Florida Homeowners’ Association

CONDO ASSOCIATION BEATS BANK IN RACE FOR TITLE

by Grant W. Kehres* | Posted 02/24/2014

It’s rare that a bank’s mortgage is wiped out by a condominium association.  Condominium Association of La Mer Estates, Inc. v. The Bank of New York Mellon Corporation[1] decided by Florida’s Fourth District Court of Appeals on February 19, 2014 proves that with the right facts, a little timing and the right court, winning the lottery is possible.

This case turns on the distinction between a judgment that is void, and one that is merely voidable.

real_estate_pic2

The owners of a condominium in La Mer Estates executed a mortgage in 2006.  By 2008, they had stopped paying both the mortgage and the condominium association.  The condo association filed a claim of lien for unpaid condominium maintenance, filed an action to foreclose its claim of lien, and as the only bidder at the condominium lien foreclosure sale, received a certificate of title to the condominium unit.

After the condominium association received title, the bank continued to sit on its mortgage and in addition made no payments to the condo association.  The condo association wrote to the bank offering to convey to it the title to the condominium unit, but the bank did not respond.  Several months later the condo association filed a suit to quiet title, alleged that the bank’s mortgage constituted a cloud on its title, and that the bank had no bona fide interest or claim to the property.[2]

The bank was served with the quiet title suit but failed to respond.  The clerk of the court entered a default against the bank, and the condo association filed its motion for entry of final judgment against the bank to quiet title.  The bank was given notice of the motion but failed to appear at the hearing.  The court entered the final judgment against the bank on February 10, 2011, and the bank was given notice of the entry of the judgment but did nothing until over a year later[3].

On August 31, 2012, the bank finally shows up and moves the court to vacate the judgment quieting title pursuant to the court rule that a judgment may be vacated if the judgment is void, no matter how late the movant comes to the party.  The bank claimed that the judgment was void due to some technical pleading rules that the condo association failed to follow.

Although the bank was probably correct in its analysis of the condo association’s pleadings, the Fourth District Court of Appeals found that the quiet title judgment was not void but merely voidable, and that a voidable judgment may not be overturned more than a year after it is entered, even if incorrect, absent some fundamental failure of due process.  The court followed the Florida Supreme Court holding in Malone v. Meres[4] that if a court has the authority to rule on the subject matter before it and has jurisdiction of the parties, a judgment that is entered by error or due to irregularities or even wrongdoing in the proceedings is not void but only voidable as long as the adverse parties were given an opportunity to be heard.

In this case, even thought the quiet title judgment might have been obtained by the condo association by mistake, the court had jurisdiction of the subject matter and the bank.  The fact that the bank sat on the results of the quiet title judgment for over a year prevented it from overturning the mistakenly obtained quiet title judgment.

The result of this case, however, conflicts with similar decisions from both the First District Court of Appeals as well as the Third District Court of Appeals.  Because of the importance of this issue to the finality of judgments and the stability of property titles based upon those judgments, the Florida Supreme Court has jurisdiction to resolve the conflict between the Districts.  I expect we will be hearing further on this case by the Supreme Court.  But until then, at least in the Fourth District with the right facts and a little luck, timing once again is everything, and a condo association can beat a bank and wipe out its mortgage!


[1]Condominium Association of La Mer Estates, Inc. v. The Bank of New York Mellon Corporation, No. 4D13-17 (Fla. DCA February 19, 2014)

[2]Of interest to lawyers and layman alike, there is no rule against making an incorrect statement of law, fact or legal conclusion in a court pleading so long as it is not done in bad faith.  When one thinks about it, at least one of the party’s pleadings in every case is always (after the fact) determined to be incorrect on one of these points.

[3]The one year is significant because of under Rule 1.540(b) of the Florida Rules of Civil Procedure, a voidable judgment may not be attacked after it has been entered for more than a year.

[4]Malone v. Meres, 109 So. 677 (Fla. 1926)


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist.  He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in Investments and Economics from Babson College.  Admitted to The Florida Bar in 1978, he has handled more than 10,000 closings for more than 8,000 clients.  For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200 or e-mail us at info@bocaclosings.com.

