Law Offices of J.C. Fuller, P.A.

Transcription

1 Law Offices of J.C. Fuller, P.A. Joyce C. Fuller, Esq Lee Road Winter Park, Florida Phone: (407) Fax: (407) Sarah Carcano, Paralegal Firm Administrator Nathan R. Fuller, Jr., Paralegal Charitable Solicitation Registration Beverly J. Fuller, Paralegal Charitable Solicitation Registration Chief Justice Peggy A. Quince 500 South Duval Street Tallahassee, Florida RE: Comments Regarding Final Report and Recommendations on Residential Mortgage Foreclosure Cases dated August 17,2009, (the "Report") issued by Task Force on Residential Mortgage Foreclosure Cases (the "Task Force") Dear Madam Chief Justice and Justices of the Court, I sincerely appreciate the opportunity to offer comments on the above Report issued by the Task Force from my perspective of a Community Association lawyer. Preliminarily, I join my colleagues in applauding the Court s establishing the Task Force, and the Task Force s indepth analysis of the critical problems facing the judicial system and our Florida communities resulting from the mortgage foreclosure crisis. The issues and the relative findings within the Report are consistent with my experiences defending multiple community associations in the quagmire of the new mortgage foreclosure industry. If it pleases the Court, I would like to use an informal approach with personal references to expound on the Task Force s allusion to the foreclosure crisis impact on community associations. o THE DILEMMA FOR THE HOA REPRESENTATIVE There is an ethical and moral dilemma that lawyers and community association managers face when issuing estoppel letters on post-foreclosure bank-owned Homeowners Association ( HOA ) properties. Once the foreclosure cases are concluded with a judicial sale, the Plaintiff Institutions ( Banks ) depart from their foreclosure lawyers and turn to their asset managers and title companies in order to dispose of their newly acquired properties. These asset managers and/or title companies request estoppel letters be issued by the Homeowners Associations in order that the banks can pay all outstanding moneys due and issue clear title upon re-sale. While the Summary Judgments do not contain specific findings as to amounts due to Homeowners Associations, in most cases, no moneys are due. Nevertheless, the formal written estoppel requests made by the title company clerks or asset managers instruct the Homeowners Association (the HOA lawyer or the Licensed Community Association Manager ( LCAM )) to include a demand that the bank pay to the HOA one percent (1%) of the original mortgage amount or twelve months (12) past due assessments whichever is less, citing Florida Statutes. In most cases, does not apply.

2 Page 2 of 5 Chapter 720 of the Florida Statutes was amended effective July 1, 2007 to add and was thereafter modified to eliminate an ambiguity effective July 1, Because substantively affects the rights of lenders, homeowners associations and property owners, the law only applies to those first mortgages recorded on or after July 1, 2007 or July 1, See State v. Lavazzoli, 434 So.2d 321 (Fla.,1983). See also Pondella Hall For Hire, Inc. v. Lamar, 866 So.2d 719 (5 th DCA 2004) holding that, in order to determine whether a statutory amendment applies retroactively, courts must engage in a two step analysis: first, they must determine whether there is clear evidence of legislative intent to apply the statute retrospectively; if the legislation clearly expresses an intent that it apply retroactively, then the second inquiry is whether retroactive application is constitutionally permissible. Simply stated, if was not in effect when the first mortgage was recorded, the terms and conditions found within the HOA s Declaration would then dictate whether any assessments survive the foreclosure of a first mortgage. Typically all HOA Declarations contain a subordination clause whereby the association s assessments are wholly junior and inferior to first mortgages. At the risk of undue self-deprecation, I offer the following true story. Several years ago, I bravely moved on behalf of one of my HOA clients to recover applicable delinquent assessments, attorneys fees and costs in a mortgage foreclosure lawsuit that was filed after July 1, The mortgage was recorded before Instead of demanding the questionable recovery in a post-foreclosure estoppel letter, I wanted to take the conservative approach and seek judicial approval before final judgment of foreclosure was entered. At no cost to my client, I attempted to make the argument that the ambiguity in the newly created statute should be construed against the foreclosing bank and in my client s favor. It was a novel argument and I was passionate about its application. As I made the argument, the judge patiently listened. Then, after I had concluded with a bold summation, the judge gently asked me when the mortgage was recorded. Uh oh I felt a lump in my throat. I had never considered the mortgage date. As I thought about the answer, I felt the cobwebs begin to shift in my brain I responded. The judge then asked me if there was any language in the law indicating that it should be retroactively applied. With that, the dust had cleared and I knew exactly what was coming next. No I answered. Well then, Ms. Fuller, he kindly continued, I would have granted your motion except for the fact that this law is a substantive change and it is not retroactively applied unless so stated within the statutory text. The judge was gracious in his explanation most especially in light of my being a seasoned lawyer at the time of that hearing. That judge now sits with you on the Court. He is Justice Perry. I have recently come to believe that many lawyers and association managers, state-wide, blindly issue estoppel letters as requested by the banks asset managers and title companies: demanding to recover 1% of the original mortgage balance or 12 months past due assessments, whichever is less, notwithstanding the inapplicability of Lawyers and community association managers who attempt to collect money for clients are defined as debt collectors within the Fair Debt Collection Practices Act ( Act ) and we are

