| October 2000 MEMORANDUM TO CLIENTS ASSESSMENTS: WASTE NOT WANT NOT The ability to collect assessments is as crucial to an association as a body =s ability to digest food. Block an association=s assessments or a body=s food, and weakness quickly follows. Last month=s Memorandum to Clients= discussed the Taxpayers= litigation which may impact a community association=s ability to collect monies due. This month another assessment related issue is reviewed.What must an association do when it acquires a unit or lot after a foreclosure sale? Usually an association secures access to the property, undertakes necessary work to avoid the property becoming a danger or nuisance, and protects the association and members from claims by obtaining appropriate insurance coverage. Frequently a unit or lot obtained as a result of an assessment lien foreclosure is also encumbered by, or subject to, one or more mortgages. After all, if the property had plenty of equity, or value exceeding the mortgages, it is unlikely that there would be a foreclosure because an intelligent owner would not let their investment in the property be lost. The issue of what duty an association has to a mortgage holder to maintain property that the association purchased at a foreclosure sale was involved in a recent Florida appellate court decision, Hochstadt v. Sanctuary H.O.A., Inc., 761 So. 2d 1153, 25 Fla. L. Weekly D1367 (Fla. 4th DCA 2000). In Hochstadt, the Sanctuary Homeowners = Association obtained title to a lot as the result of an assessment lien foreclosure. Mr. Hochstadt claimed to hold a third mortgage on the property. After Mr. Hochstadt took title to the property he sued the association claiming that the association laid Awaste@ to the property.What is Awaste@? Waste is a legal term, generally referring to claim for money damages. The claim for Awaste@ is a tort, meaning a claim that is not founded upon a statute or contract but instead is a common law or equitable claim. The claim of waste has been defined by one Florida law commentator as:
22 Fla. Jur. 2d Estates, Powers and Restraints and Alienation '150.In simple terms, how does the claim of waste arise? Waste generally involves someone who has permission or is lawfully able to occupy property, as opposed to a trespasser who has no rights to occupy. Generally the situation involves someone who occupies property knowing that the property will eventually be occupied by someone else who has an ownership interest in the property. When the occupant is not the owner, then the occupant owes the owner an duty to avoid destruction of the property. The justification of the claim of waste is to ensure equity. You can understand how it applies in daily life, outside of the community association law context. If you let someone borrow your property you expect the borrower not to damage your property; thus, you can understand that when the occupant of property is not the owner, then the occupant has certain legal duties to the owner. Traditionally, the claim of waste arose in probate or landlord-tenant settings. A tenant generally has a duty not to misuse an apartment. In estate planning a widow or widower may obtain a life estate, or the ability to live in a house for the rest of his or her life and his or her children are entitled to the property thereafter, in which case the the occupant has a duty to the children not to destroy the property. The difficulty for associations, is that associations normally do not want to expend any more funds than necessary on foreclosed units or lots. Usually, if an association will not be reselling foreclosed property, then a mortgage holder will foreclose their mortgage quickly. Problems seem to occur when there is delay between the time an association takes title and when a mortgage holder forecloses and takes title. What can an association do to protect itself? Approaching the situation in a business-like basis usually helps to avoid liability. When securing a foreclosed unit or lot, frequently an association will be taking steps that will avoid waste. Normally, to protect neighboring owners, associations will want to take interim efforts to protect the foreclosed property. Occasionally a property requires substantial repairs, such as a new roof or other significant effort. In that situation, an association may be urged to contact the mortgage holder, requesting action. By placing the mortgage holder on notice of the situation, the association may reduce its liability, particularly if the mortgage is in default and the mortgage holder has a right to enter and repair. Frequently a mortgage holder may not know of the situation and the notice will spur action. Traditionally associations have pursued assessment liens up to and including foreclosure sales. It has been the firm =s experience that relatively few assessment liens involve lien foreclosure law suits, and even fewer result in foreclosure sales. Generally owners have found that if their financial circumstances are dire and even if they have not paid their first mortgage it is generally best to pay the association to avoid having to move immediately. However, occasionally associations do proceed with a foreclosure sale and as a result take title to property. The Hochstadt decision will stand for the proposition that associations must take reasonable care of the property. In those situations when there is a delay or when there is a problem maintaining the property, at a minimum it is suggested that an association contact the first mortgage holder and advise the first mortgage holder of the need to undertake maintenance. For an analysis of a particular situation, an association is urged to contact its association=s counsel.OFFICE NOTES In observance of Columbus Day and Yom Kippur the firm =s offices will be closed on October 9, 2000.The firm is proud to introduce Tanique G. Lee. Ms. Lee received her law degree from Temple Law School, Philadelphia, Pennsylvania in May 1997, and her bachelor and master degrees from the University of Florida. Upon graduation from law school, Ms. Lee worked as an Assistant Public Defender in Palm Beach County. At the Public Defender =s Office she handled misdemeanor and felony cases.The firm is also proud to announce that Mr. Gelfand has been published in the Florida Bar Real Property, Probate and Trust Law Section =s ActionLine publication. The June-September, 2000 issue includes two of his articles concerning community association law, the first reviewing recent legislative changes and the second summarizing recent judicial decisions.This information is provided for public information purposes only and is provided without obligation or fee. It is distributed to the firm's association clients to provide a general notice of recent legal changes. This information is not to be considered as legal advice. The changes in the law may not have been reviewed by Florida courts and may be subject to further challenge. Before taking any action you are urged to consult with counsel to ensure that your legal rights are protected. F 8 2000 by Gelfand & Arpe, P.A. F:\WP51\CLIENTLT\UPDATE00.10.wpd |