Condominium Assessment Liens are Technical and Cumbersome
Article Courtesy of Coastal Breeze
By William Morris
Published February 26, 2023
A condominium association is responsible for managing, maintaining and repairing the common elements. Common elements generally include the building structure, roof, parking, pool and in some cases much more. Funds to carry out the association’s duties are provided by assessments on unit owners.
Each association adopts an annual budget under which every unit is required to pay the percentage for the unit provided in the declaration of condominium. If all owners pay and the budget is correct, there is a balance between collected assessments and association expenses. When one or more owners fail to pay, an association may not have enough to pay its bills.
The Florida Condominium Act recognizes how important it is for owners to pay assessments. From the earliest days, the Act provided associations with right to file a lien against a unit that did not pay its share of assessments as well as confirmed the owner of a unit is personally responsible for the assessments. Over the years the legislature added pre-lien and pre-suit requirements to association collection rights that significantly slow the process. The legislature did that in an effort to make sure no unit owner was unfairly required to pay association expenses of collection. Some think the legislature went too far.
Most of the statutory provisions addressing assessment liens are in Sections 116 and 121 of the Act. First thing the Act does is provide interest on delinquent association assessments. Assessments bear interest at the rate set by the declaration of condominium for that association or, if no rate in the declaration, 18 % per year. A lot of associations fail to charge interest either because it is too much work to calculate or do not know they can charge interest. Others charge 18%, but their declarations have a smaller percentage, that is particularly true of older declarations. The interest is due even if no lien is filed, so it behooves all associations to check their declarations and charge the appropriate interest on delinquent accounts.
The Act also authorizes associations to charge an administrative late fee of the greater of $25 or 5% of the delinquent assessment even if the declaration does not provide for a late fee. Again, many associations fail to charge a late fee because they do not know they can.
The Act mandates how payments are applied. The association has no discretion and must apply payments from an owner first to interest, then to any late fee, then to costs and reasonable attorney fees of collection and last to unpaid assessments. By statute, an association may accept and apply any payment in that fashion even if the owner gives different instruction, adds a restrictive endorsement that accepting the payment is payment in full or purports to pay in full by tendering less than full payment. Owners cannot get cute with payment and whatever they send is applied by the association per statutory so what is left unpaid is assessment. That is important as failure to pay in full means the assessment is not paid and the association can proceed with filing a lien for unpaid assessments.
The Act confirms each association has a lien on each parcel to secure payment of assessments. The lien also secures payment of the related amounts due in connection with the assessment and collection, as stated earlier. The lien is effective when recorded and relates back to the date the declaration was recorded.
First mortgages get special treatment. Liens are effective against a first mortgage on the date recorded. That means the assessment lien comes ahead of any claim against the property recorded after the declaration, except a first mortgage. First mortgages are given special treatment because lenders would not loan on condominiums if assessment liens could leap ahead of a recorded mortgage in priority (i.e. if the assessment lien is foreclosed, it could extinguish the mortgage without the special treatment).
The Act requires a lien include description of the condominium parcel, owner’s name, name and address of the association, amount due, due dates and be notarized. The lien is effective for one year and if no foreclosure action is filed in that time the lien expires and it cannot be refiled.
Everything so far may seem pretty simple and favorable to associations, but the legislature did not stop there. It added much to slow things down and make sure a delinquent owner gets lots of notice before getting stuck with the association’s attorney fee bill for collection.
An association may not require an owner pay the association collection attorney fees unless it first delivers a written notice of late assessment in form mandated by the statute stating what is owed. It cannot do that until the payment is overdue. That notice has to be sent by first class mail to the owner at the owner’s address on record with the association and also to the unit if that is not the owner’s record address with the association. The notice gives the owner 30 more days to pay.
One would think that after the association has invoiced and then sent an extra 30-day notice mandated by statute it could file a lien without further delay. That is not the case. If the association wants to collect attorney fees related to the lien, the Act also requires the association provide another 45-day notice, after the owner fails to pay in response to the 30-day notice. The 45-day notice warns the owner the association intends to file a lien if the assessments are not paid within 45 more days.
The 45-day pre-lien notice must be sent to the owner by certified or registered mail and first-class mail to the address in the association’s records and, if different, also to the unit by first class mail. If the owner still does not pay, the association can proceed to file a lien and the lien will also secure payment of the association’s attorney fees.
The legislature has certainly made sure an owner who does not pay assessments will get lots of warnings before association attorney fees get added. But in so doing, it makes associations pay the attorney fees when accounts are sent to collection until after those extra notices are sent and the owner still fails to pay.
Owners know they have to pay assessments. Most associations send reminder invoices at least a month before an assessment is due and another on or about the due date. The statutes require an extra 30-day notice followed by a 45-day notice if the association wants to collect its attorney fees via lien foreclosure. The two statutory notices alone add almost three months to the collection process. But, if associations do not follow the statutes, they cannot recover their attorney fees in collection from a delinquent owner.
The statutes are especially problematic for associations when they add delay to collection at a time an association runs short because owners do not pay. But, failure to follow the statutes can bar collection of attorney fees, so associations comply.