, 22 Fla. L. Weekly Fed B423 (Bankr. S.D. Fla. 2010) in referencing  §718.116(b)(1).   Section 718.116(b)(1) gives associations the right to be paid the lesser of six months unpaid assessments or 1% of the original mortgage even if the first mortgagee becomes the owner of the property and even if there is no equity in the property.  But this does not create an additional lien against the owner, but rather is part of the secured claim of the first mortgagee, to be paid for by the first mortgagee or whoever obtains title to the property at a foreclosure sale.

 

 Homeowners associations have another statute they argue gives them a superior lien status to the first mortgage.  §720.3085 provides

 

(1) When authorized by the governing documents, the association has a lien on each parcel to secure the payment of assessments and other amounts provided for by this section. Except as otherwise set forth in this section, the lien is effective from and shall relate back to the date on which the original declaration of the community was recorded. However, as to first mortgages of record, the lien is effective from and after recording of a claim of lien in the public records of the county in which the parcel is located. This subsection does not bestow upon any lien, mortgage, or certified judgment of record on July 1, 2008, including the lien for unpaid assessments created in this section, a priority that, by law, the lien, mortgage, or judgment did not have before July 1, 2008.

 

Fla. Stat. Ann. § 720.3085 (West)

 

The courts reject this argument on similar grounds as §718.116(5)(a).  The section cannot apply retroacatively to improve a lien's priority to a position it did not have prior to July 1 2008.  Evoventure WGV, Ltd. v. Saint Johns Northwest Residential Ass'n, Inc., 56 So.3d 126 (Fla. 5th DCA, 2011).  Thus Judge Jennemann has allowed the stripping of a homeowners association lien where the prior mortgage was owed more than the value of the property in In re Jimenez, 427 B.R. 106 (Bankr. M.D. Fla. 2012).

 

Under recent current Florida law appellate rulings, whereby the value of the property securing the First Mortgage is less than the secured mortgage, it may be possible to strip the HOA lien in a Chapter 13 bankruptcy reorganization and keep your home. If you are “underwater” in your current home and the HOA is threatening a foreclosure action or has an action against you please give us a call to determine your options.



The attorneys at Murphy and Murphy Law Group pride themselves on having the ability to provide their clients with low fees and flexible payment plans while providing HOA advise. 

 

There are never any hidden attorneys fees in our prices.

 

CALL US TODAY TO

PROTECT YOUR FINANCIAL FUTURE



 

2897 SE Ocean Boulevard

Stuart, FL 34997

772 223-8600