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Expansion of Safe Harbor to Subsequent Purchaser

The Fourth District Court of Appeals recently expanded the benefits of Florida Statute’s Safe Harbor Provision to third parties that purchase foreclosed homes from banks that foreclose properties. Unwary buyers often purchase properties at foreclosure auctions because the properties seem to have equity from the loan standpoint—only to find that upon purchase, the buyer is now on the hook for several thousand dollars in past-due HOA assessments. These purchasers are not entitled to the coveted Safe Harbor provision that lenders enjoy.

The case of Villas of Windmill Point II Property Owners’ Assoc. Inc. v. Nationstar Mortgage, LLC, 4D16-2128 (4th DCA October 25, 2017) provides a new angle for savvy buyers to get the most out of their investment. This case expands the beneficial safeguard that only lenders have traditionally enjoyed to those who purchase the foreclosed property from the bank after the bank has received a foreclosure judgment.

Section 720.3085, Florida Statutes, which governs who is responsible for the payment of past-due HOA assessments after a property is foreclosed on, states in relevant part,

(2)(a) A parcel owner, regardless of how his or her title to property has been acquired, including by purchase at a foreclosure sale or by deed in lieu of foreclosure, is liable for all assessments that come due while he or she is the parcel owner…

(b) A parcel owner is jointly and severally liable with the previous parcel owner for all unpaid assessments that came due up to the time of transfer of title…

(c) Notwithstanding anything to the contrary contained in this section, the liability of a first mortgagee, or its successor or assignee as a subsequent holder of the first mortgage who acquires title to a parcel by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee’s acquisition of title, shall be the lesser of:

  1. the parcel’s unpaid common expenses and regular periodic or special assessments that accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or
  2. 1% of the original mortgage debt. (Subsection C is the “Safe Harbor Provision”)

The court did a good job of reading the statute as a whole—even if Section 2(c) has to be read before section 2(b). If a parcel owner is jointly and severally liable with the previous owner for assessments, and the previous owner was the bank—i.e., the party entitled to the Safe Harbor Provision—then it only makes sense that the buyer who purchased from the lender after the foreclosure sale would also enjoy the benefit of the Safe Harbor Provision. It now begs the question—is it better to bid on a property at the foreclosure auction or wait on the bank to buy it back and then try to purchase it as an REO? That strategy is now worth the discussion.

About the author

After receiving her Bachelor of Arts in Legal Studies with a Minor in Sports Law from the University of Central Florida, Theresa moved to Jacksonville to attend Law School. Since her graduation from law school, Theresa has focused her practice on civil litigation with a strong emphasis on real estate and property law, as well as, family law.