HOW ONE ASSOCIATION LOST BIG BY FAILING TO UPDATE THEIR DOCS.

Every now and then, the courts of our state issue an opinion in a case involving a condo or HOA that is very important and certainly worth mention.   On June 1st, the 4th District Court of Appeals issued a decision in Pundit 2 Joint Venture v. Westwood Gardens HOA that does not bode too well for some associations.   .Here is what the case is about:

 

 

A bank foreclosed on a unit and at the foreclosure auction a 3rd party bought the unit.  Usually,  that’s great news for the association,  because the HOA statute (Florida Statute 720) states that a new buyer is jointly and severally liable with the old buyer for any unpaid assessments owed to the association.  Thinking that was the situation here, the attorney for the HOA sent a letter to the new owner telling the new owner to pay the association and bring the account current.  Usually, the HOA and their lawyer would be right.  But not this time.

 

The problem in this case was that the governing documents of this community specifically stated that purchasers at a judicial foreclosure sale are not responsible for the unpaid assessments that are owed on the unit by the prior owner.  This new buyer said to the association “Hey…..read your own documents…..I don’t owe you anything.”

 

In court, the association argued that a Florida statute that was passed subsequent to the recording of the declaration clearly made the new buyer responsible for the unpaid assessments and that this new statute superseded the express terms of the declaration.  The trial court agreed and ruled with the association.  However, on appeal, The 4th DCA reversed the trial court and sided with the new owner and said that the new owner does not owe the association any back assessments whatsoever.  The reason the association lost was that was that their set of governing documents did not contain the “as amended from time to time”language I always talk about at our seminar.  In other words, there was no language in the governing documents that automatically adopted this new statute and change in the law making new owners responsible for the unpaid assessments ….and because that as amended from time to time language wasn’t there…….the new law did not automatically apply in this HOA and the HOA was stuck with what their governing documents said.  The court found that to apply the new statute to the new buyer in the absence of the “as amended from time to time” language would violate the United States Constitution.

 

Here’s why this decision is so important…….A great deal of HOAs out there have the same exact language in their governing documents that specifically states that buyers at a judicial sale are not responsible for past due assessments owed by the prior owner.  So……the only way for an HOA to protect themselves now from getting wiped out is to have the community vote in favor of amending their governing documents to make new owners who purchase at judicial sales liable for the unpaid assessments.  If your association fails to properly amend the documents — they will be owed zero.  So in other words….get busy.

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