Foreclosure Assessments--WTF?

“How could I owe the association $10,000 in back assessments, I just bought the property at a foreclosure sale free and clear last week? Those fees are the responsibility of the prior owner, not me!”

It is no wonder that purchasers of foreclosure properties in Florida frequently have questions about whether they are liable for past due homeowners or condominium assessments after purchasing property at a foreclosure sale.

If you’re thinking that the next big “score” in your real estate portfolio might be a condo purchased at a foreclosure sale, call your lawyer before you sign on the dotted line.  After the initial excitement of the new purchase wears off, foreclosure purchasers are  frequently finding themselves the target of associations seeking to collect past due assessments owed by the previous homeowner.

Over the last half-dozen years, condos—many of which were only partially filled with owners or tenants—have not had the monthly income to cover their basic costs, ergo, there have been assessments to keep the buildings running.  And these assessments may or may not have been paid by the owners. When confronted with the scenario that old assessments may survive a foreclosure sale, new unit owners are often shocked at the notion that they could be responsible for the past due assessments.

Condominium association liens in Florida are governed by Sec. 718.116, Florida Statutes, whereas homeowners’ association liens are governed by Sec. 720.3085, Florida Statutes. Both statutes make the new owner “jointly and severally” liable for unpaid assessments.

The statutes specifically provide that:

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.

Today’s Lesson:  The purchaser of a foreclosure is treated exactly the same as the prior owner and is equally responsible for the past due assessments.

All this may seem unfair to the new owner, but the law is clearly designed to assist association budget shortfalls. Further, while the law gives the new owner to the right to sue the prior owner for the recovery of any money spent paying off the old assessments, it is rarely a good idea to take advantage of such a right given that the prior owner is usually penniless and judgment proof.

And if you understood that the new owner only has to pay up to 12 months of back assessments, well, given Florida’s ever-changing foreclosure law, there is legitimate confusion about this issue. That 12-month rule only applies when the mortgage holder – i.e. the Bank – takes title to the property in a foreclosure sale, it does not apply to third-party purchasers who purchase properties at foreclosure sales.

New property owners wanting to reduce their obligations to the association by as much as possible, should be working with an experienced real estate lawyer who understands which assessments are valid and which assessments, fees or fines can be negotiated down is always the best bet.

Dane Hahn is a real estate professional serving Sarasota and Charlotte Counties from bhis office at Sarasota Realty Associates in Venice.  You can reach him at 941-681-0312, or by email at dane.hahn@gmail.com