More on Lender Liability

More on Lender Liability

No Safety For Associations

By Michael J. Gelfand / Published February 2018

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How many times can you use the same discount coupon? The vision of coupon clippers sitting at a table with paper and scissors may be “so last century,” but today many community associations have grappled with the question of when a banker’s discount continues and when it ends, allowing a fresh start.

       The discount is the so-called “safe harbor” for first mortgage holders. You have heard the question in your community or next door. It starts with a parcel whose assessments have not been paid for years. What happens to the unpaid assessment debt after a first mortgage holder forecloses on a parcel, buys the parcel at the foreclosure sale, and re-sells the parcel? Do all the owners in the community have to subsidize the foreclosing mortgage holder who made the bad mortgage? 

       We know that in most Florida communities the foreclosing holder of a first mortgage pays very little of the assessment delinquency because of the “safe harbor.” Immediately after a first mortgage foreclosure the Condominium Act and the Homeowners Association Act limit liability to 12 months of assessments or one percent of the mortgage’s original principle amount.

       So, what happens when the first mortgage holder re-sells the property? Can the association go back and collect all back due assessments from the new owner? Not if the original lender qualified for the safe harbor provision under Florida statute.

       “Not so fast” was the recent ruling from a Florida appellate court when a homeowners association tried to collect the difference. Although the re-sale purchaser did not qualify for the safe harbor provision under Section 720.3085(2)(c), Fla. Stat. (2011), the court by strictly reading the Homeowners Association Act determined that the re-sale purchaser indirectly benefitted from the safe harbor provision. Regarding delinquent assessments before the foreclosure sale, the resale purchaser was “jointly and severally liable with the previous owner,” which did qualify for the safe harbor provision.

        In Villas of Windmill Point II P.O.A., Inc. v. Nationstar Mortgage, LLC, 42 Fla. L. Weekly D 2278 (Fla. 4th DCA, October 25, 2017), CitiMortgage, the holder of the first mortgage, foreclosed, was the high bidder at the foreclosure sale, and obtained title to the property. CitiMortgage then transferred title to Fannie Mae. The association demanded that Fannie Mae, the new owner, pay all the assessments delinquent from before the foreclosure. Nationstar, as the agent for Fannie Mae, sued the association, claiming that the safe harbor provision of Section 720.3085(2)(c), Fla. Stat. (2011) also protected Fannie Mae from liability to the association. The trial court agreed, granting judgment to Nationstar, ruling that the new owner’s liability was limited. 

       The Florida appellate court agreed with the decision of the trial court. The court started by recognizing that the safe harbor limits a first mortgagee’s liability to the lesser of one percent of the original mortgage amount or 12 months of assessments.

       The court then drew a line of demarcation, the date when the foreclosing owner, CitiMortgage, re-sold or transferred the property to a new owner, Fannie Mae. Although Fannie Mae was not the foreclosing first mortgage holder, as the re-sale or transferred owner Fannie Mae benefitted from the safe harbor provision.

       The statute requires that a new owner is “jointly and severally liable” with the old, foreclosing owner, CitiMortgage, which qualified for the safe harbor provision. The new owner’s liability includes what the “previous owner” was liable for at the time of transfer, the demarcation date; thus, Fannie Mae was only liable for the safe harbor amount if CitiMortgage did not pay that amount. Of course, Fannie Mae as the new owner was jointly and severally liable for all assessments coming due after Fannie Mae took title. 

       This case should serve as a warning to associations that you should not try to collect what you are not entitled to. Normally, in a suit between an association and an owner, even if a lender, the prevailing party recovers attorneys’ fees from the losing party. Thus, there may be substantial risk in taking an unsustainable position. Before taking the leap or painting yourself into a corner, consult with your association counsel.

Saying No To All Vegetables, Not Just Broccoli, Is Constitutional

       Everyone used to be encouraged to do it! “It” was called a “victory garden,” and before that, just a “vegetable garden.” Literally for centuries owners and tenants tilled their soil, reaping nutritional, and perhaps financial, benefits of their labor.

       Can a garden actually be prohibited? Should you be entitled to the proverbial “Constitutional right” to plant what you can eat? But, do you want to live next to a farm?

        In these modern times, there are many restrictions on what you can do with your own land. Town ordinances, including building and zoning codes, were created to specifically limit how an owner could use their property, to protect neighbors. Community associations were created in large part to not just enforce town codes but to enforce stricter restrictions.

        So, in a decision that impacts the limits of association restrictions, the issue of whether a town ordinance may limit vegetable gardens to a back yard was addressed in Ricketts v. Village of Miami Shores, 42 Fla. L. Weekly D 2352 (Fla. 3rd DCA, November 1, 2017). A Miami Shores ordinance prohibited a homeowner from growing a vegetable garden in a front yard. The zoning code specified, “Vegetable gardens are permitted in rear yards only.” For more than 17 years, the Ricketts grew vegetables in their front yard without objection.

       After the Village decided to enforce the prohibition, the owners removed their garden to avoid fines, but sued the Village, claiming that the ban on front-yard vegetable gardens violated the Florida Constitution’s Due Process and Equal Protection Clauses, including infringing on the Ricketts’ right to acquire, possess, and protect property and their right of privacy. The trial court ruled that the ordinance was constitutional.

       Agreeing with the trial court’s decision, the Florida appellate court found that the ordinance was rationally related to the Village code’s design standards and landscaping regulations. The appellate court stated:
       It is at least fairly debatable that a vegetable garden occupying most of   the appellants’ front yard and including, according to the appellants’ complaint, some 75 different varieties of vegetables, could signify a conflict between the Village’s decorative standards for front yards (green space planted with grass, sod, low growing plants, and a minimum of two trees) and an agricultural use based on the cultivation of vegetables for consumption.

Although the court found the owners’ claims to be compelling, the court nonetheless concluded that the ordinance was constitutional.

       The court pointed out that the owners still had a remedy. As citizens, the Ricketts could petition the Village Council to change the ordinance and could support Village Council candidates who agreed with their position that the ordinance should be repealed.

       So, a lesson learned:  If an owner is unhappy with restrictions, frequently there are options beyond just being unhappy or going to court. An owner can seek to change the restriction. This can be sought outside of court by direct communication with your elected officials, council members, or directors. Vote for candidates who agree with your position, or perhaps run for an election on the board!

Michael J. Gelfand, Esq.

Senior Partner of Gelfand & Arpe

Michael J. Gelfand, Esq., the Senior Partner of Gelfand & Arpe, P.A., emphasizes a community association law practice, counseling associations and owners how to set legitimate goals and effectively achieve those goals. Gelfand is a Florida Bar Board-Certified Real Estate Lawyer, Certified Circuit and County Civil Court Mediator, Homeowners Association Mediator, an Arbitrator, and Parliamentarian. He is a past Chair of the Real Property Division of the Florida Bar’s Real Property, Probate & Trust Law Section, and a Fellow of the American College of Real Estate Lawyers. Contact him at or (561) 655-6224.