SAFE HARBOR PROVISIONS FOR BANKERS IN HOA STATUTES

By Jan Bergemann
President, Cyber Citizens For Justice, Inc.

Published February 23, 2013

Association board members and owners are often told that association/owner friendly laws passed by the legislature are not retroactive and can’t be applied in their case since contract law prohibits laws being enacted retro-actively.

I always wonder why this only applies to owner-friendly provisions, not to the new laws passed by the Florida legislature to the detriment of the owners already living in these community associations?

I specifically think about the Safe Harbor provisions that were added to FS720.3085(2)(c) only in 2008 – at a time when the real estate market had long collapsed and community associations were fighting for financial survival due to budget shortfalls caused by unpaid dues and/or foreclosures. Senator Jeremy Ring found it appropriate at that time to protect the banks against their own incompetence – to the detriment of the homeowners. Make no mistake -- the other owners are paying the price for banks being protected against their own mistakes.

In 2008 Senator Jeremy Ring sponsored Senate Bill 1986 – the bill that turned out to be a curse for owners living in homeowners’ associations, because they were suddenly forced to pay for the budget shortfalls caused by the fact that this new law protected banks against the liability to pay for all past dues and fees created by the non-payment of dues.

Let’s make it very clear: Unlike the Condo Act (FS718) the Florida HOA statutes (FS720) never contained any restrictions on the liability of mortgage holders before. This was not an amendment to anything long in existence, it was a brand-new addition to existing laws.

How about it? Wouldn’t it be considered retroactive if the actual mortgage was signed in 2007 -- with no Safe Harbor provisions in place? The HOA accepted the buyer at a time when neither the mortgage nor the statutes contained any Safe Harbor provisions, telling the homeowners’ association that they will only receive the lesser of 1% of the original mortgage or 12 months of unpaid dues if the homeowner defaults on his/her payments. Association boards and owners were unaware that they would have to pay for the financial shortfalls caused by the bill sponsored by Senator Jeremy Ring that would plainly remove the mortgagee’s liability for unpaid dues towards the association. The initial contract clearly said otherwise before July 1, 2008.

Which clearly leaves the question: Why could such a bill be enacted that clearly violates any “contract” entered before July 2008 – taking away contractual rights the association had before this bill was enacted?

Maybe homeowners’ associations which have the right of approval of new buyers should just add a paragraph to their approval guide lines saying that only buyers are accepted who either pay cash or where the mortgage contract clearly states that the mortgage holder is fully liable for all unpaid assessments and cost in case the homeowner defaults on the association payments. That sure would prevent neighbors from having to pay for neighbors who defaulted on their payments.

Mortgage lenders and their lobbyists caused the Safe Harbor provisions to be entered into FS 720.3085. Homeowners’ associations don’t need costly lobbyists to enter these protective provisions into their governing documents.

Fighting fire with fire may still work – even in Florida !