New Decision: Assessments/Successive Liens and Partial Payments (Rajabi v. Villas at Lakeside Cd’m. Assn’n).

Michael Gelfand 12/20/2020
It’s true! If you ignore a court’s warning that you will be acting at your “peril,” then you actually will be in peril, if not an endangered species!!
 
The viability of an amended condominium association assessment lien filed more than a year after the initial, first filed lien was recently addressed in Rajabi v. Villas at Lakeside Cd’m. Assn’n, Inc., Case No. 5D18-852 (Fla. 5th DCA November 13, 2020) which also reminded that any thought that a de minimus principal balance will not draw scrutiny, if not ire, in a Florida association lien foreclosure proceeding, will likely be dashed. A copy of the decision is attached.
The Facts.
 
After purchasing a condominium unit in August 2010, unit owner Rajabi made “several late payments” for assessments due for that year and for part of 2011. The timeline is as follows:
January 2011. Outstanding balance of $82.50.
March 2011. Initial, the first Assessment claim of lien filed.
April 2011. The Association stopped crediting the owner’s account with his assessment payments, instead forwarded his checks to the Association’s attorney where the checks were deposited into the attorney’s trust account.
The Association continued to assess the unit owner and the balance continued to accrue late fees and interest.
February 2013. The owner wrote to the Association that the Association ignored requests for his current statement. In a subsequent letter he confirmed emails and Certified letters for the accounting.
July 2013. The Association files its second claim of lien. The Association did not provide a notice of intent to file a second claim of lien.
July 18, 2013. The Association provides the owner a notice of intent to foreclose.
August 2013. The Association’s attorney sent the owner the Association’s itemized ledger. The ledger:
Was identified as an “official record of the Association kept in the ordinary course of business;”
Confirmed that the owner’s payments were never applied;
The Association added assessments, late fees and interest while noting the date that the owner’s checks were received; and,
Included “partial disbursement” entries reflecting monies received from the Association’s attorney and applied to the outstanding balance.
 
At the Trial Court.
 
The Association obtained a final judgment of foreclosure of the second lien in the amount of $135,205.80 including $48,533.91 in principle, interest, late fees and other fees and $80,590.76 in attorney’s fees.
The Appeal.
 
The appellate court reversed on two independent grounds.
 
The first ground was the Association’s failure to provide the owner a notice of intent to file the second, 2013 claim of lien. That failure violated Section 718.121(4) Fla. Stat. (2013). The Association’s argument that the second claim of lien was merely “supplemental” to the first claim of lien was rejected.
 
Florida law does not contemplate a “supplemental” claim of lien piggybacking onto a prior lien that has been extinguished by the passage of time.
 
The second ground was the Association’s “erroneous handling of the owner’s payments,” violating the Condominium Act payment allocation provisions in Section 718.116(3) Fla. Stat. This erroneous handling also breached the Declaration of Condominium’s similar payment allocation provisions. The appellate court harkened back to the “disapproval” of a homeowner’s association’s failure to properly post payments in Ocean Two Cd’m. Ass’n. v. Kliger, 983 So. 2nd 739 (Fla 3d DCA 2008).
 
Kibitzing.
 
The decision reminds condominium associations to timely file their assessment lien foreclosure complaints. After one year of effectiveness, the lien is extinguished, assuming no tolling provision applies. It cannot be revived.
Nevertheless, no need for rending of garments.
 
The decision does not prohibit filing a new claim of lien. Filing a new claim of lien may be relatively simple.
As the decision follows the statutes, new notices of intent to lien and to foreclose are required for which there is some expense. There will be a sixty day minimum delay, Section 718.121(4) Fla. Stat., ninety day minimum for homeowners’ associations Section 720.3085(4)(a) and (5) Fla. Stat.
 
