Appeal Puts Spotlight on Fee Claims Against Lenders After Foreclosure
The case involves a demand for reimbursement for a condo association's collection efforts targeting U.S. Bank.
April 09, 2018 at 01:47 PM
3 minute read
A question about attorney fees for collection efforts pursued after a foreclosure sale puts Florida's safe harbor provisions in the spotlight.
The state's safe harbor provision protects lenders recovering property after foreclosure from paying the full amount of overdue association dues. Under the rule, lenders pay a year's worth of dues or 1 percent of the mortgage, whichever is less.
But in a case reaching the Fourth District Court of Appeal, a community association demanded more.
Emerald Estates Community Association sought to collect more than $6,000 in attorney fees and costs, alleging it was forced to undertake collection efforts after the buyer, U.S. Bank N.A., refused to pay.
“We're not arguing about safe harbor,” association attorney Lourdes Ferrer said Monday. “What we're saying is, 'You owe and failed to pay the fees from the time you took title. Because of that, we're entitled to fees.' ”
Ferrer said it took more than seven months for the bank to pay the overdue association fees. She said the new owner also incurred multiple other violations during that period.
“ This is a common problem when banks take title to property. They obtain the property via foreclosure, and then they don't do anything,” she said. “The banks won't pay or maintain while they're waiting to sell the property. In this case, that's what happened.”
Ferrer was co-counsel with Michael T. Ross of the Law Office of Michael T. Ross P.A. in Hollywood.
Bank's attorney Alexzander D. Gonano of Gonano & Harrell in Fort Pierce did not respond to requests for comment by deadline.
U.S. Bank purchased the foreclosed property at Emerald Estates at Weston in March 2014. Months after that sale closed, the association sent an estoppel letter for 12 months' worth of unpaid assessments accrued before the bank took title.
The association also argued the bank owed court costs and fees for forcing the association's hand on collection efforts. U.S. Bank paid under protest but filed a complaint against Emerald Estates, denying responsibility for any attorney fees or court costs.
Broward Circuit Judge Carol-Lisa Phillips agreed and granted summary judgment in the bank's favor.
On appeal, it was up to the Fourth DCA to determine the timing of costs and whether the association incurred them before or after U.S. Bank took title.
“U.S. Bank presented no evidence at the hearing regarding when these fees and costs actually accrued,” Judge Mark W. Klingensmith wrote in a unanimous decision with Judges Martha C. Warner and Cory J. Ciklin concurring. Because “a genuine issue of material fact remained … we reverse the entry of summary judgment and remand for further proceedings.”
Now, Phillips will have to unravel the timeline in a case that's caught the attention of community association and lender attorneys.
“It's interesting that the appellate court did not proclaim that the former mortgage holder, now buyer, is responsible for attorney fees accruing after the certificate of title. However, that is the essence of the holding because otherwise there would be no need to remand,” said Michael Gelfand, a board-certified real estate lawyer who is not involved in the litigation.
“Why would they make more work for the trial court? If the association could not collect post-certificate, they would simply have affirmed. By remanding, that is an acknowledgement that the association has a legal claim to post-certificate-of-title attorney fees.”
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