Richard Zaretsky,Esq. a Florida Real Estate Attorney from West Palm Beach, FL has provided us a very insghtful post on the subject of Association Assessments and How They Can Survive a Foreclosure Sale. Great post. Please stop by Richard's post and leave him a comment.
Buying a mortgage from a lender is becoming more popular.I have had some calls to the office regarding note purchasers having problems with Association's that think they still have a lien on the property after the foreclosure.If you don't buy the mortgage at the right time and using the right method, the Association can be right!
In Florida there are statutes that govern the remaining lien or obligation statutorily available to condominium, homeowner and property owner associations.Associations are statutory provisions to place a lien upon the borrower's property to insure that the association is paid.However, there is also a “safe harbor” provision to these statutes that permits a first priority mortgage holder to foreclose on the property and only be responsible to pay one percent of the mortgage amount, or six months (one one year for a HOA/POA) worth of regular monthly or quarterly maintenance assessments.
Many investors buy the mortgage during the foreclosure process usually through and “assignment of mortgage”.In such cases the plaintiff's name should be changed in the court proceeding to the name of the buyer.Others buy it after the foreclosure judgment but before the sale through an assignment of judgment or assignment of mortgage.Still others buy the mortgage after the foreclosure sale but before the clerk issues the title.This is done through an assignment of mortgage or and assignment of bid.
The safe harbor that limits the exposure of the first mortgage lender is very specific.The safe harbor protection is available to a first mortgage lender or its assigns when IT or it’s assignacquires title through a foreclosure sale or a deed in lieu of foreclosure.The issue seems clear cut, but Florida courts have made a second look at the statute worth taking!
When a mortgage is in foreclosure and the judge issues the Foreclosure Judgment, the safe harbor provision no longer protects any new owner of the mortgage or judgment.This is because the mortgage ceases its existence as soon as the foreclosure judgment is created.The mortgage and note “merges' into the foreclosure judgment.Likewise, any assignment of a successful foreclosure bid is not protected.See Bay Holdings vs 2000 Island Condo. There, the bank's own subsidiary took title to the property at the foreclosure sale and they were determined not to be protected under the safe harbor statute!
Therefore, if you are not the mortgage holder (when you, or) that acquires title, you don't get the safe harbor protection.
So back to a real life example.The property had an association lien of $10,000.The mortgage foreclosed was for $150,000.The safe harbor would have limited the mortgage holder that took title to the property through a foreclosure sale or deed in lieu of foreclosure to $1,500.But the title was taken by the person that called was taken by him though an assignment of the mortgage and assignment of bid.The problem is that the assignment of mortgage was moot – at the time of the assignment there was already a judgment, so there was no mortgage as it had merged into the final judgment.Also the title was taken by someone other than the first mortgage holder. Therefore the demands of the Association for payment of $10,000 in unpaid association liens is valid, and if not paid the Association can seek the fees both by foreclosure of its lien on the property and by a personal money judgment against the new owner – who thought he was getting a “deal”.
Copyright 2011 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com.
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