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Tuesday, August 25, 2015  
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Orlando REALTOR® | September/October 2015

Calm those rough waters caused by HOAs who ignore Florida's "safe harbor" statutes

By A.J. Stanton, III, Esq.

Congratulations! Your client has successfully obtained title to their security through either a deed in lieu of foreclosure or a foreclosure proceeding.

One of the first steps to take after the certificate of title is issued is to obtain an estoppel letter from the condominium or homeowners’ association (HOA) governing the community. For many, this step has proven to be frustrating, costly, and time consuming.

Chapters 718 and 7201 of the Florida Statutes provide that a first mortgage holder’s obligation for unpaid assessments is limited to the lesser of 12 months unpaid assessments or 1 percent of the mortgage principal.

This amount is often times referred to as “Safe Harbor.” Of course, this assumes that a foreclosure has been filed, the HOA has been joined, and title has been obtained through foreclosure or a deed in lieu of foreclosure. Unfortunately, the provisions of Chapters 718 and 720 have not kept HOAs from demanding amounts in excess of Safe Harbor, which often interferes with a timely closing on the sale of the property.

The process of minimizing the liability for unpaid HOA assessments should begin before a foreclosure action is filed. Lender’s counsel should take time to review the recorded declaration of an HOA that was in existence at the time the mortgage loan was closed.

Many declarations contain a provision exempting first mortgage holders from any liability for unpaid assessments that have accrued before title is obtained through foreclosure or a deed in lieu. Florida Courts have held that a mortgage lender is a third party beneficiary of the declaration and that the provisions of the declaration in existence at the time the loan was closed cannot be overridden by the Safe Harbor provisions of Chapter 718 and 720.2 As such, the operative portion of the declaration should be referenced in the complaint or attached as an exhibit and relief should be sought for a declaration that no monies are due and owing by the foreclosing lender through the issuance of the certificate if title.

A request should be made that the court make a finding that no assessments are due under the terms of the declaration. An alternative request should be made for Safe Harbor under Chapter 718 or 720. Oftentimes the HOA will not respond to the complaint in which event the requested relief should be incorporated into the final judgment by default. However, if the allegation is contested, there is an increased likelihood that the HOA will concede Safe Harbor as it is more favorable than obtaining nothing under the declaration. The goal is liquidate the method of calculating unpaid assessments in a final judgment so that there is no dispute at a later date.

Notwithstanding the foregoing, and assuming that the HOA agrees that no assessments are owed or at worst agrees to Safe Harbor, it is likely a demand will be made for other items such as legal fees, late fees, interest, etc. In this event, it is again important to refer to the declaration. Careful attention should be made to determine if such fees are permissible or otherwise limited in amount. For example, the declaration may provide that legal fees are only recoverable if the HOA files a lawsuit or the declaration may cap late fees to a specific amount. The point is that absent authority from the recorded declaration or Florida law, such amounts are not collectable by the HOA.

If declaratory relief was not pursued through the foreclosure and a dispute arises after title has been obtained over the amount of assessments due, litigation against the HOA must be considered. Typically an action for declaratory judgment and slander of title are sufficient to establish an avenue for the desired relief. Other claims, including those against individual board members may be available depending on the facts of each case. Legal fees should be demanded if provided for under the terms of the declaration. Once an action is filed, if the HOA has insurance coverage for the claims filed, the carrier will appoint new legal counsel who may approach the dispute more objectively and thereby foster resolution.

It is important to understand that time invested on the front end of a foreclosure can save a wealth of time and money on the back end. This logic applies not only assessments but any issue facing a lender on the back end of a foreclosure whether it is tenants, title defects, deficiency judgments, and the like. While this article is not intended to provide guidance for every assessments dispute, if the suggestions provided herein are followed, the likelihood of a dispute will be reduced.

A.J. Stanton, III, Gasdick Stanton Early, P.A. is a member of Central Florida Real Estate Attorneys Council. CFREAC provides this column on real estate law issues as a service to ORRA members for general understanding of the law, not as a substitute for individual legal advice or consultation and should not be relied on in specific situations without consulting with a real estate attorney. For more information, please visit

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