By Aaron L. Gordon, Esq.
Corporate General Counsel
For the second year in a row, Florida’s homeowners dodged a financial bullet. The failure of House Bill 1339 to pass the legislature this year was an important victory for struggling homeowners who continue to face financial woes due to budget shortfalls resulting from delinquent assessments.
Just as important, the defeat of House Bill 1339 was a statement that voters will not stand for legislation that tries to further limit a financial institution’s liability at the expense of community associations.
The banking lobby’s concern is understandable as a growing number of associations are challenging foreclosing banks under Florida’s Safe-Harbor law. The result is that aggressive associations are getting more than the statutory limit (12 months or 1 percent of assessments, whichever is less). The amount allowed by the statutory Safe-Harbor is a paltry sum, making proposed House Bill 1339 even more egregious, as it would have further limited the foreclosing banks liability with the following language:
“The first mortgagee or its successors or assignees who acquire title to a unit by foreclosure or by deed in lieu of foreclosure are not liable for any interest, administrative late fee, reasonable cost or attorney fee, or any other fee, cost, or expense that came due prior to its acquisition of title. This subparagraph is intended to clarify existing law.”
This bill was inaccurately characterized by its few supporters as a way to “expedite” the foreclosure process by “clarifying” existing law, something that was hardly needed since legislators already passed House Bill 87 to accomplish this very goal. In practice, House Bill 1339 would actually have had the opposite effect by removing the only incentive a Bank now has to act on a foreclosure. With no legal requirement to pay anything to the association for the maintenance of the bank’s property, why would the banks be motivated to act quickly or at all? The practical effect of this bill would have been the transfer of more wealth from homeowners to banks. In short, it would have been yet another “bailout” for the banks.
With no Senate companion bill, House Bill 1339 faced an uphill climb with a much more informed legislature this year and ultimately was not considered in its last committee of reference. As a result, House Bill 1339 did not pass the legislature for another year.
Moving forward, voters should ask the following questions should a similar bill backed by the banking lobby be introduced next year:
Why would politicians make it easier for financial institutions to pay less and mandate that association residents pay more?
Why not strengthen rather than weaken the provision for community associations by making more assessments recoverable from first mortgagees and subsequent purchasers?
Florida’s homeowners must be aware of these efforts. Although House Bill 1339 did not pass again this year, the battle is by no means over and homeowners should continue making their voices known with their legislators right now to discourage this type of legislation from being introduced again next year.
Florida’s status quo is a battle of attrition, with banks stalling foreclosures and associations picking up the tab and leaving too many dollars on the table. Associations must take the lead in these efforts and suggest, perhaps, a more narrow definition of a first mortgagee.
It is clear that the intention of House Bill 1339 was to protect entities that purchased mortgages for pennies on the dollar. These entities are not facilitating home ownership. They are financial predators and deserve no protection from dues paying homeowners. To protect them as a “clarification of existing law” is a distortion of the well-meaning intent of the current law which operates to encourage and protect mortgage originators whose mission is to put people in homes, not kick them out for profit.
Going forward, Florida voters must diligently monitor community association bills. The effort toward curbing or narrowing the safe-harbor provisions should start now with lobbying efforts and a grass-roots campaign by residents in community associations. Call or email your legislators now. Don’t let the opposition try to increase your association’s liability again next session.
This year, Florida’s homeowners won the battle to hold banks to their legal obligation, insufficient as it may be, but next year it could be different.