All of you know how terrible the condo and HOA statutes are in terms of the association’s ability to collect unpaid assessments when a bank forecloses on a unit or home. If the bank gets back a unit in foreclosure, they owe the association the lesser of 1% of the mortgage or 1 year of assessments. Terrible.
The saving grace is that every once in a while, the association will get lucky, and a third party will purchase the unit or home at the bank’s foreclosure sale. When that happens, the association is entitled to get all of the unpaid assessments from the new 3rd party purchaser. Unless………….. the governing documents of your community specifically state that a 3rd party purchaser owes nothing when they purchase a unit at a foreclosure sale. Unfortunately for associations, this is not uncommon.
In Pudlit 2 Joint Venture, LLP v. Westwood Gardens Homeowners Ass’n, Inc. 169 So.3d (4th DCA, 2015) the court held that the statute that would have made a parcel owner within a homeowners’ association jointly and severally liable with a previous parcel owner for unpaid assessments did not supersede a provision of homeowners’ association’s declaration, providing that personal obligations for delinquent assessments would not pass to successors in title.
In Gardens of Kendall Condominium v. Valores Agregados, LLC, 187 So.3d 252 (3rd DCA, 2016) this same holding was applied to Florida condominiums.
So, you now have a homework assignment. Check your governing documents to make sure you don’t have language in them that limits the liability of 3rd party purchasers at foreclosure sales. If you do, take steps to amend the documents immediately.