New Decision: Assessments – Joint and Several Liability with Previous Owners (Coastal Creek v. FLA Trust Services)

Michael Gelfand 7/17/2019

The battle is joined! The prize is whether pursuant to § 718.116(n)(a), Fla. Stat. (2017) a current condominium unit owner is jointly and severally liable for delinquent assessments accruing during the ownership of a remote owner. The result is far from certain because yesterday an express conflict between two District Courts of Appeal was declared in Coastal Creek Cd’m Ass’n., Inc. v. FLA Trust Services LLC, Case No. 1D18-1457 (Fla. 1st DCA, July 16, 2019).

FACTS

The Levraeas were the original owners of a Coastal Creek Condominium unit that was foreclosed by a bank. Homes HQ LLC was the successful bidder and obtained a certificate of title to the unit on June 13, 2016. On July 26, 2016, Homes HQ quit claimed the unit to FLA Trust, the present owner. Thus the ownership sequence was:

Levraeas → Homes HQ → FLA Trust

For purposes of this Memo, the Levraeas would be the “remote” owners as their ownership is separate from the current owner by a least one intervening owner.

In December 2016, the Condominium Association recorded its claim of lien, followed in 2017 with an action for lien foreclosure and damages. The Condominium Association asserted that FLA Trust failed to pay assessments due since August 15, 2015, a time period that included three distinct unit owners: FLA Trust, Homes HQ, and the Levraeas.

APPELLATE COURT HOLDING AND ANALYSIS

Both the Condominium Association and FLA Trust moved for summary judgment, each asserting a different interpretation of the Condominium Act’s joint and several liability provisions in § 718.116(n)(a) (2017). As a foundation for analysis, the court recited general rules of statutory construction, including:

· If the statute is clear and ambiguous, rules of construction are not applied, and the plain and obvious meaning holds.

· Give effect to all parts of the statute.

· Avoid rendering a part of the statute meaningless.

· Read all parts of the statute together for consistency.

· Do not construe to modify express terms or reasonable and obvious implications, avoiding unreasonable results or clearly results contrary to legislative intent.

· Amendments enacted shortly after controversies as to the interpretation of the original act arise may be considered useful guidance for the original intent.

The court then recited the 2017 statute adding emphasis:

A unit owner, regardless of how his or her title has been acquired, including by purchase at a foreclosure sale or by deed in lieu of foreclosure, is liable for all assessments which come due while he or she is the unit owner. Additionally, a unit owner is jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of title. This liability is without prejudice to any right the owner may have to recover from the previous owner the amounts paid by the owner. For the purposes of this paragraph, the term “previous owner” does not include an association that acquires title to a delinquent property through foreclosure or by deed in lieu of foreclosure. A present unit owner's liability for unpaid assessments is limited to any unpaid assessments that accrued before the association acquired title to the delinquent property through foreclosure or by deed in lieu of foreclosure.

The court defined the issue as:

…whether, pursuant to section 718.116(1)(a), the present owner of a condominium unit is jointly and severally liable with the previous owner for unpaid assessments that came due during the ownership of both the previous owner and the original owner (as contended by the Association) or only for unpaid assessments that came due during the ownership of the previous owner (as argued by FLA Trust and found by the trial court).

The court’s analysis began with differentiating Aventura Mgmt., LLC v. Spiaggia Ocean Condo. Ass'n., Inc., 105 So. 3d 690 (Fla. 3d DCA 2014). The court noted that post Aventura the statute was amended to add the last two sentences, and that Aventura addressed an intervening owner that was the collecting condominium association with joint and several obligations, a factor not present in the instant case.

The court focusing on the phrase “previous owner” explained and held that:

The phrase “the previous owner” pertains to the person with whom the present owner has joint and several liability, not to the period of ownership during which the present owner is liable for unpaid assessments—the latter of which is at issue. Reliance on the phrase “the previous owner” is also unpersuasive because the previous owner is jointly and severally liable with the original owner, and the use of the singular definite article does not foreclose the reasonable interpretation that the previous owner’s liability for assessments unpaid by the original owner flows to the present owner. The phrase “all unpaid assessments that came due up to the time of transfer of title” is more on point and lends further support for that interpretation. If the Legislature intended to limit the present owner’s joint and several liability to unpaid assessments that came due during the previous owner’s ownership, it could have simply said, “a unit owner is jointly and severally liable with the previous owner for all unpaid assessments that came due during the previous owner’s ownership.”

The court reinforced its analysis by proverbially refocusing, zooming out from the one sentence to avoid an isolated too narrow approach, and viewing the whole statute. Including in this focus the 2014 amendment is said to further the court’s conclusion. The court explains the purpose of the 2014 amendment as it:

essentially skips the period of the association’s ownership and absolves the present owner of liability for assessments unpaid during that time while maintaining the present owner’s liability for assessments unpaid during the original owner’s ownership.

Thus, the current owner is liable for unpaid assessments due during the remote ownership but not for assessments accruing during the time the Condominium Association owned the unit.

In conclusion, the statute as a whole was held to have “unambiguous” intent. Reversing the trial court’s summary judgment, conflict was certified with the Third Districts decisions in Spiaggia and related cases.

COMMENTARY

While the deluge of foreclosures of condominium units has receded significantly, and with that a corresponding reduction in condominium associations taking title to foreclosed units, the frequency of disputes over assessments accruing during a remote ownership has decreased to a trickle, if that. Nevertheless, many “see smoke” over the horizon and are bracing themselves for a new wave of defaults and foreclosures.

Regardless of one’s personal thoughts on the issue, to provide certainty, it is hoped that the Florida Supreme Court will swiftly resolve the issue with finality. There is always the potential of yet another “clarification” by the Legislature.

Addressing substantive rights, the decision did not indicate if the declaration of condominium had “Kaufman language” and whether there was a constitutional impairment of contract concern.

In the interim what does a practitioner do? If located in the Third or the First Appellate Districts, then the decision from your District’s court is binding. As for the rest of the State…. If amending community covenants, perhaps add this to the list of items.

Many thanks to Mr. Christy, Mr. Brown and Ms. Schwinn for promptly providing notice of the decision.

Have a great rest of the week.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

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Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2019 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified:

Real Estate Attorney

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


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