House Bill 319’s Potential Effects on Condominium Purchasers and Mortgage Lenders

Florida House Bill 319 passed the Florida House of Representatives on February 29, 2012 on a vote of 114 to 1.  Florida House Bill 319 proposes various amendments to the Florida Condominium Act, and perhaps most importantly, it strives to clarify Florida Statutes section 718.116, which governs liability for unpaid condominium assessments.

At present, Florida Statutes section 718.116 provides that a condominium unit owner shall be jointly and severally liable with the prior owner for all unpaid assessments which became due prior to the transfer of title to the unit to the new owner.  Fla. Stat. § 718.116(1)(a) (2012).  House Bill 319 seeks to expand a new unit owner’s liability under section 718.116 to include not only past due assessments which accrued prior to the acquisition of title, but also all late fees, interest, costs, and reasonable attorneys’ fees incurred by the association in an attempt to collect all such assessments.  This proposed amendment has the potential to expose a new unit owner to significantly greater financial liability than under the current version of section 718.116.  This is especially true for new unit owners living in luxury condominium buildings where the assessments tend to be significant.

Section 718.116, as presently enacted, additionally limits the liability of a first mortgagee who acquires title to a condominium unit by foreclosure or a deed in lieu (provided that certain procedural requirements are met) to the lesser of either (a) the unit's unpaid common expenses and regular periodic assessments which accrued or came due during the 12 months immediately preceding the mortgagee’s acquisition of title and for which payment in full has not been received, or (b) one percent of the original mortgage debt.  Fla. Stat. § 718.116(1)(b)1 (2012). Notably, House Bill 319 does not seek to expand a first mortgagee’s liability to include late fees, interest, costs, and the association’s reasonable attorneys’ fees, but rather would specifically exclude these items from a first mortgagee’s liability under section 718.116.

Accordingly, first mortgagees who acquire title to a condominium unit by foreclosure or deed in lieu clearly stand to benefit from the enactment of House Bill 319.  New condominium unit owners acquiring title to a unit with unpaid assessments, however, stand to face additional financial liability.