Association Liens for Unpaid Assessments do not Survive the Issuance of a Tax Deed

On September 20, 2013, Florida’s Second District Court of Appeal issued an opinion in the case of Cricket Properties, LLC v. Nassau Pointe at Heritage Isles Homeowners Association, Inc.  This opinion is of great importance to all community associations across the state of Florida as it concerns an association’s ability to enforce liens for unpaid assessments when there has been an issuance of a tax deed on the subject property.  According to Florida’s Second DCA, an association lien for unpaid assessments does not survive the issuance of a tax deed.  Cricket Properties, LLC v. Nassau Pointe at Heritage Isles Homeowners’ Ass’n Inc., No. 2D12-6194 (Fla. 2d DCA 2013).

The facts and procedural history of this matter, leading up to the Second DCA’s decision, are not uncommon.  Cricket Properties, LLC (“Cricket”) commenced a quiet title action after acquiring title to property governed by an HOA.  The HOA filed its answer and raised as an affirmative defense that Cricket was liable for all unpaid assessments that came due up to the time of transfer of title on the property.  Id.  Cricket subsequently filed a motion to strike the HOA’s affirmative defense, arguing that it acquired title through the issuance of a tax deed and that tax deed purchasers acquire property free and clear of assessment liens.  Id.  The HOA obviously disagreed with Cricket’s assertions.

In supporting its position that a tax deed sale extinguishes prior assessment liens, Cricket relied on Section 197.573, Florida Statutes, which is titled “Survival of restrictions and covenants after tax sale.”  The specific section that Cricket referenced states that “this section shall not protect covenants creating any debt or lien against or upon the property. . . .”  Fla. Stat. § 197.573(2). The HOA responded that its statutory right to lien, and to foreclose a lien, for past-due assessments under Section 720.3085, Florida Statutes, superseded Section 197.573, Florida Statutes, and therefore controlled the issue.  Cricket Properties, LLC, No. 2D12-6194.

The association’s claim against subsequent title owners for past-due assessments on a property is based on statutory language that states all new parcel owners are jointly and severally liable with prior owners for “all unpaid assessments  that came due up to the time of transfer of title.”  Fla. Stat. § 720.3085(2)(b).  Therefore, Florida’s Second DCA explained that the question turns on whether acquisition of property by a tax deed is considered a “transfer of title” as described under Section 720.3085, Florida Statutes.  Id.  The court referenced prior case law stating that a tax deed does not represent a transfer of title but rather constitutes the commencement of a “new, original and paramount” title that “creates in the purchaser a new and original title entirely disconnected with that of the former owner.”  Id. (quoting Blume v. Giles, 197 So. 344, 346 (Fla. 1940); Dean v. Kane, 143 So.656,657 (Fla. 1932)).  Consequently, the Second DCA held that liens for unpaid assessments do not survive the issuance of a tax deed.

Although this case before Florida’s Second DCA involved an HOA, a similar outcome would have likely occurred if this matter involved a condominium association.  This is because the language of § 720.3085(2)(b) and § 718.116(1)(a), Florida Statutes, are nearly identical.  Even though the issuance of a tax deed wipes out association liens for prior unpaid assessments, the new property owner who acquired title through a tax deed sale is still bound by the association’s governing documents, which includes the duty to pay all assessments incurred after gaining title to the property through the issuance of a tax deed.  In other words, the lien for prior unpaid assessments is extinguished, but the association’s covenants and restrictions still govern the property going forward.