 


Home | Recent Closings | Real Estate Myths | Grant’s Commentaries | Qualifications | Contact


 

TAX DEED PURCHASER BEATS HOMEOWNERS’ ASSOCIATION LIENS

by Grant W. Kehres* | Posted 01/10/2014

Some say you can’t beat the HOA unless you are the bank.  Lunohah Investments[1], decided by Florida’s Fifth District Court of Appeals on December 27, 2013, demonstrates that along with certain mortgage lenders there’s a new protected player in town.

Foreclosure

In 2007, the Florida legislature amended the Florida homeowners’ association statute to allow homeowners’ associations to impose liability on a parcel owner for all unpaid assessments due up to the time of transfer of title.[2]  In 2008, a safe harbor provision was added to the law that limited that liability for a first mortgagee who acquired title by foreclosure or deed in lieu of foreclosure to the lesser of twelve months of unpaid HOA fees or 1 percent of the original mortgage amount.[3]  Thanks to Lunohah Investments, LLC v. Gaskell, tax deed purchasers can now defeat the HOA for pre-tax deed assessments.

Lunohah Investments, LLC acquired title to a parcel of real estate by tax deed and initiated a suit to quiet title against the prior owner and two homeowners’ associations holding liens on the property for unpaid HOA assessments.  The HOA’s asserted that Lunohah remained liable for the HOA liens by virtue of Section 720.3085(2)(b), F.S. (2011) which imposes joint and several liability on a parcel owner for unpaid assessments that came due up to the time of transfer of title.  Lunohah countered that the lien and liability to pay the unpaid assessments were extinguished upon issuance of the tax deed by virtue of Sections 197.552 and 197.573(2), F.S. (2011) which provide that covenants creating any debt or lien upon property or requiring the grantee of the tax deed to expend money for any purpose do not survive the issuance of a tax deed.

The Court observed that the tax deed statutes preserve the validity of covenants that control the use of the property but extinguish all such covenants, upon issuance of the tax deed, to the extent they authorize a lien for unpaid assessments or require the grantee to expend money.  The HOA statute is a more general statute that imposes liability on any grantee for unpaid assessments without specific reference to the manner by which the grantee acquires title.  The Court held that when two statutes embrace the same subject and produce contradictory results, the law requires that the specific statute be given effect over the general statute.

From this case we learn the homeowners’ association statute that imposes joint and several liability on a parcel owner for unpaid assessments does not apply to a parcel owner that acquires title by tax deed.  As a practical matter, tax deed purchasers, who might have limited their interest in a property “encumbered” by a substantial unpaid HOA assessment no longer have to factor this into their bid.  Although this case addressed only the HOA statute, the result for a condominium association assessment would likely be similar.

————————————-

[1] Lunohah Investments, LLC v. Gaskell, No. 13-1175 (Fla. DCA December 27, 2013)

[2] Section 720.3085(2), F.S. (2007)

[3] Section 720.3085(2)(c), F.S. (2008)


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist.  He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in Investments and Economics from Babson College.  Admitted to The Florida Bar in 1978, he has handled more than 10,000 closings for more than 8,000 clients.  For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200 or e-mail us at info@bocaclosings.com.

 


Home | Recent Closings | Real Estate Myths | Grant’s Commentaries | Qualifications | Contact


 

FLORIDA’S NEW POWER OF ATTORNEY ACT

by Grant W. Kehres* | Posted 11/03/2011

Effective October 1, 2011, the Florida legislature created the Florida Power of Attorney Act which established requirements for creating powers of attorney. Unless the new requirements are met, a power of attorney will be useless. Master these concepts and you will have a good handle on the new Act:

