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Associations and Receiverships: Will the Mortgagee Be Required to Pay?

Posted By USFN, Tuesday, February 4, 2020
Updated: Monday, February 3, 2020

by Jane E. Bond, Esq. and Matthew Morton, Esq.

McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY)


Receivership and homeowners’ associations are strange bedfellows.  Instead of filing an action to collect assessments, associations are turning towards receivership actions.  A receivership action allows a receiver to be appointed to manage and rent the property out with such funds used to recoup expenses and assessments along with an equitable lien for any expenses or assessments not recovered from the rental of the property. 


In Florida, this process is authorized by Fla. Stat. §720.3085(1)(e), (8)(a) and (8)(f) and further requires the association to serve and provide the lender with a copy of the petition before obtaining an order granting same if the lender is going to be responsible for any amounts associated with the receivership.


This issue played out in Fannie Mae v. JKM Servs., LLC, 256 So. 3d 961 (Fla. 3d DCA 2018).  In JKM, the association filed an action for a receiver for units subject to foreclosure actions or soon-to-be-filed foreclosure actions.  Id. at 964. The court granted the petition and appointed JKM Services as the receiver on behalf of the association.  Id. Subsequently, the lender completed their foreclosure action, was the successful bidder at the foreclosure sale and acquired title to a property under this receivership.  Id. at 965.  The receiver never notified the lenders of the receivership and, even after foreclosure was filed, never asserted its existence in the foreclosure action.  Id.


The lender sought the safe harbor amount due to the association.  Id. Instead of receiving the safe harbor amount, the lender received an amount from the receiver which included multiple years of past due assessments, receiver’s fees and attorneys’ fees, among other expenses.  Id.  The lender filed a motion to intervene in the receivership to limit amounts to safe harbor, which was denied.  Id.  In reversing, the court held that the lender was not a party to the initial petition for receivership nor were they noticed of same until such time as they became owner of the property.  As such, the court in JKM held that the lender did not become liable or responsible for the fees or any amounts beyond the safe harbor amount. Id. 969.


In light of the rationale of JKM, it is important that any lender served with such a petition take immediate action to oppose and prevent the entry of an order of receivership.  The question becomes how should a lender protect its interest?

First, the lender should review whether the mortgage includes a clause regarding the appointment of a receiver or assignment of rents.  If either exists, they should be asserted in opposition to any petition. Second, the lender should review the loan and, if appropriate, move forward with foreclosure.  Lastly, the lender should review whether the property is vacant or occupied by someone other than the borrowers as Fla. Stat. §702.10 allows a court to order mortgage payments be deposited monthly with the clerk of court until judgment is entered. 


If it appears that the court will appoint a receiver, a lender should assert in opposition that any receivership be granted for a limited duration, that any expenses above a specified amount be approved by the court before being incurred and that monthly statements be filed with the court reflecting how monies received are applied. 


In summary, receivership actions have become a tool used by associations to try to benefit from those properties, but it only becomes an effective tool if the lender is noticed and fails to take action to address same.  As such, any attempt to obtain a receivership should be addressed timely to avoid the imposition of a receivership.

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Tags:  Florida  Foreclosure - HOA  Receiverships 

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