Monday, March 2, 2015

FYI: Fla Trial Court Rules Mortgage Loan Owner's Liability for Unpaid Condo Assessments Not Limited by Fla Safe Harbor, Where Foreclosure Judgment Was Entered in Servicer's Name

A judge in the 17th Judicial Circuit of Florida in and for Broward County recently held that a mortgage loan owner’s liability to a condominium association for unpaid assessments was not limited by Florida’s safe harbor provision at Fla. Stat. § 718.116(1)(b), where the loan owner was not the first mortgagee of record at the time of foreclosure, but rather was assigned the right to bid at the foreclosure sale by the loan’s servicer, who had been the plaintiff and mortgagee of record in the underlying foreclosure action.  A copy of the opinion is attached.


Here, the subject mortgage was executed in 2006, naming a third party registry as mortgagee.  The loan owner purchased the same shortly after closing.  In 2009, the third party registry assigned the mortgage to the loan’s servicer “together with the note and each and every other obligation described in said mortgage and the money due and to become due thereon.”


Shortly after being assigned the mortgage, the loan’s servicer filed a foreclosure action.  In the foreclosure complaint, the servicer alleged that it was the present holder of the note and mortgage “as servicer for the owner and acting on behalf of the owner with authority to do so[.]”


In August of 2012, a foreclosure judgment was entered in the servicer’s favor. The servicer assigned its right to bid at the foreclosure sale to the loan owner post-judgment. 


On March 12, 2013, the clerk of court then issued a certificate of title in favor of the loan owner.


Thereafter, in order to resolve an apparent dispute with the condominium association over unpaid assessments, the owner of the loan filed a declaratory action, asking the court to find that it was entitled to the provisions of the safe harbor provision set forth in Fla. Stat. § 718.116(1)(b).


As you may recall, section 718.116(1)(b) limits “the liability of a first mortgagee or its successors or assignees who acquire title to a [condominium] unit by foreclosure or by deed in lieu of foreclosure for unpaid assessments that became due before the mortgagee’s acquisition of title to the lesser of: (a) the [unpaid assessments] which accrued or came due during the 12 months immediately preceding [acquisition of title]; or (b) one percent of the original mortgage debt[.]”  § 718.116(1)(b), Fla. Stat.


Accordingly, in order to be entitled to limited liability under the Florida safe harbor, “a party must establish: (1) it was a first mortgagee; (2) it acquired title to the condominium unit through foreclosure; and (3) the condominium association was joined as a defendant in the foreclosure action[.]”


The court held that, in order to be entitled to the safe harbor, “[t]he key is who had rights and obligations under the mortgage at the time of foreclosure, whether as a first mortgagee or as a successor or assignee.” Bermuda Dunes Private Residences v. Bank of Am., 133 So. 3d 609, 615 (Fla. 5th DCA 2014).


The court found as a matter of undisputed fact that the original first mortgagee (the third party registry) had assigned the mortgage to the loan’s servicer in 2009, and that the servicer was still the first mortgagee as of the date the final judgment of foreclosure was entered.  The trial court also ruled that the owner of the loan did not take title to the condominium unit through foreclosure, but rather as the successful bidder at the post-judgment foreclosure sale.


A post-judgment assignment of a foreclosure judgment is insufficient to confer the protections of the safe harbor as a matter of Florida law.  Bay Holdings, Inc. et al. v. 2000 Island Boulevard Condo. Ass’n, 895 So. 2d 1197 (Fla. 3d DCA 2005). 


Accordingly, the trial court granted the condominium association’s motion for summary judgment, finding that the owner of the loan was not entitled to the liability limitations set forth in section 718.116(1)(b), Florida Statutes.





Ralph T. Wutscher
McGinnis Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874


Admitted to practice law in Illinois



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