POWER-OF-ATTORNEY

  1. Powers of attorneys executed prior to October 1, 2011, if valid at the time of their execution, will remain valid after October 1, 2011.
  2. The Act applies to all powers, both durable and nondurable, except military powers of attorney and proxies.
  3. Powers executed after the effective date of the Act must be signed by the principal and by two subscribing witnesses and be acknowledged by the principal before a notary public.
  4. A power of attorney is suspended when a petition to determine the capacity of the principal has been filed; but the suspension is not effective if the agent acts in good faith and without knowledge of the suspension.
  5. A power of attorney is terminated when
    a) the purposes for the power is accomplished, or
    b) upon a date specified in the power of attorney, or
    c) if the principal revokes it or dies, or
    d) if a power is not durable, when the principal loses capacity, or
    e) if a power is durable, upon an adjudication of incapacity, or
    f) when the agent’s authority terminates and the power does not provide for an alternate agent.
  6. Springing powers are no longer authorized after the effective date of the Act, but those in existence prior to the effective date will continue to be recognized.
  7. Photocopies or electronically transmitted copies of an original power of attorney have the same effect as the original, but an original may still be required for public record recording on real estate transactions.
  8. An agent may not
    a) perform duties under a contract that requires personal services of the principal,
    b) make an affidavit as to the principal’s personal knowledge,
    c) vote on behalf of the principal in a public election,
    d) execute or revoke the principal’s will or codicil; or
    e) exercise powers or authority held by the principal in a fiduciary capacity.This last restriction is very important. It is very common for an agent holding a durable power of attorney to believe that he or she has authority to manage or transfer assets titled to the principal’s revocable trust. Only the acting trustee of the trust has authority over the trust assets, who may not necessarily be the agent.
  9. Certain banking and investment powers may be incorporated by reference. The banking powers are found in Section 709.2208(1), Florida Statues. The investment powers are found in Section 709.2208(2), Florida Statutes.
  10. The power to create, amend, modify or revoke any document or other disposition effective at the principal’s death or transfer assets to an existing trust created by the principal are considered “superpowers” and must be specifically authorized by the power of attorney, and the principal must sign or initial next to each specific enumeration of the authority.

Although the new Act has the greatest impact on estate planning, many of its provisions can be a trap that might otherwise hinder a successful real estate transaction or result in a title that is defective or uninsurable. I am happy to review your power of attorney before your real estate transaction or draft you a new one that qualifies under the Act.

Our office is committed to providing our clients and the real estate agents that work with us the assistance and experience needed to help them safely close their real estate transactions. For your real estate closing needs, we invite you to tap into our 34 years of Florida real estate law knowledge and experience.


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist. He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in investments and economics from Babson College. Admitted to The Florida Bar in 1978, he has handled nearly 10,000 closings for more than 6,000 clients. For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200.

Posted 11-03-2011

New RESPA Amendments Affect Consumers and Real Estate Agents

by Grant W. Kehres* | Posted 11/01/2010

Since January 1, 2010, the public and real estate professionals have experienced significant changes in the Federal Real Estate Settlement Procedures Act (RESPA) which regulates every residential real estate transaction in the United States involving a federally related mortgage loan. The new rules are designed to protect consumers from unnecessarily high settlement costs by requiring disclosures related to mortgage settlement costs. The Federal department of Housing and Urban Development has revised the form of the required Good Faith Estimate and the HUD-1 Settlement Statement.

The GFE is now a three-page document. It must be provided to qualified borrowers within three business days of the borrower’s application. The focus on the new GFE is how much a charge for a settlement service may or may not change. If the charge exceeds the permissible or maximum amount, there is a tolerance violation. The lender has 30 days after the closing to correct the tolerance violation or risk facing fines and penalties for a RESPA violation.

The New HUD-1 consists of three pages, one more than the previously required version. The first page of the new HUD-1 is not significantly different from before. But page two and three are different in that page two ties the settlement charges into the GFE and page three provides a comparison chart between the estimated charges from the GFE to the actual charges, thereby testing whether there is a tolerance violation.

real_estate_pic6

The effect these new regulations will have on settlement charges remains unknown and whether or not the consumer will ultimately benefit. Some have suggested the new regulations will result in higher compliance costs, which will be passed on to the consumer, and greater lender-related closing delays. What is known is that there will be a substantial learning curve for real estate professionals who must use and explain these documents to the consuming public.

If you need help with the new RESPA, HUD and GFE rules, feel free to contact our office.


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist. He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in investments and economics from Babson College. Admitted to The Florida Bar in 1978, he has handled nearly 10,000 closings for more than 6,000 clients. For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200.

Posted 11-01-2010

2010 FAR/BAR: ARE YOU READY?

by Grant W. Kehres* | Posted 09/28/2010

The 2010 version of the FAR/BAR contract has made its debut. A number of changes from previous FAR/BAR versions are noted, and there are some important points to keep in mind when drafting or responding to an offer involving this form, including:

• The Buyer is entitled to an automatic extension of the closing date (up to 7 days) to allow for Truth In Lending Act compliance.