3 Page 3 of 5 subject to all of the regulations contained therein. Despite the risks involved with violating the Act, I understand that many debt collectors are compelled by various reasons to proceed with demanding the bank s payment of these sums which are not legally due. I further believe that banks desire to dispose of their newly acquired properties as quickly as possible, and so long as the amounts demanded by the Homeowners Associations are under a certain threshold amount, banks blindly and willingly pay. So why would debt collectors face an ethical and moral dilemma when confronted with the Act which prohibits us from demanding moneys that are not legally due? The answer is quite simply because our clients are suffering grave and immeasurable harm in this foreclosure crisis, which harm has left them without adequate funds to maintain their communities or defend themselves in the multiple foreclosure lawsuits. o THE BACKGROUND IN A NUTSHELL Homeowners and Condominium Associations are experiencing a high volume of mortgage foreclosure lawsuits within their communities. Many associations are communities wherein one-third (1/3) of their properties are in mortgage foreclosure. For HOA s, this means that the individual lots subject to mortgage foreclosure oftentimes fall into a state of disrepair; detrimentally impacting the surrounding properties. Most importantly, however, as batches of mortgage foreclosure lawsuits are filed against a myriad of individuals, each action names a respective community association as a co-defendant. Whether the named defendant is a condominium or homeowners association, each lawsuit requires the defending association to file an answer. Typically, the owners of properties in mortgage foreclosure are not current on their maintenance assessments. Nevertheless, each individual lawsuit requires an answer, and each answer generates a legal fee. Thus, associations with deficient budgetary funding due to extensive maintenance fee delinquencies are compelled to pay increased attorneys fees in answering the multiple lawsuits -- or otherwise face defaults. Oftentimes a special assessment to cover these legal fees is not available to the community association. So the associations are compelled to pay increased attorneys fees with moneys that they just simply do not have. o DELAYS Once the lawsuit is filed and the association files its answer, the waiting game begins. There is no rhyme or reason to the game. I have had little success in communicating with Plaintiffs counsel in these cases. Typically my inquiries are fielded by paralegals who are not able to discuss the legal strategies and consequences, and on those rare occasions when I do reach a lawyer, the lawyer explains that he/she is uninvolved with negotiations between a bank and a property owner. I have spent many uncompensated hours trying to reach lawyers. So it is the community association that must sit on the sidelines and wait for an outcome of the negotiations, all the while the assessment delinquency grows. I have started filing Notices of Inactivity in an attempt to prod the cases along. Unfortunately, these efforts have been unsuccessful.

