HOA Foreclosures

What are the Limitations on HOA Foreclosures in Florida?

Florida associations can only foreclose on assessment liens judicially. That is, an association can file a foreclosure complaint and ask a court to order foreclosure of its lien but cannot foreclose non-judicially like mortgages in some states. Fla. Stat. §720.3085(1)(c).

If the amount in controversy exceeds $100,000, the board must, before taking legal action, obtain approval by a majority vote occurring at a meeting at which a quorum has been obtained. Fla. Stat. §720.303(1).

Prior to filing a complaint for foreclosure, an association must provide to the delinquent member notice of intent to foreclose. Fla. Stat. §720.3085(5). The notice cannot be sent until at least 45 days after the HOA served notice of its intent to file a lien. Id. The notice must identify the amount of delinquency, state the HOA’s intent to collect the amount through foreclosure, and provide contact information for an HOA representative. Id.

For condo associations, a foreclosure suit must be filed within one year of the filing of the lien. Fla. Stat. §718.116(5)(b). The statute of limitations applicable to HOA foreclosures is five years. Fla. Stat. §§720.3085(c); 95.11(2)(c). Florida’s requirement of pre-suit mediation of disputes between members and HOAs is not applicable to actions to collect amounts owed to the association. Fla. Stat. §720.311(2)(a).

Who is Responsible for Paying the Mortgage after a Foreclosure?

Florida’s Homeowners’ Association Act does not preclude an association from foreclosing on a home subject to a superior mortgage, but the mortgage lien holds higher priority (and is therefore paid first from sale proceeds) if the mortgage was recorded earlier than the HOA’s lien claim. Fla. Stat. §720.3085(1).

If the mortgage is superior, sale proceeds will be applied to the mortgage debt. If the proceeds are sufficient to pay off the mortgage, the mortgage debt is extinguished. If not, the bank can seek a deficiency judgment against the prior owner within one year following the foreclosure, though the deficiency judgment amount is limited to the difference between the fair market value on the sale date and the total judgment balance granted by the court (if the property was residential and owner-occupied). Fla. Stat. §702.06.

If the HOA’s lien has superior priority, sale proceeds are applied to the outstanding amounts secured by the HOA lien, with the balance paid to junior lienholders. The prior owner remains personally obligated for any junior mortgage until it is satisfied and for assessments that come due while he or she owns the property.

If there is enough money to pay the mortgage and the HOA lien, any surplus belongs to the prior owner, and both the mortgage and HOA lien are extinguished. If the foreclosure does not result in a sale because the combined mortgage and past-due assessments exceed the property value, the association can purchase the property for the amount of the assessments – thereby extinguishing the lien. Florida’s Homeowners’ Association Act expressly authorized associations to purchase properties at foreclosure. Fla. Stat. §720.3085(1)(f).

Can Homeowners Recover their Homes After an HOA Foreclosure?

After an HOA foreclosure action has been filed, but before the court has ordered the foreclosure sale, a homeowner can file a “qualifying offer” indicating his or her intent to pay all amounts owed to the association within a period of not more than 60 days. Fla. Stat. §720.3085(6). The filing of a qualifying offer stays proceedings to permit the homeowner time to satisfy the association’s claim. A homeowner may not make an effective qualifying offer if the property’s mortgage is in foreclosure, if the homeowner has filed bankruptcy, or if the trial date of the foreclosure action is set for less than thirty days in the future. Id.

With regard to foreclosures in general, Florida law permits homeowners to “redeem” a property in foreclosure at any time prior to certification of the sale by the clerk or a later date specified by the judge in the foreclosure order. Fla. Stat. §45.0315. A home is redeemed by paying all past-due amounts, including any foreclosure costs.

Do Homeowners Have to Pay Assessments Accruing During Foreclosure?

The owner of a parcel is responsible for paying all assessments coming due while he or she is the owner “regardless of how his or her title to property has been acquired.” Fla. Stat. §720.3085(2)(a). No waiver, suspension, or abandonment of the parcel affects that liability. Id. Thus, up until the time that title actually transfers, the owner is legally obligated for all accruing assessments.

Depending on the value of the property compared to the total lien amounts, a purchaser might elect to pay off any delinquent assessments to clear the title to the property. Following a transfer, the new owner (unless it is the association) is jointly and severally liable along with the former owner for all assessments due prior to the transfer. Fla. Stat. §720.3085(2)(b). However, if a first-mortgage holder acquires title through foreclosure, its liability is limited to the lesser of the prior 12 months’ assessments or one percent of the mortgage amount. Fla. Stat. §720.3085(2)(c).

If the property sells, the proceeds will be applied toward the assessments (to the extent the sale price is sufficient to pay off any existing mortgage). If assessments are fully paid off from sale proceeds, the former owner will no longer be liable for the assessments because the assessments will have been paid.