• If the Buyer’s mortgage loan fails to fund due to the financial failure of the lender, the Buyer is excused from performance and receives the return of the deposit.

• The Buyer now bears the responsibility to determine during the inspection period if there are any open or expired building permits or unpermitted improvements.

• By definition, municipal lien searches are distinguished from open or expired building permit searches. In Miami-Dade and Broward counties, the Seller pays for the municipal lien search; but the contract is silent as to which party bears the responsibility in other counties.

• Buyers may cancel the contract within 20 days of the Effective Date if the property is in a Special Flood Hazard Area or Coastal High Hazard Area.

• Disputes must be first submitted to mediation. The mediator must be certified or must have experience in the real estate industry. If the dispute is not resolved through mediation, only then may it be pursued in court.

• Real estate brokers now enjoy a limited hold harmless and indemnity for a number of common transactional problems, including misstatements made by either of the parties and inaccurate information in the public records.

Every transaction and every client is unique, so if you need help with the new FAR/BAR contract, feel free to contact our office. We are committed to providing the assistance needed to custom modify the new form contract whenever necessary to meet our client’s unique and special needs.


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist. He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in investments and economics from Babson College. Admitted to The Florida Bar in 1978, he has handled nearly 10,000 closings for more than 6,000 clients. For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200.

Posted 09-28-2010

Refinancing: Whom Can You Trust?

by Grant W. Kehres* | Posted 09/18/2010

A great article appeared in this weekend’s edition of The Wall Street Journal that concludes the refinance tools on most banks, mortgage broker and “lead generator” websites are filled with conflicts of interest or simplistic formulas that lead to refinance sooner and at higher cost than optimal for their prospective customers. (See Real Estate Myth #4)

refinancing

These websites typically take a simplistic approach, apply rules of thumb, and fail to consider the factors that make you an individual, such as your tax rate, inflation expectations, how long you plan to live in the house and the opportunity cost of paying closing costs rather than investing in stock, bonds or other investments. Their “one size fits all” approach often leads to refinance prematurely at higher rates than you might otherwise if a more sophisticated analysis were applied.

The best refinance calculator appears to have been devised by two economists from the Federal Reserve and one from Harvard University, professor David Laibson. Their analysis is based upon a formula using stochastic calculus and takes into account loan size, your marginal income tax rate, the expected inflation rate over the life of the loan, how long you intend to remain in the house and other sophisticated factors.

Stochastic calculus not your strong suit? For an unbiased analysis of whether or not its time to refinance, call our office for a free analysis of your situation. We’ve never been owned or controlled by any bank, mortgage broker or real estate company. For more than 32 years, the independence of our office and our fiduciary duty to our clients has been putting your best interests first.

Posted 09-18-2010

Fraud Alert: Foreign Cash Buyer

by Grant W. Kehres* | Posted 02/14/2010

Fraudulent “buyers” are out there, wasting the time of real estate agents and sellers, fishing for the opportunity to rip-off the real estate agent or title company escrow account. We just witnessed one of our colleagues nearly have his trust account fraudulently emptied by a “cash buyer.” The “buyer” contacted a local real estate agent by E-mail indicating that he was a Chinese businessman and wanted to buy a Florida vacation home. He said he saw the listing of a particular property on the Internet, that he liked what he saw and wanted to make a cash offer. After several E-mails back and forth, a contract was executed to purchase the property, sight unseen for $380,000.00. The contract provided for a $15,000.00 initial deposit and an additional $23,000.00 deposit to be made within 15 days of the Effective Date. As proof of funds to effect the transaction, the executed contract was accompanied by the “buyer’s” December bank statement from the Bank of China showing an opening balance of $2,500,000.50, an ending balance of $1,057,654.63, and an E-mail that read as follows:

fraud_alert

“Attached are scanned copies of the acknowledged document. As I have said before, the home will be a cash buy and I and my wife will fly to USA for viewing the property but before that I would like my stock broker in America to send the money to your firm via a lawyer/solicitor. I want to make the funds available in USA before coming to view the property, please I would want you to retain a lawyer for me so that my stock broker can send the funds directly to him to keep in a trust account until I arrive in USA with my wife. Please let me know the lawyer retaining fees and charges so that my stock broker can include all in the payment he would be sending to the lawyer. Kindly get back to me with a candid response as I plan to be in USA soon.”

