Article Courtesy of The Daily Business Review
By Jed Frankel

Published May 18, 2018

In the recent decision of First Equitable Realty III v. Grandview Palace Condominium Association, Florida’s Third District Court of Appeal ruled that the trial court erred in decreasing the amount of interest awarded to the association in a collection case due to “equitable considerations” and reiterated that equity does not afford defenses to delinquent unit owners in such actions.

In First Equitable, the condominium association filed suit to recover unpaid assessments from a delinquent unit owner which asserted counterclaims for unjust enrichment and rescission. As part of the defense, the unit owner claimed that it was not responsible for the assessments because the association was itself responsible for protracted litigation giving rise to the association’s right to pursue the unpaid assessments and that the association had failed to mitigate its damages. The trial court ruled in favor of the association, but reduced the amount of interest on the unpaid assessments awarded because of “equitable considerations.”

On appeal, the Third District affirmed the entry of final summary judgment in the association’s favor but held that the reduction in interest owed on the unpaid assessments was improper. Judge Scales on behalf of a unanimous panel wrote: “Equity has no role. Under the plain and unambiguous language of [Florida Statute] section 718.116(3), the association was entitled to recover interest at the rate provided in the declaration, from the due date until paid. The trial court had no discretion to award anything less in this case.”

Viewed in the context of earlier decisions regarding unit owners’ refusal to pay assessments, this case is the most recent of Florida courts’ affirmance of an association’s right to collect lawful assessments. In Gerecitano v. Barrwood HOA, the Fourth District Court of Appeal held that a unit owner could not refuse to pay assessments because the association manager was not properly licensed, in violation of Florida law. Similarly, in Abbey Park Homeowners Association v. Bowen, the court rejected an owner’s defense that the association’s failure to maintain common elements justified the refusal to pay assessments. A previous panel of the Third District in Coral Way Condominium Investments v. 21/22 Condominium Association, reviewed a unit owner’s defense to payment of a special assessment on the grounds that it would not have been necessary absent breach of a fiduciary duty which resulted in depletion of the association’s funds. The Coral Way court rejected the unit owner’s defenses on the well-established principle that a unit owner’s duty to pay assessments is conditioned solely on whether the owner holds title to the unit and whether the assessment conforms to the association’s constituent documents and the Condominium Act.

With the First Equitable court’s extension of the above principle to include interest owed on past due assessment payments, it is clear that an aggrieved unit owner cannot look to equity to justify a refusal to pay assessments. Rather, a unit owner who has an issue with the association must pay lawfully imposed assessments and challenge the board action by another means such as by bringing a legal challenge to an association action or inaction (such as failure to maintain common elements) or seeking to replace the association board through a recall or election.

Florida courts clearly recognize that the financial stability of the thousands of community associations throughout Florida depends upon timely payment of assessments to exist and serve the needs of their members and will likely continue to support them by applying such precedent in future cases.