Since the real estate meltdown which began in 2006, many condominium and homeowner associations have struggled with a significant increase in delinquent assessments. Any money received by an association from a delinquent owner helps, and many associations were willing to work out payment plans with such owners.
Many of the delinquencies were the result of the large number of foreclosures in many communities and the time lenders were taking to complete the foreclosure. Often, many years passed while a home was in foreclosure and usually the assessments were unpaid during the entire time. While the situation is improving with the recovering real estate economy, there are still thousands of pending foreclosures in Florida and many owners still delinquent in assessments.
Sometimes a condominium or homeowner association can look to the new owner for payment of all outstanding delinquent assessments. (When and if an association can bill the new owner is beyond the scope of this article.) Sometimes the new owner may not know they can be liable for all past due assessments.
In a recent court case, a purchaser at foreclosure was billed over $38,000 in past due assessments by the condominium association. The purchaser sent the association a check for $840.00, which was the pro-rated amount that had become due from the date the new owner purchased the condominium. With the check, the purchaser’s attorney submitted a letter to the association stating that:
Regardless of intent, negotiation of the enclosed check shall be deemed an acceptance of the offer of settlement made herein, and shall be full and final satisfaction of all claims against the owner and the property.”
Both the condominium law and homeowner association law seem to address this issue. Each law has very similar language which essentially says:
Any payment received by an association and accepted must be applied first to any interest accrued by the association, then to any administrative late fee, then to any costs and reasonable attorney’s fees incurred in collection, and then to the delinquent assessment. The foregoing is applicable notwithstanding any restrictive endorsement, designation, or instruction placed on or accompanying a payment.”
Notice the underlined language, that could be interpreted to allow an association to accept whatever they can get without waiving their rights to demand full payment. However, in the recent case, the court ruled otherwise. The court concluded that the language in the statute, when both sentences are read together, was intended to prevent an association from altering the formula for the application of payments rather than to preclude the delinquent owner from making a partial payment and conditioning acceptance of that payment on waiving the remaining delinquency.
Associations need to be cautious when an owner tries to make a partial payment as full satisfaction of what they owe. As the court said in this recent case: “Simply put, the Association cannot have their cake and eat it too.”