Safe Harbor Clarification/Application – Not Good News for Community Associations

Dated: April 5 th, 2016 .


Photo of Andrew Cuevas.

Cuevas, Garcia & Torres, P.A. .

Vantage Property Title Company.

Andrew Cuevas, Esq. – President
E-mail: [email protected].

Tel: (305) 461-9500
Fax: (786)362-7127



Mr. Andrew Cuevas, Esq., is the President of Cuevas, Garcia & Torres, P.A., and Vantage Property Title Company. Cuevas, Garcia & Torres, P.A., provides legal services in the areas of Community Association Law, Real Estate law, and Business Immigration, including title insurance services through Vantage Property Title Company. If you have any questions regarding this article or any other questions, you may contact Mr. Cuevas at (305) 461-9500 or via e-mail at [email protected] . If you are interested in reading previous newsletters, please visit , select the icon for Newsletters , and then choose the area of law you are interested in..

Safe Harbor Clarification/Application – Not Good News for Community Associations .

There are several players in the community association industry who were in the habit of advising their clients to not push their collection cases when banks are pursuing their mortgage foreclosure cases and merely waiting for a short sale of the property or the end of the bank foreclosure process to charge excessive legal fees in estoppel letters in an effort to benefit themselves and not necessarily their clients. When the scenario is a bank foreclosure sale being finalized, these estoppel letters seek legal fees and other costs against either the bank acquiring title or the third party bidder who was successful in acquiring titles at the foreclosure sale, even though Florida Statutes (for both Condominiums and Home Owner Associations) clearly state that the obligations of the prevailing third party bidder at a bank foreclosure sale is the past due maintenance obligations or, in the case of the bank which prevails at the foreclosure sale, the lesser of 1% of the original mortgage amount or 12 months of maintenance. Well as they say, Every Turkey Has Its Thanksgiving, The Gig Is Up, The Party Is Over !! .

The issue of whether a lender obtaining title after its mortgage foreclosure and invoking the “safe harbor” of the Homeowners’ Association Act, §720.3085(2), Fla. Stat. (2014) is required to pay anything more than delinquent assessments, and specifically is exempt from collateral items such as attorney’s fees, costs, interest or other charges, was addressed by the Third District Court of Appeal in Catalina West HOA, Inc. v. Federal National Mortgage Ass’n. , Case No.: 3-D 15-271 (FLW 3rd DCA, March 30, 2016)

The relevant dates are:

2005: Homeowners obtain a mortgage on the subject property;
2006: FNMA purchased the loan;
2011: FNMA files its housing mortgage foreclosure;
2013, February: FNMA obtains a final judgment of foreclosure;
2013, April: FNMA obtained a certificate of title;
2013, December: HOAs provide estoppel letters to FNMA including late charges costs, attorney’s fees “violation charges” as well as quarterly assessments.

After receiving an estopell letter seeking $657.10 for maintenance and late charges, $1,389 for costs, and $6,300 for legal fees, FNMA turned to the courts for enforcement of its Safe Harbor Rights provided by the HOA Act. The two defendant associations defended, asserting that §720.3085, by requiring payments to be allocated first to the litany of collateral items, late charges, interest, costs and attorney’s fees before assessments, mandated that those items had to be charged to FNMA and collected.

The trial court agreed with FNMA and the appellate court laid out the exact language of the safe harbor, emphasizing the text “liability of a first mortgage”… shall be the lesser of … unpaid common expenses and regular periodic or special assessments….” Referencing the quoted language, that language does not include attorney’s fees costs and interest is “evident from the plain language of the statute” which “limits the extent” of liability.

The court utilized the statutory interpretation concept that the mention of one thing implies the exclusion of another, and therefore the court stated that it:

“must conclude that if the legislature intended to include attorney’s fees, costs, interest or other charges as a part of the first mortgage’s liability, it would have included any one or more of those items the safe harbor provisions.”

(citations excluded). In arriving at this conclusion, the court cited to several other previous court decisions which provided for distinctions between common expenses and “individualized charges”. Dealing short shift to the argument of the need to apply payments to interest and attorney’s fees, those items should be zero dollars, no monies to be applied to such.

Therefore, what do we recommended to our association clients? That the association should enter into legal representation agreements with law firms that are willing to waive their deferred legal fees and not charge the association if they cannot collect such fees due to safe harbor application. This would almost ensure that law firms will not sit on their cases, push the law firm to seek positive outcomes for their client prior to the bank taking title, and hopefully generate rental income on the properties while defending the bank foreclosure action. Too many law firms sit on their cases in the hope that several years down the line the owner desires to sell their unit, requires an estoppel for the sale, and force the payment of exorbitant legal fees in excess of $8,000 or $10,000, without the law firm even having going to court once to try to collect for the association. This is all at the cost of the association. Our recommendation is that associations, after exhausting all negotiations with the unit owner who is past due on their monetary obligations, aggressively pursue collection cases in court for the benefit of the entire community. There is no method that provides a 100% positive outcome for the associations, especially if rental of units once acquired by associations is not pursued, but it is our experience that sitting on collection cases is not the way to go unless the association’s goal is to increase its accounts receivables. The law firm can also always seek a personal judgment against the prior owner to recover the past due maintenance and legal fees, but that should be at the risk of the law firm.

This article is solely a partial explanation of all the issues related to the topic of this newsletter, and is not to be considered legal advice. The association should consult with its legal counsel to obtain explanations of all issues addressed herein and determine what procedures will most benefit your association. This Memorandum is for informational purposes only and should not be relied upon as a legal opinion..