HOA/Condo Foreclosures During Lender Foreclosure May Be No More

In the past, when a homeowner stopped paying mortgage payment, he or she generally stopped paying condo/HOA assessments as well.  This caused a default with the HOA/condo who after some time would file their own foreclosure action to sell the property, subject to the mortgage and possible bank foreclose of course.

The 4th DCA recently turned this concept on its head, ruling that once the lender records a lis pendens that only that court has jurisdiction to adjudicate all liens on the property, including HOA and condo assessment liens.

In the recent opinion in Jallali v. Knightsbridge Village Homeowners Association, Inc.,  2016 WL 320601 (Fla. 4th DCA Jan. 27, 2016), the homeowner appealed the lower court’s refusal to vacate a final judgment by a HOA.  On appeal, the borrower argued that the lender had a 2007 mortgage foreclosure case pending and that there was no jurisdiciton in the HOA’s 2012 foreclosure to enter a final judgment or conduct a foreclosure sale.  The 4th DCA found U.S. Bank National Association v. Quadomain Condominium Association, 103 So. 3d 977 (Fla. 4th DCA 2012), applicable to this case.

In Quadomain, the lender filed a mortgage foreclosure complaint and obtained a final judgment.  Then the condo association recorded a lien and filed for foreclosure as well selling the property after judgment.  The lender intervened moving to vacate the condo judgment arguing that it was void being filed after the lender had filed its lis pendens.  The 4th DCA found that the lender’s lis pendens created exclusive jurisdiction in one court to determine any lien or encumbrance on the property from the date the lis pendens was recorded through final judgment.

In this case, the lender had filed its lis pendens in May 2007, with the HOA recording its lis pendens in 2011.  Applying Quadomain, the 4th DCA found that the foreclosure by the HOA was void for lack of jurisdiction and that the lender’s foreclosure was the property place to adjudicate all liens on the property.  The court found that the HOA has to intervene in the lender mortgage foreclosure to enforce it’s lien rights.  While Section 720 of the Florida Statutes permits a HOA to lien a property and foreclose on it, it can only do so if the lender has not recorded a lis pendens on the property yet.

HOA and condominium associations should take careful note of this if they have pending foreclosures on properties with concurrent lender mortgage foreclosure active.  Investors should also be very careful buying properties from HOA/condo auctions as they may have bought void title now.

If you need assistance with a condo/HOA foreclosure issue, or want to determine if we can get the condo/HOA case dismissed in a situation like this, please contact out office

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