Firm’s Miami Herald Column: “Real Estate Counselor: Technicality Gives Homeowner a Reprieve in HOA Foreclosure Action”

The firm’s latest Miami Herald column was authored by Awilda Esteras and appears in today’s edition of the newspaper.  The article, which is titled “Real Estate Counselor: Technicality Gives Homeowner a Reprieve in HOA Foreclosure Action,” focuses on the ramifications of a technical shortcoming in an HOA foreclosure action that were illustrated in a recent decision by Florida’s Second District Court of Appeal. The appellate panel found in favor of the homeowner and reversed the lower court’s foreclosure judgment due to the failure of the association and its board of directors to properly levy an individual assessment against the owner.  Awilda’s article reads:

. . . The case stems from a 2019 mortgage foreclosure action filed against homeowner Tammy Desch by Deutsche Bank. The South Fork of Hillsborough County II Homeowner’s Association incurred $475 in legal fees for the filing of a required response in the matter by its attorneys, and it then sought recovery from the homeowner as an individual assessment for these costs pursuant to its own governing documents.

The debt subsequently went unpaid by Desch, and in less than one year the balance due on the account grew to nearly $1,700. In order to collect, the HOA filed a lawsuit in 2020 to foreclose its claim of lien for the unpaid assessment as prescribed under Florida law and its own governing documents. It alleged it “ha[d] made assessments against the Property” and Desch had failed to pay, and it attached a copy of its account ledger showing the initial entry for $475 plus the subsequent fees and interest.

The homeowner responded by contending the HOA had failed to identify the origin and basis of any assessment officially levied against her property in accordance with the procedural requirements of Florida law as well as its own governing documents.

The Hillsborough County Circuit Court was not swayed. It implicitly determined that the act of placing an individual assessment in the HOA’s account ledger was a proper levying of the assessment against the owner.

In the ensuing appeal, Desch argued that despite discovery requests, the HOA never produced any evidence that its board of directors actually levied an individual assessment against her property. In response, the HOA argued it is entitled to reimbursement for such legal fees, but it spent little time refuting her argument that the board failed to actually levy an assessment. Instead, it relied on the entry in its ledger.

In the Second DCA panel’s unanimous opinion, the HOA’s own governing documents show that the ledger entry is insufficient to levy an individual assessment against the property for delinquent legal fees. The bylaws state assessments “shall be imposed by the Board at its discretion,” and the “Board of Directors shall have power . . . to establish, levy and assess, and collect assessments or charges in accordance with the Declaration.”

The appellate ruling states that the HOA does not assert there was written and signed consent, nor that its board of directors made any kind of decision to levy an individual assessment against the owner. It notes that the HOA does not point to anything in its bylaws that would allow its property manager or any other agent or employee to levy an individual assessment for legal fees in a foreclosure action.

As a result, based on the absence of any evidence that the board ever levied an assessment against Desch, the appellate panel agreed that the HOA did not comply with its own governing documents giving the board the power to levy individual assessments. It reversed the lower court’s summary judgment and remanded the case back for a ruling in her favor.

Given that Florida law enables homeowners who prevail in such legal actions to be entitled to having their legal fees and costs paid by the association, it is now a painfully ironic fiscal reality for the HOA that it may end up being on the hook for Desch’s presumably substantial appellate attorney fees as well as its own legal costs.

Community associations, their directors and property managers should only move forward with their collections, lien and foreclosure actions under the guidance of highly qualified and experienced association law attorneys. In this case, a careful review of the HOA’s governing documents could have determined that simply placing such legal fees in its ledger was insufficient in the levying of an individual assessment against the homeowner. . .

Awilda concludes her article by noting that this costly misstep by the HOA provides a helpful complimentary lesson for all other Florida communities.  She writes that the procedures for levying individual assessments must be strictly followed by associations to ensure a successful recovery, and boards of directors and property managers should consult with qualified legal counsel for careful reviews of such matters before engaging in collections efforts against owners.

Our firm salutes Awilda for sharing her insights into the important takeaways for community associations from this recent appellate opinion with the readers of the Miami Herald.  Click here to read the complete article in the newspaper’s website.