Shortly after the lawyer was retained, the lawyer received an official looking check, complete with watermarks on security paper from a Canadian insurance company in the amount of $350,000.00 disbursed on the account of a numbered Canadian company and made payable to the attorney’s trust account. The check was counterfeit. The “buyer” was fake. The whole exercise was a monumental waste of time for the real estate agent and seller. The only good news is, there were enough warning signs that the lawyer refused to disburse on the counterfeit check, and the fraud was averted. This was the second “foreign cash buyer” scam that we’ve seen in the last six months. There are other types of scams going on. Our office is committed to providing our clients and the real estate agents that work with us the assistance and experience needed to help avoid being a victim of real estate fraud. Protect yourself, your family, your money and your time. You have the right to choose your counter party and your closing/title attorney. For your real estate closing needs, we invite you to tap into our 33 years of local real estate law knowledge and our real estate transaction experience; because your time and money are terrible things to waste.


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist. He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in investments and economics from Babson College. Admitted to The Florida Bar in 1978, he has handled nearly 10,000 closings for more than 6,000 clients. For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200.

Posted 02-14-2010

Tenants and Foreclosure

by Grant W. Kehres* | Posted 11/01/2009

What happens to a tenant when a lender, condo association or HOA forecloses their mortgage or lien? Before Congress recently stepped in, the tenant would be subject to immediate eviction.

When Congress passed the Protecting Tenants at Foreclosure Act of 2009, it was trying to prevent the quick eviction of the nonowner tenant in connection with a foreclosure. The law is applicable to any foreclosure of a federally related mortgage loan or any residential property after the date of enactment of the Act.

The Act provides that the immediate successor in interest in the property will be subject to the rights of the tenant to remain in possession of the property, subject to certain limitations specified in the Act. The tenant under a bona fide lease will have the right to remain in possession pursuant to the lease to the end of the term of the lease, subject to the tenant’s rights being terminated with 90 days notice; or if no lease, subject to termination with 90 days notice.

A lease is considered bona fide only if the mortgagor or the child, spouse or parent of the mortgagor is not the tenant, the lease was an arm’s length transaction, and the lease requires rent that is not substantially less than fair market rent for the property. The Act applies to lenders and condominium/homeowner’s associations who foreclose their liens on the property.

There are many unanswered questions raised by the Act. It’s not clear when the 90-day notice must be given to the tenants. It’s not clear what happens if the tenant fails to pay rent or otherwise defaults under the lease. Stay tuned for further developments as the courts start to interpret this new law.


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist. He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in investments and economics from Babson College. Admitted to The Florida Bar in 1978, he has handled nearly 10,000 closings for more than 6,000 clients. For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200.

Posted 11-01-2009

Home | Recent Closings | Real Estate Myths | Grant’s Commentaries | Qualifications | Contact


 

BOCA RATON HOME PRICE INDEX DROPS 1.28% FOR APRIL

by Grant W. Kehres* | Posted 11/01/2009

Home prices in Boca Raton as measured by my Boca Raton Home Price Index dropped 46 points to 3535.50 from the March figure of 3581.50, a 1.28% decline for the month; and is off 43.8% from its peak of 6232.49 reached in April of 2006.

All ten categories in the index saw a decline, but high end condominiums on the beach saw the smallest decline averaging less than 0.3%, with lower end single family homes in the western part of the community showing the largest decreases averaging slightly more than 3.25%.

Starting in January of 2001, my Home Price Index for Boca Raton was developed to help our clients and real estate professionals monitor residential home prices in the community. The index reflects a statistical makeup of Boca Raton housing, tracking price changes in ten categories of homes, town homes and condominiums located in the various regions of the city from the swamp to the beach between the C-15 Canal and the Hillsboro Canal.

The Boca Raton Home Price Index should not be used as a substitute for the professional evaluation of a particular property. Each property is unique with a number of factors that influence valuation. If you have a question as to the value of your property or are thinking of buying or selling a home and require assistance in selecting a real estate agent, property inspector, appraiser, mortgage broker or other real estate professional, call our office. We routinely work with a number of highly qualified real estate professional. Allow us to refer you to the one that would best fit your particular needs.


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist. He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in investments and economics from Babson College. Admitted to The Florida Bar in 1978, he has handled nearly 10,000 closings for more than 6,000 clients. For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200.

Posted 11-01-2009