Associations can Collect Unit Owner Past-Due Assessments From Tenant’s Rent

It is inevitable.  Every condominium and homeowners’ association must deal with it.  It destroys budgets, makes future planning difficult, and burdens all other responsible unit owners with making up the deficit. You guessed it – delinquent unit owner assessments.  Because of the devastating impact that unpaid assessments have on associations, the Florida Condominium Act provides some beneficial remedies for associations to utilize in attempting to collect on unit owner delinquencies. For example, Section 718.116, Florida Statues, gives condominium associations a statutory lien on community properties for unpaid assessments, which can be foreclosed similar to a mortgage foreclosure.  Section 720.3085, Florida Statutes, provides homeowners’ associations with that same remedy.  Yet, associations often overlook what is arguably the most effective remedy available, which is the association’s ability to collect rental payments from the tenants of delinquent homeowners

How could this remedy be more effective than the association’s ability to foreclose on the property?  Because a foreclosure action can take approximately 5 months at best and up to a year or more at worst.  That is 5 months to a year or more without that property producing assessment income to the association.  Conversely, a demand to the tenant for his or her rental payments can produce an immediate positive impact on the association’s bottom line beginning that very month.  Moreover, this demand of the tenant can be made while the association continues its foreclosure action on the property.

What could be more frustrating for associations than having a unit owner, who is delinquent in paying assessments, profit off the rental income produced from his or her investment property within the association community?  Thankfully, the Florida legislature, over the past several years, has amended the Florida Condominium Act to prevent this type of abuse.  Section 718.116(11)(a), Florida Statutes, states that “if the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may make a written demand that the tenant pay to the association the subsequent rental payments and continue to make such payments until all monetary obligations of the unit owner related to the unit have been paid in full to the association.”  This remedy is not only afforded to condominium associations but also to Florida’s homeowners’ associations under Section 720.3085(8)(a), Florida Statutes.  Associations must be mindful, however, that they cannot demand any more from the tenant than what the tenant’s rental obligation to the unit owner is under their existing lease agreement.

In order to take advantage of this remedy the association must first provide the tenant with notice, and section 718.116(11)(a)1., Florida Statutes, provides the sample language for this notice.  In addition to sending this notice to the tenant, the association must also mail it to the delinquent unit owner, making him or her aware of the association’s demand to the tenant for those rental payments.  Fla. Stat. § 718.116(11)(a)2.  One reason why this statutory remedy is so powerful is that the tenant is immune from any claim made by the unit owner for those rental payments after the association has made its written demand.  Fla. Stat. § 718.116(11)(a)4.  In other words, the unit owner cannot evict the tenant and the association can continue collecting the rental payments for the entire length of the lease or until all past-due assessments are paid in full, whichever occurs first.  See Fla. Stat. § 718.116(11)(b).

While the unit owner is unable to evict the tenant for paying the future rent to the association, the association does have the ability to evict the tenant if the tenant ignores the association’s demand.  Fla. Stat. § 718.116(11)(d).  Thus, it literally is an offer from the association that the tenant cannot refuse – pay your future rent to us and you will be statutorily protected from the landlord’s threat of eviction; however, refuse to comply and we have the statutory right to evict you.  It’s a no-brainer for the tenant, and this rental income will stop the financial hemorrhaging the association has been suffering as a result of the unit owner’s delinquency.

The takeaway for Florida’s associations is to ensure that, going forward, they are taking full advantage of every remedy available to them under the Florida Statutes.  If a unit owner is severely delinquent in assessments, then initiate the claim of lien and foreclosure process.  However, if the unit owner has a tenant renting the property, then the association should also make a demand of that tenant for all future rental payments under the lease while that foreclosure action is working its way through the judicial system.  If the rental payments eventually satisfy all of the past-due assessments then the foreclosure action must cease, but if not, then the association can foreclose on the property to protect its remaining interest.