In terms of priority, there likely is little to be lost as what intervening lien will arise that has priority over the association’s lien? Real property taxes will always be there. First mortgages will normally have priority, but if they, as regular procedure, obtain an association estoppel letter, the lender will normally not close the loan with an outstanding balance.
It may be best said that if the one-year time period has passed, bite the bullet and start over! Of course, this assumes that the Section 95.11 Fla. Stat. Statute of Limitations has not run.
 
The appellate court did not have to address the viability of an “amended” condominium association assessment claim of lien, if filed before the Section 718.116(5)(b) Fla. Stat. (2020) one year expiration period. The court’s rationale would appear to allow an amended claim of lien; however, the claim of lien must be recorded before the one-year anniversary of the original claim of lien. The Condominium Act’s one year limitation does not re-commence, but instead continues from the recording of the original claim of lien; however, it would appear particularly if the original claim of lien is being amended the one year period commences on the original claim of lien’s recording. As a reminder, the one-year period does not apply to a homeowners association claim of lien filed pursuant to Section 720.3085 Fla. Stat., and there is the statutory extension of the one year period for a bankruptcy court stay preventing the filing of a foreclosure action.
 
The appellate court did not prohibit the Condominium Association from sending partial payment checks to the Association’s attorney to hold in trust; however, the court appears to condemn the Condominium Association’s failure to enter the amounts paid on the Association’s ledger.
 
The appellate court also did not comment upon the Condominium Association’s statutory duty to generally provide an accounting record upon request. That may not have been an issue on appeal or there may be other reasons, particularly as the request for records would not be dispositive in light of either of the two reasons for reversal.
The court did note that the unit owner stopped paying assessments, but that was not to discredit the owner. The court accepted the owner’s statement that payments were stopped because the Association was not recording payments. The court did not expressly approve of the withholding of payments; however, the failure to make payments was not held against the unit owner.
The decision ends with a footnote observing that:
 
… there was no evidence demonstrating how the Association calculated interest or whether it did so correctly and in accordance with the terms of the Declaration.
 
While this quote may be dicta because the issue of proof of the calculation of interest would be moot in light of the reversal, the footnote appears to meander from precedent providing that interest is in essence a ministerial matter for which proofs are normally not required. Perhaps distinguishing this case from most other foreclosure actions, is what may have been a somewhat convoluted ledger because of the manner in which principal was, and was not, posted. Hopefully, this dicta will not shift a ministerial determination into an issue of fact for each dispute, recognizing that the calculation of interest is not unique to association lien foreclosure actions.
 
What does the Association do now? The holding was a plain vanilla “reversal.” No remand. No other directions to the trial court. Thus, the Association is not receiving a proverbial second bite at the apple, at least on this second claim of lien.
Should the Association regroup and record a third claim of lien? Presumably, yes after providing a notice of intent to lien. Monies due outside the limitations period likely have to be dropped, if nothing else than to avoid debt collection law penalties.
What happens to the $80,000.00 attorney’s fee claim? In light of the reversal that the claim of lien was not preceded by the statutory notice of intent to lien, it would be anticipated that the unit owner would argue that no attorney’s fees would be due.
Speaking of attorney’s fees, if the owner plead attorney’s fees it would be anticipated that the owner would recover reasonable attorney’s fees for the appeal and likely the trial court.
 
In this same regard, it is not known how attorney’s fees for this lien foreclosure exceeded $80,000, especially if the matter was non-jury which the opinion does not indicate.
 
Undoubtedly, many will be second guessing the initial decision of the Association to proceed when the initial delinquency was less than $100, especially if that amount resulted from the accrual of late fees and interest.
 
Perhaps a side note, or maybe not, interestingly, the court remarked that the unit owner’s renovation had a detrimental impact on other unit owners. One must wonder whether issues regarding the renovations pushed the Association down this path of “peril.”
Beyond the decision and disputes, one must wonder when the Legislature will move the requirement for an initial notice of intent to lien from 718.121 to 718.116, where it belongs.
 
And last but not least, this decision stands as a stark reminder that Florida community associations that fail to accept partial payments do so literally at their own “peril.”
 
Past Chair
 
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