Limited Liability of the Mortgagee under the Safe Harbor Provision, Section 720.3085(2)(c)
The Florida Third District Court of Appeals recently issued its opinion in Catalina West Homeowners Assoc., Inc., and Old Cutler Lakes by the Bay Comt'y Assoc., Inc., v. Fed. Nat'l Mortg. Assoc., regarding the safe harbor provision provided to foreclosing lenders by Section 720.3085(2)(c). The statute limits the liability of a first mortgagee who acquires title by foreclosure or in lieu of foreclosure. The successor mortgagee is limited to paying the lesser of 1) the unpaid and regular periodic special assessments that accrued or came due during the 12 months immediately preceding the acquisition of title; or 2) one percent of the original mortgage debt. Since its enactment Homeowner Associations have tried to broaden the safe harbor provision and require mortagees to pay additional fees including interest, attorneys fees and costs.
The Homeowners’ Associations (“Association”) in Catalina argued that by excluding those additional fees from the mortgagee's payment, the Court prevented the Association from complying with Section 720.3085(3)(b). The payment priority in Section 720.3085(3)(b) imposes a duty on Homeowner Associations to apply mortgagee payments in the following order: interest, administrative late fees, costs, attorneys fees, then delinquent assessments. The Association suggested that without payment by the mortgagee of all the fees provided in the payment priority, it lacked the ability to comply with (3)(b). The Third District ruled in favor of the mortgagee, Fed. Nat'l Mortg. Assoc., and held that enforcement of the safe harbor provision does not interfere with the Association’s ability to comply with the statutory payment priority. The safe harbor provision simply limits the payment amount, not the application of the payment to the existing debt. Payment priority cannot create an entitlement to fees, costs, and interest expressly prohibited by the safe harbor provision.
The Third District upheld mortgagee protection under the safe harbor provision and expressly limited liability to the lesser of: 1) the unpaid and regular periodic special assessments that accrued or came due during the 12 months immediately preceding the acquisition of title or 2) one percent of the original mortgage debt, exclusive of interest, attorneys fees or costs.
By Ashley Duncan Segal, April 25, 2016
Florida Statutes Section 720.3085