Association held Liable for Excessive Collection Demands

Jonathan M. Mofsky
August 19, 2013


While everyone agrees that a first mortgagee’s (“bank”) liability for assessments when they acquire title to a unit is limited to 12 months of assessments or 1% of the mortgage, whichever is less, some associations take the position that a first bank is also liable for all of the past due interest, late fees and attorney’s fees and costs due on the account. However, a newly released opinion from the Third District Court of Appeal along with the trial court rulings against the association illustrate the risks and exposure that associations and attorneys take when seeking amounts in excess of the statutory maximum.

In Ocean Bank v. Caribbean Towers Condominium Association, Inc., the Third District addressed two trial court orders which stated that the association could not recover interest, late fees and attorney’s fees and costs from a bank who acquires title to a unit pursuant to its own foreclosure action.  The Third District agreed with the trial courts’ finding that an association is not entitled to recover interest, late fees and attorney’s fees and costs and is limited to collecting 12 months of assessments or 1% of the mortgage, whichever is less.  Furthermore, the Third District held that the bank was entitled to its attorney’s fees for having to litigate the association’s position which one trial court referred to as “frivolous”.  As a result of the association’s counsel losing on its claim for attorney’s fees, costs, interest and late charges, the association is now exposed to a claim for attorney’s fees likely to be thousands of dollars, if not more, for having taken such a position. If appellate attorney’s fees are awarded to the Bank, the association will likely be accountable for paying substantially more.

In the opinion, the Third District stressed the excessive demands of the association, noting that for one unit, the association claimed almost nine times that which it was entitled to collect, and on the other unit, the association was found to have improperly claimed more than thirteen times the amount to which it was entitled from the bank. The Third District commented that:

Section 718.116(1)(b), Florida Statutes (2012), capped the Bank’s liability for condominium assessments at no more than one percent of the original mortgage debt. Notwithstanding this statutory cap, on one unit in this consolidated appeal, the Association issued a certificate . . . totaling $8,835.93, an amount almost nine times the statutory maximum. On the other unit, the Association issued a certificate claiming a lien of $20,233.14, an amount more than thirteen times the statutory maximum.

This appellate decision highlights the importance of seeking counsel from community association attorneys with regard to association collection policies and uncertainties about the association’s ability to recover attorney’s fees, costs and other charges from a bank or other purchaser.