HOA Q&A: Is it legal to require paying owners to pay assessments for those who don't pay?
Editor’s note: Attorneys at Goede, DeBoest & Cross respond to questions about Florida community association law. With offices in Naples, Fort Myers, Coral Gables and Boca Raton, the firm represents community associations throughout Florida and focuses on condominium and homeowner association law, real estate law, litigation, estate planning and business law.
Q: Our condominium association levied a special assessment for $1,000 per unit for our four-building, 48-unit-per-building complex (after Hurricane Ian). The deadline for payment is four months. The units are valued at around $500,000. Owners have been advised by a follow-up letter that those who pay as assessed will also have to pay for the owners who refuse or can't pay. And then liens will be placed on nonpaying units. Is it legal for the board to require paying owners to also pay for the assessment of units that do not pay?
A. Yes. The Association is obligated to pay the cost and expenses incurred for Hurricane Ian. If some owners do not pay on time, the cost and expenses remain unchanged and must be paid. Therefore, the other owners will have to cover these deficits in the short run. However, as you mention, the Association can recover the unpaid assessment via the lien foreclosure process which ultimately can result in the unit being sold on the courthouse steps to the highest bidder. The Association can also seek a personal money judgment against the delinquent owners. Therefore, while this collection process may take several months to complete, as long as there is equity in the delinquent owner’s unit, it is very likely the Association will collect the money and its attorney’s fees and costs in doing so.
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Q: How can an Association obtain financial assistance in the event of a natural disaster?
A: In the aftermath of a natural disaster, Associations may find themselves grappling with the immediate need for financial assistance to restore stability and normalcy. There are two primary ways to obtain financial assistance. The first one is to obtain a traditional bank loan or have a preapproved line of credit in place with a bank. The preapproved line of credit is something that can be arranged in advance, and if you do that, the money is available immediately following the event.
Another often overlooked method is to obtain a Small Business Administration Loan (SBA). It was often thought that community associations could not obtain SBA loans, but this is not true. SBA loans typically have extremely favorable interest rates and payment terms when compared to a traditional bank loan. To access this financial aid, Associations are required to submit an application accompanied by crucial documentation including tax returns, schedule of liabilities, and other pertinent documents and information as required by the SBA. Navigating through this process is notably intricate, diverging from standard bank loan procedures. One such intricacy involves the timely submission of certain documentation in a precise timeframe. Errors or oversights during submission can cause setbacks for weeks or even months before any significant advancement is realized, let alone receiving the much-needed funds.
One important requirement from the SBA is for an Association to obtain a majority vote from the total voting interest of an Association. Despite certain governing documents potentially allowing Boards to acquire loans and impose special assessments without member approval, the SBA commonly insists on approval from the majority of the Association’s voting interest. The SBA will require a comprehensive attorney opinion’s to be submitted at the end of this process, assuring that the attorney has meticulously examined the loan, special assessment documents, and governing documents, validating the authority of an Association to accept the SBA loan.
Navigating the complexities of the SBA loan process is fraught with many unexpected requirements. Some clients have spent as long as 10 months mired in the loan process before seeking legal assistance, further highlighting the imperative need of experienced counsel. Such legal guidance can not only expedite the loan process but also enhance the prospects of obtaining the maximum disbursement amount. Associations either currently involved in or contemplating the SBA loan journey should proactively seek experienced legal counsel to have the best opportunity at a swift and efficient disbursement of funds, ensuring a seamless path to recovery and rebuilding in the wake of a natural disaster.
Q: Can my Association lien my property if I do not pay a fine that the Board imposed on me?
A: It depends. If you live in a condominium or cooperative association, the answer is no, because Chapters 718, Florida Statutes (the Condominium Act) and 719 Florida Statutes (the Cooperative Act) both expressly prohibit the Association from filing a lien to secure payment of a fine. These Acts also both cap fines at $100 per day up to $1,000 for a continuing violation, such as parking a pick-up truck in the driveway for 10 days. Conversely, Chapter 720, Florida Statutes, (the HOA Act), provides for fines of up to $100 per day per violation and allows fines for a continuing violation to accrue to $1,000, but these limits can be increased if the HOA governing documents allow for it. Also, Chapter 720 provides that the HOA can lien for fines that have accrued to $1,000 or more.
Richard D. DeBoest, Esq., is a Partner of the Law Firm Goede, DeBoest & Cross. Visit www.gadclaw.com or to ask questions about your issues for future columns, send your inquiry to: [email protected]. The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, DeBoest & Cross, or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.
This article originally appeared on Treasure Coast Newspapers: HOA Q&A: Must owners have to pay assessments for those who don't?