Question: We recently purchased a property out of a mortgage foreclosure case. The association was a party to the lawsuit. When we researched the property, we did not find a lien recorded by the association. Now that we own the property, the association is demanding that we pay past-due assessments that came due before the foreclosure. Are we liable for these charges? B.S. (e-mail)
Answer: It depends, but probably so.
Generally, the foreclosure of a first mortgage extinguishes all inferior interests in the property. Therefore, the purchaser at the foreclosure sale takes title only subject to any superior interest in the property which could not be foreclosed in the lawsuit, such as property taxes. However, if the property is subject to a homeowners’ association governed by Chapter 720, or a condominium association governed by Chapter 718, the purchaser at the foreclosure sale is liable by statute for all assessments that were due at the time that title transferred.
The only exception is that a first mortgagee only has to pay the “safe harbor” amount (generally 12 months of unpaid assessments or one percent of the original mortgage debt, whichever is less) when it takes title through its foreclosure. However, the safe harbor protections in the statute do not extend to bidders at a foreclosure sale.
I would also note that in the homeowners’ association context, recent case law suggests that the language of the governing documents, the year the community was created, and perhaps the year the mortgage was recorded would all have relevance and may (or may not) change the answer. These are issues that should be discussed with your counsel.
Question: I live in a condominium unit in a complex that wants to switch the condominium to a “55 and over” complex. How can this be done? J.V. (via e-mail)
Answer: There are two main requirements that a condominium association must follow in order to convert to a “55 and over” community.
First, the association must verify through reliable means, as set forth in the law, that at least 80 percent of the occupied units are occupied by at least one person who is 55 years of age or over. Secondly, the community must publish and adhere to policies and procedures demonstrating an intent by the association to provide housing for persons 55 years of age or older.
As a first step, I typically recommend that the association conduct a census to establish that at least 80 percent of the occupied units are occupied by at least one person 55 years of age or over. Legal counsel should be asked to assist with the preparation of the census and provide advice on how the 80 percent threshold is calculated, especially in terms of what qualifies (or does not qualify) as an “occupied” unit, and what type of age verification procedures are required. If the community meets the legally required 80 percent threshold, then the association would need to adopt an amendment to the declaration of condominium establishing the condominium as a “55 and over” community.
The amendment should also be prepared by your association attorney to make sure that it addresses all appropriate issues, including desired minimum age requirements, (if any) for other residents, rules on the 20 percent of the units that are not legally required to be occupied by a person who is at least 55 years of age or older, and how heirs and surviving spouses should be treated.
After the amendment is properly adopted and recorded in the public records, a number of other steps must be taken, including the adoption of census update procedures, various certifications by the board of directors, and registration of the community.