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YES - says the Fourth District Court of Appeal.

The housing market crisis that led to the massive wave of foreclosures forced thousands and thousands of people to find a new profession or line of work.  Real estate agents and mortgage brokers were out of work and many had to re-position themselves in the new economic reality.  Attorneys did so as well.  Many attorneys lost their real estate and bank related business and therefore turned to other areas of the law. 

It takes less than a second to find about 18,600,000 results for "foreclosure defense attorney" on Google.  Many of these attorneys are excellent - discovering the 'robo-signers', false or forged documentation and other illegal or just bad practices on the part of lenders, mortgage servicers and/or certain law firms.   However, more is not always better when it comes to handling lawsuits, especially in the eyes of the overburdened Judges.

The Fourth District Court of Appeal recently upheld an award of attorney's fees, costs and sanctions against a law firm in an amount over thirty-eight thousand ($38,000.00) dollars.  The Court found Section 57.105, Florida Statutes applied to attorneys representing borrowers in foreclosure cases if 1. actions taken in the lawsuit were shown to be for the primary purpose of delaying the case (allowing the borrower to stay in the home without paying) and 2. the attorney knew or should have known those actions were not supported by the material facts of the case.

Here's what happened in this case - the bank filed a foreclosure lawsuit against the borrowers.  The borrowers hired an attorney/law firm to represent them in the case.  The attorney filed documentation with the Court claiming that the bank violated certain aspects of the Federal Truth in Lending Act.  The bank responded with proof it did comply with the Federal Truth in Lending Act, demanding a retraction.   The Judge was not happy about this situation obviously and, after various hearings, issued an order requiring payment of the bank's attorney's fees, costs and sanctions for the delay.  The appellate Court affirmed the ruling.

While this case involved a bank, the same issues often arise in cases filed by condominium or homeowners associations.  The Courts are awarding sanctions in favor of community associations when lenders or debtors use the system to delay a case when they know their position doesn't have merit. 

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Fourth District Court of Appeal Rules that Lender Cannot be Compelled to Pay Assessments Prior to Acquisition of Title.

Deutsche Bank National Trust v. Coral Key Condominium Association (at Carolina), Inc. and Luna, Opinion April 14, 2010.

An earlier post discussed the Third District's appellate ruling in the U.S. Bank National Ass'n v. Tadmore case which held that the Court cannot require a lender to pay condominium assessments before its completes its foreclosure case and obtains a Certificate of Title or otherwise acquires title to the unit.  The Fourth District ruled the same way in a case involving the Coral Key Condominium Association.  The ruling is hot off the press, so its not final yet.  If anything changes we will report it on this site.

Do these rulings mean the Association is powerless when a bank is foreclosing against a property within the community?  No - not at all.

The Motion to Compel filed in both cases asked the Court to require the lender to pay assessments immediately, reportedly since the mortgage foreclosure cases were taking so long.  The Associations supported their request for relief upon notions of equity and fairness.  Sure, it is unfair.  The Association has to insure the property, pay for common utilities, pay for maintenance and repair of the property, etc. all while the unit owner isn't paying assessments.  The lender derives a benefit from the Association's actions - its collateral is preserved and insured at the expense of all the paying unit owners. But, as my Dad used to say, life just isn't fair sometimes.

That doesn't mean Association's are without options when a bank is foreclosing against a property in the community, especially when there is a feeling that the bank is 'dragging its feet'.  The Florida Rules of Civil Procedure allow the Courts to establish deadlines or schedules for certain actions to take place.  Any party is entitled to request a case management conference at which the judge may (among other things):

• Set deadlines for service of motions, pleadings or other papers;
• Limit, schedule, order or expedite discovery;
• Require preliminary stipulations to narrow the issues; and
• Set a date for trial.

Any party to the case can advise the Court that the case is ready for trial.  Basically, once the pleadings are closed (all motions concerning the pleadings have been resolved or withdrawn or 20 days after the last pleading is served), the case is eligible for placement on the Court's trial calendar.   

The Court has the power to award sanctions against a party that fails to comply with its scheduling orders and our Firm has had success showing that the lack of action on the part of the bank (and/or its counsel) justified sanctions.  

That is not to imply that every bank in every case has done something wrong, even if the case takes what seems to be an extraordinarily long time. There are legitimate reasons that a foreclosure case can be on 'hold'  Owners/borrowers may be trying to modify their mortgages, there may be an offer for a short sale on the property, and/or a bankruptcy filing may prevent the bank from moving forward, etc.   You know, there is a pretty big load on the Courts right now as well.

Nonetheless, we have learned that some lenders deliberately allow some foreclosure cases to linger for various reasons.  Those are the cases that Associations should address - first with the lender (actually, lender's counsel) and then with the Court.  It is important to discuss your options in each of the cases involving property in your community with counsel.  The board can't be expected to make reasonable strategy decisions unless it is fully advised.

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Lenders Cannot Ignore Foreclosure Cases With Impunity. 

Becker & Poliakoff Attorney Scott Petersen obtains second court ruling requiring a lender and its attorneys to pay an association for failure to proceed with its foreclosure action and failure to obey Court Orders.

The Manatee Observer published an article yesterday notifying its readers that action on the part of a community association can achieve good results in bank foreclosure cases.  The Bank of New York was recently ordered to pay a condominium association over Thirteen Thousand ($13,000) Dollars in sanctions, representing assessments that accrued during the stalled foreclosure case.

In the most recent case, Mr. Petersen filed a Motion to Compel after six (6) months of little or no activity in a bank foreclosure case.  The Court granted the Motion and entered an Order requiring the bank to proceed.  Later on the Court found that the bank did not show 'good cause' why it disobeyed the earlier ruling.  The association incurred attorney's fees and costs for attendance at hearings, writing several letters demanding compliance and additional motions, including the Motion for Contempt - all sent without any response from the bank or its counsel.  It took almost four (4) months for the bank's attorney to acknowledge the motions, letters and rulings.  Another three (3) months went by before the bank filed any responses with the Court.

The responses were apparently too little too late.  The Court granted the association's Motion for Contempt and awarded attorney's fees to the association.

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