A Condominium Association Victory in the Ongoing Fight for a Prior Owner’s Assessments

A recent case, Coastal Creek Condominium Association, Inc. v. FLA Trust Services LLC has upped the ante in the fight to collect outstanding assessments owed by previous owners pursuant to Section 718.116(1)(a), Florida Statute. In Coastal Creek, the Florida First District Court of Appeal adopted a different interpretation of a Florida statute than the Florida Third District Court of Appeal’s 2013 opinion Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Aventura 105 So. 3d 637 (Fla. 3d DCA 2013). Unlike in the 2013 Spiaggia opinion, the Coastal Creek opinion determined that joint and several liability extends backwards to include the total historical debt that remains outstanding and does not get limited to the portion of the debt during the most recent owner’s period of ownership.

In Spiaggia, an association foreclosed on a unit owner for failing to pay assessments and became the title owner of the property. A lender then instituted its own foreclosure action where a third party placed the winning bid, becoming the new owner. The association then attempted to collect from the new owner the historical unpaid assessments extending from their predecessor in ownership. The new owner refused to pay, arguing that the new owner had no joint and several liability because the association acquired intervening title and the joint and several liability did not extend back to the association’s predecessor owner.

The Third District Court of Appeal ruled in favor of the new unit owner, holding that the association’s brief ownership of the unit extinguished the prior unpaid assessment responsibility.   In doing so, the appellate court interpreted the joint and several liability to stop at the most recent owner, i.e., — the association.

In 2014, the Florida Legislature amended the Condominium Act on the heels of the Spiaggia ruling, excluding the association from the term “previous owner” to make clear that a unit owner’s responsibility for unpaid assessments extends to those assessments that came due prior to an association’s ownership, and is not cut off by a condominium association’s temporary ownership of the unit. Whether these statutory changes apply is dependent on the age of the association attempting to enforce it or whether language in its declaration incorporates future amendments to the Condominium Act (“Kaufman Language”).

Most recently, the appellate court in Coastal Creek was presented with the issue of whether pursuant to the Statute, the current owner’s shared liability with the previous owner is limited to solely those assessments that accrued during the ownership of the most recent previous owner, or whether the association could collect assessments that came due prior to the most recent owner’s ownership, including the inherited debt of the original debtor owner that preceded the most recent owner. Distinguishing the fact pattern from Spiaggia was the absence of an intervening period of association ownership.

The trial court found that the present owner is solely responsible for assessments coming due during its ownership and the immediate prior owner’s ownership, but not for those assessments that accrued before. However, this ruling was reversed by the appellate court in Coastal Creek. The Court concluded that the present owner is jointly and severally liable with the previous owner for unpaid assessments that came due during the ownership of all previous owners.

While associations can attempt  to interpret Spiaggia narrowly and limit it to its specific facts, at this time the Florida Third District Court of Appeal’s interpretation is that an association can only recover assessments from the most recent owner, and not earlier predecessors in title. In the First District, the opposite interpretation now holds sway. In other Florida appellate districts, it is unknown which way the courts will go. It is important to note that in Coastal Creek, the intervening second ownership period was a very small amount of time; therefore, had the assessment liability been cut-off only at the last owner, it would have created an egregious and unfair loss for the association and a recipe for abuse.

Ultimately, the Florida Supreme Court will have to decide the issue. As such, it is critical that associations consult carefully with legal counsel when determining its strategy when a new owner takes title subject to a longstanding delinquency of more than one previous owner. To learn more, contact me at jgoldstein@haber.law.