4 Page 4 of 5 When the Final Judgments are at last entered and sale dates are set, Plaintiffs oftentimes cancel the sales without any advance warning or reason, and fail to move to re-set them for months. This means that while the property is in limbo, no one is paying any assessments. o RING AROUND THE ROSEY - a personal account In one recent case, the bank filed a mortgage foreclosure action in January 2008 and named my HOA client as a co-defendant. In April, 2008 the case was ripe for summary judgment. The property owners were long since defaulted. However the case languished for one year without any record activity. Thus, in April, 2009 I filed a Notice of Inactivity, prompting a rare response from Plaintiff s counsel indicating that the bank and the owner were in negotiations and thus the lawsuit should remain open and pending. As I was preparing for a hearing on my subsequently filed Motion To Dismiss For Lack Of Prosecution, the bank changed attorneys and, believe it or not, in May 2009 filed yet another new foreclosure lawsuit against that owner naming my HOA client as a co-defendant (same owner, same mortgage, same judicial circuit). Now there were two identical mortgage foreclosure cases pending against my HOA client, which was compelled to be represented in both. Plaintiff s former counsel was not talking with Plaintiff s new counsel. Plaintiff s former and current counsel requested my intervention between them which, I explained to all lawyers on my own dime, was not my role as defense counsel. As I marched forward toward my hearing date in the first lawsuit, the bank s former counsel dismissed the first case voluntarily. This left the newly filed duplicate lawsuit pending. Several months have now passed and today, as I was preparing this commentary, I received notification that the bank terminated its relationship with its new counsel and returned to the former. The second suit remains open, and unless relief is granted to my association client (at its additional expense in yet more attorneys fees of course), this case will effectively extend all deadlines and languish for at least a minimum of another year. This particular Plaintiff bank has sued this particular property owner on several occasions over the past six (6) years, naming my HOA client as a co-defendant, during which time the property owner has paid no assessments at all. And so this story reminds me of the rhyme ring around the rosey : owner pays no assessments and falls behind in his mortgage -- the bank files suit -- the association suspends collection efforts because its lien is junior and inferior to the bank s first mortgage -- the mortgage foreclosure case languishes for over a year -- the case is finally dismissed -- the association begins its collection efforts -- the owner falls behind in his mortgage payments -- the bank sues -- the mortgage foreclosure case languishes for over a year -- the bank dismisses the case -- the association tries to move forward with collection -- the owner falls behind in his mortgage payments -- the bank sues -- the case languishes -- the case is finally dismissed -- the association continues collection -- the owner falls behind in his mortgage.. and on and on and on. Unfortunately this example is typical of the mortgage foreclosure cases that I defend. So long as banks do not own properties, they are not required to pay any community association assessments.

5 Page 5 of 5 o SOLUTIONS Under current law, once a first mortgage has been foreclosed, the Condominium Association can only recover 1% of the original mortgage amount or 6 months past due assessments, whichever is less, unless a court determines that a Plaintiff s conduct warrants sanctions under Under current law, once a first mortgage has been foreclosed, the Homeowners Association cannot typically recover any moneys unless the first mortgage was recorded on or after July 1, 2007 or unless a court determines that a Plaintiff s conduct warrants sanctions under I respectfully suggest that trial courts be encouraged to issue Summary Final Judgments with specific findings as to the first mortgage and a Homeowner s Association s right to recover moneys under This would assist collection agents in rendering appropriate estoppel letters. I also respectfully suggest that trial courts be encouraged to take a long look at and its applicability in those situations where games are played and innocent communities are affected. There is truly harm and great economic damage to Florida community associations when Plaintiffs conduct is intended to delay final outcomes. While I have come to the conclusion that I cannot be Robin Hood in this foreclosure crisis by improperly demanding sums not legally due from banks in order to make my clients whole, I hope our trial courts will objectively stand alongside our ailing Florida communities, take that additional time to make specific findings in the judgments, and apply sanctions where appropriate. This, in my opinion, would be time well spent. Thank you for your indulgence in this critical matter. With highest respect, Joyce C. Fuller, Esquire Florida Bar No.: