If you fail to pay your HOA or COA assessments in Florida, the association may get a lien on your property and foreclose on it.
When you purchase a single-family home, townhouse, or condominium in a covenanted neighborhood, you will almost certainly be required to pay fees and assessments to a homeowners’ association (HOA) or condominium owners’ organization (COA). If you fall behind on your assessments, the association will most likely attempt to recover the debt by regular means first. For example, the association will most likely contact you and send you letters. If such efforts don’t work, the association will most likely attempt another method of collecting from you. The association may revoke your usage of the common facilities or initiate a lawsuit to obtain a monetary judgment against you. Most HOAs and COAs have the authority to place a lien on your property if you fall behind on your assessments. Not only would an assessment lien obscure the title to the property, making it difficult to sell or refinance, but the property may also be repossessed to compel a transfer to a new owner—even if the property has a mortgage.
HOAs in subdivision communities and COAs are sometimes governed by different sets of state regulations. One set of legislation in Florida governs HOAs in planned communities (Chapter 720 of the Florida Statutes), while another governs COAs (Chapter 718 of the Florida Statutes). The two sets of legislation are almost identical. If your house is part of a HOA or COA in Florida and you fall behind on assessments:
Before the association files (records) a lien, you will be notified.
Overdue assessments, late fines, interest, and lawyers’ fees and expenses may be assessed by the association.
You have the right to compel the organization to enforce the lien (or else the lien is invalid).
If the association decides to foreclose to enforce the lien, the procedure will be judicial.
Before a foreclosure may begin, you have the right to obtain a notice of intent to foreclose.
If the HOA or COA launches a foreclosure action, you may have a defense or be able to negotiate a means to catch up on the late sums and keep your house.
In General, How Do HOA and COA Liens Work?
An HOA or COA may normally get a lien on your house if you are behind in paying the assessments, based on the association’s Covenants, Conditions, and Restrictions (CC&Rs) and state law. In certain circumstances, regardless of whether state law mandates registration, the organization will register its lien with the county registrar to give public notice that the lien exists. HOA and COA liens are registered in Florida.
In Florida, a notice of a HOA or COA lien is required.
Under Florida law, a HOA may not file a lien unless it first sends a written demand to the homeowner through registered or certified mail, return receipt requested, and first-class mail, giving the homeowner 45 days to pay any sums outstanding. 720.3085(4) (Fla. Stat. Ann.). A COA cannot file a lien until 30 days after delivering a notice of intent to file a lien to the owner by certified mail, return receipt requested, and first-class mail. 718.121(4) (Fla. Stat. Ann.).
Charges that the HOA or COA may include in its lien
The sorts of charges that a HOA or COA may include in an assessments lien are specified by Florida law. (Florida Statute Ann. 720.3085(1)(a), 718.116(5)(b)).
Assessments. Unpaid assessment amounts might be included in the lien by the HOA or COA.
Charges for late payments. If the HOA or COA declaration or bylaws call for it, the association may levy an administrative late fee of up to $25 or 5% of the amount of each payment that is past due. 720.3085(3)(a), 718.116(3) (Fla. Stat. Ann.).
Interest. The HOA or COA may levy interest on delinquent assessments at the rate specified in the declaration or bylaws, but it may not exceed the legal rate. If no rate is specified in the declaration or bylaws, interest is calculated at 18% per year. 720.3085(3), 718.116(3), Fla. Stat. Ann.
Attorney’s fees and expenses. The HOA or COA is authorized to include in the lien its reasonable lawyers’ fees and expenses.
How to Dispute a HOA or COA Lien
A homeowner may compel the HOA or COA to pursue a registered lien claim by filing a “Notice of Contest of Lien.” The legislation specifies the format that must be used for the notification. 720.3085(1)(b), 718.116(5)(c) (Fla. Stat. Ann.). The association then has 90 days after receiving the notification to take an action to enforce the lien, such as by foreclosing. Subject to a few exceptions, the lien is invalid if the action is not filed within the 90-day term. 720.3085(1)(b), 718.116(5)(c) (Fla. Stat. Ann.).
Limitation Period for a COA Lien
A COA must commence an action to enforce the lien within one year of the day the lien was registered in order for the lien to remain valid. (718.116(5)(b) of the Florida Statutes). However, if the association is unable to bring a foreclosure case due to an automatic stay in the owner’s (or another party’s) bankruptcy, the statute of limitations is extended.
Foreclosures on HOA and COA Liens in Florida
State laws often impose specific due process requirements on HOAs and COAs in terms of how and when an association might foreclose an assessment debt. For example, Florida law mandates a preforeclosure notification and that the foreclosure be handled via the courts.
Notice of Preforeclosure in HOA Foreclosures
An HOA cannot begin foreclosure proceedings until 45 days after the homeowner has been notified of the association’s plan to foreclose and collect the outstanding amount. 720.3085(5) (Fla. Stat. Ann.).
Notice of Preforeclosure in COA Foreclosures
A foreclosure judgment cannot be obtained until at least 30 days after the COA provides written notice to the owner of its intention to foreclose its lien in order to collect outstanding assessments. (718.116(6)(b) of the Florida Statutes). This notification requirement will be deemed satisfied if the COA:
If the condo owner files a notice contesting the lien, an action to foreclose a mortgage on the condominium unit is pending in any court (if the rights of the COA would be affected by the foreclosure), and actual, constructive, or substitute service of process has been made on the unit owner (Fla. Stat. Ann. 718.116(6)(b)).
The COA cannot collect lawyers’ fees or costs if the notice is not delivered at least 30 days before the foreclosure action is filed, and if the outstanding assessments—including those due after the claim of lien is recorded—are paid before the entry of a final judgment of foreclosure. (718.116(6)(b) of the Florida Statutes).
Procedures for HOA and COA Foreclosure in Florida
Depending on state law and the CC&Rs, a HOA or COA foreclosure will be either judicial or nonjudicial. In Florida, a HOA or COA may foreclose a lien for assessments in the same way as a mortgage on real property might. 720.3085(1)(c), 718.116(6)(a) (Fla. Stat. Ann.). As a result, since mortgages in Florida are judicially foreclosed, the HOA or COA will file a case in court to foreclose its claim.
Making a Qualifying Offer in the Event of a HOA Foreclosure
In a HOA foreclosure, the homeowner may serve and submit with the court a “qualified offer” to pay all sums secured by the lien (plus accruing amounts while the offer is pending) for the HOA to consider at any point before the entry of a foreclosure judgment. However, you cannot make an offer if:
The parcel is the subject of a mortgage foreclosure or a notice of tax certificate sale (if a parcel becomes the subject of a mortgage foreclosure or a notice of tax certificate sale while a qualifying offer is pending, the qualifying offer becomes voidable at the association’s election), you are in bankruptcy proceedings (if the parcel owner files for bankruptcy while a qualifying offer is pending, the qualifying offer becomes void), or the trial for the lien for the parcel is underway. 720.3085(6) (Fla. Stat. Ann.).
HOAs, on the other hand, are often prepared to accept a qualifying offer since it implies you’ll pay off the debt.
What is a qualified offer? The legislation includes a form for making a qualified offer. (Speak with a lawyer if you need assistance locating the legislation or formulating an offer.) During a foreclosure proceeding, a homeowner may only make one eligible offer. 720.3085(6) (Fla. Stat. Ann.).
What happens after you’ve made a qualifying offer? The foreclosure proceeding is stopped after the homeowner submits such an offer with the court (postponed). The stay lasts for the time specified in the qualifying offer, which cannot be more than 60 days from the date of service of the qualifying offer and cannot be less than 30 days before the date of trial, arbitration, or the start of the trial docket, whichever comes first. The stay provides the parcel owner time to pay the qualifying offer amount as well as any obligations owed to the association while the offer is pending. (Florida Statute Ann. 720.3085(6)(b)). If the homeowner fails to meet the criteria of the qualifying offer, the stay is removed, and the HOA may seek a foreclosure judgment. 720.3085(7) (Fla. Stat. Ann.).
HOA and COA Liens, as well as Your Mortgage
A widespread misperception is that the association cannot foreclosure if your mortgage payments are current. However, whether or not you are current on your mortgage does not affect an association’s power to foreclose. Instead, what occurs in a foreclosure is determined by lien priority.
What Exactly Is Lien Priority?
The priority of liens affects who gets paid first after a foreclosure auction and, in many cases, whether a lienholder gets paid at all. Liens normally follow the “first in time, first in right” rule, which states that the lien that is registered first in the land records takes precedence over subsequent recorded liens. A first lien has a higher priority than other liens and receives first dibs on the earnings of the foreclosure auction. If any funds remain after paying off the first lien, they are distributed to the second lienholder until that lien is paid off, and so on. A low-priority lien may get nothing from a foreclosure auction. However, state law or an association’s governing papers may change lien priority.
Two Florida statutes govern HOA and COA lien priority. For lien priority purposes, you utilize the date that the HOA or COA registered its CC&Rs or Declaration of Condominium, according to amendments in the HOA legislation in 2008 and modifications in the COA statute in 1992 (Fla. Stat. Ann. 720.3085(1), 718.116(5)(a)). If the association’s declaration was filed even earlier, a HOA or COA lien may take precedence over another lien entered before you were late on the assessments.
Mortgage Lenders
An HOA or COA lien, on the other hand, is effective from the day the association documents the lien in the public records in the county where the property is situated. 720.3085(1), 718.116(5)(a) (Fla. Stat. Ann.). As a result, a foreclosure by a HOA or COA typically does not erase a first mortgage since the lien of the association is usually lower in priority.
If you are facing a HOA or COA foreclosure, consult with a lawyer.
If you’re considering about purchasing a home in a Florida HOA or COA community, or if you currently reside in one, learn about state association regulations and the community’s governing papers, such as the CC&Rs. That way, you’ll understand how the organization works and any legal constraints it may face. Consider speaking with a real estate lawyer if you have any queries regarding the HOA’s governing papers or your legal rights.
If you are facing a HOA or COA foreclosure in Florida, talk with a foreclosure expert to go through all legal alternatives available in your specific situation.