Homeowner association has super priority usually
Question: I am president of a homeowners association. I have been told that Florida law gives homeowner association liens a super priority. Is that correct?
Answer: Section 720.3085 of Florida statutes attempts to give homeowner association liens super priority over other liens. That section provides that a parcel owner, regardless of how title is acquired including by purchase at a foreclosure sale, is liable for all assessments that come due while he or she is the parcel owner. The owner is also jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of title.
That is similar to the condominium act. But, unlike the condominium act, the homeowner association act makes liens effective from and relate back to the date on which the original declaration of the community was recorded. That means the lien is treated as if it was created on the date the declaration was recorded. In some cases, that can be decades before the pertinent assessments are delinquent.
Because homeowner association liens are effective from date the declaration is recorded, they would generally take priority over mortgages because the declaration is recorded when the community is created, before parcels are sold and mortgages placed on those parcels. The super priority against mortgages is limited by two factors. First, due process under the Constitution prohibits statutes from changing contractual rights created prior to the effective date of the statute. Hence, mortgages recorded before the 2008 effective date are not impacted. Second, the statute limits liability of the first mortgagee acquiring title through foreclosure or deed in lieu of foreclosure to lesser of one percent of the original principal of the mortgage or 12 months of assessments accruing immediately before the mortgagee takes title.
With exception of mortgages, the statute has been interpreted to mean that homeowner association liens took priority over virtually all other liens under the usual rule affording priority to lien in accordance with date of filing. Since home owner association liens are considered filed as of date the declaration was filed, they supersede almost all other liens.
Not so fast said the Second District Court of Appeal in the case of Cricket Properties, LLC v. Nassau Pointe at Heritage Isles Homeowners Association by opinion filed September 20, 2013. In that case, Cricket Properties acquired title to property through purchase at a tax deed sale. It then filed a quiet title action asking the Court to rule that the lien of Nassau Pointe for homeowner association assessments was wiped out by the tax deed sale. The trial court agreed. The appellate court reversed.
The appellate court began its decision with discussion of the statutes governing tax deed sales. It noted Section 197.552, Fla. Stat. included the following: “Except as specifically provided in this chapter, no right, interest, restriction, or other covenant shall survive the issuance of a tax deed ” It noted other provisions in that chapter protected certain government liens and restrictive covenants from being wiped out by a tax deed sale. It found no reference to survival of homeowner association liens.
It then reviewed the homeowner association act. It admitted that Section 720.3085 provided that new owners are jointly and severally liable with prior owners for all unpaid assessments that came due up to the time of transfer of title. But, it explained that a tax deed does not represent a transfer of title. It is commencement of a “new, original and paramount” title. It explained that Florida’s Supreme Court had held that a tax deed creates in a purchaser a new and original title, entirely disconnected with previous owners of title. The purchaser of tax deed sale took free of any lien for homeowner association assessments.
Florida Statutes do afford a homeowner association lien with super priority but, at least with respect to mortgages and tax deeds, that priority is not absolute.
William G. Morris is an attorney with offices at 247 North Collier Boulevard on Marco Island, Florida. His practice covers a broad range of subjects, including civil litigation, real estate, business and corporate law, estate planning and probate, domestic relations and contracts. He writes this column periodically with respect to legal matters that frequently affect non-lawyers. The information contained in this column is not intended as legal advice and, of necessity, is generalized. For questions about specific circumstances, the reader should consult a qualified attorney.
Questions for this column can be sent to: William G. Morris, e-mail: firstname.lastname@example.org or by fax, (239) 642-0722. Other articles of interest can be viewed at our website, www.wgmorrislaw.com.