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08/30/12 It's The Law: Condominium Should Pursue Liens

Question:

I am on the board of my condominium. We have an owner who has not paid assessments for over 6 months. I don't want to let the overdue amount get bigger. What options do we have for collection?

Answer:

The first thing you need to do is make sure the owner is being invoiced. Make sure the invoices are going to the proper address. You might want to call the owner to make sure the owner is aware of the delinquency. In a communal living setting like a condominium, I always think it is better to start with an olive branch.

In one of my cases, I found that the owner had not received invoices because someone was stealing his mail. It would have been easy to argue that the owner was aware of assessments were due and should have made sure they were paid. But, how many people remember to pay a bill they did not receive? Unfortunately, it is rare that a non-paying owner has not received or is not aware of assessments.

The collection procedure should involve recording a lien against the condominium unit. You should first review your condominium documents to make sure that all invoice and billing requirements have been met. Then, review the documents to see if there are any requirements for filing and pursuing a collection case in addition to those set out in Florida's Condominium Act ("Act").

The Act has detailed and specific requirements with respect to assessment liens. The first requirement is that the association send the delinquent owner notice of intent to file a lien. The notice must be sent to the owner by registered or certified mail, return receipt requested, and by First Class United States Mail at the owner's address reflected in the records of the association, if the address is within the United States, and delivered to the owner at the address of the unit if the owner's address in the association records is not the unit address. If the address in the association records is outside the United States, notice to that address need only be by First Class Mail, although notice must still be sent to the unit by registered or certified and First Class Mail.

If the owner does not pay the amount due within 30 days of the notice, the association may proceed with lien filing. To be valid, a claim of lien must be recorded in the public records of the county in which the condominium is located. The lien must include a description of the condominium parcel, name of the record owner, name and address of the association, amount due and the due dates. It must be executed and acknowledged by an officer or authorized agent of the association. The lien must bear a notary signature and seal for recordation. The lien expires 1 year after the date it is recorded unless, within that time, suit is filed to foreclose the lien. The 1 year period is automatically extended if a bankruptcy stay is involved.

The claim of lien secures all unpaid assessments that are due and those which accrue after the lien is recorded through entry of final judgment plus interest, reasonable costs and attorney's fees of collection.

The association may file suit to foreclose a lien for assessments just like foreclosure of a mortgage. Alternatively, the association can sue the owner for a money judgment for unpaid assessments without waiving any claim of lien. The association is entitled to reasonable attorneys fees incurred in either a lien foreclosure or action to recover a money judgment.

Where property is encumbered by a mortgage, the association foreclosure may be of little benefit. Many associations do not want to own units and, in today's market, mortgages often exceed value of the unit. In those cases, an association may choose to pursue a money judgment against the unit owner rather than foreclose a lien. Pursuing the money judgment does not waive or impact the lien or the association's right to foreclose its lien, unless the association collects from the delinquent owner.

No foreclosure judgment can be entered until at least 30 days after the association has given written notice to the unit owner of its intention to foreclose its lien. The notice must be by personal delivery or by certified or registered mail, return receipt requested, addressed to the unit owner at his or her last known address. The unit owner does not have to get the notice, as the statute makes it clear that sending the notice is all that is required. If the notice is not given at least 30 days before the foreclosure action is filed, and if the unpaid assessments are paid before entry of a final judgment of foreclosure, the association cannot recover attorney's fees or costs.

If the owner remains in possession of the unit after a foreclosure judgment, the court may require the unit owner to pay reasonable rental for the unit. If the unit is rented or leased during the foreclosure, the association is entitled to the appointment of a receiver to collect the rent. But, a recent amendment to the Act makes it even easier to collect rent from a tenant. If a unit is occupied by a tenant and the owner is delinquent in paying any monetary obligation to the association, the association may make a written demand that the tenant pay the association all rental payments after date of the demand. The demand must be hand-delivered or mailed to the tenant and substantially in form provided by the Act. The association must also mail written notice to the unit owner of the association's demand. If the tenant fails to pay rent to the association, the association may evict the tenant as if it was the unit owner under Florida's Residential Landlord/Tenant Act, but the association is not otherwise considered a landlord and has no obligation as a landlord.

If the unit owner is more than 90 days delinquent in paying any monetary obligation due the association, the association may suspend the right of the unit owner or the unit's occupant to use common elements, common facilities or any other association property until the amount due the association is paid in full. This power does not extend to limited common elements intended to use only by that unit, common elements needed to access the unit, utility services provided to the unit, parking spaces or elevators. The association may also suspend the voting rights of the unit or member which is more than 90 days delinquent. If the voting right is suspended, the right allocated to the unit is not counted toward the total number of voting interest necessary to constitute a quorum, number of voting interests to conduct an election, or the number of voting interests required to approve action under the act or declaration.

The association may also refuse to approve sale of a unit until delinquent obligations are paid.

Associations have a broad range of options with respect to delinquent owners. The best option in any given case will depend upon the particular circumstances of that case. In reviewing these options and deciding what actions to pursue, you are well advised to consult with an experienced attorney.

By: William G. Morris, Esquire

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