Community Associations potentially affected by Mortgage Decision in Florida
Mortgages Assumed to Be Unenforceable Due to the Passage of Time May Now Be Enforceable Again
Since 1999 as a result of a decision of the Fourth District Court of Appeal in Greene v. Bursey, 733 So.2d 1111 (Fla. 4th DCA 1999), it was generally accepted that when a homeowner was in default for non-payment of their mortgage and the lender subsequently demanded – or ‘accelerated’ – all amounts due on the mortgage but did not take action to enforce the mortgage within 5 years of the date of acceleration of the amounts due, the mortgage could become unenforceable due to the expiration of the time to initiate legal action on the claim. This was potentially helpful to community associations who watched as mortgage foreclosure cases in which the lender accelerated the amounts owed by the homeowner dragged on for a number of years and were subsequently dismissed due to inactivity by the lender or for other involuntary reasons. In these cases, community associations could be relatively certain that the mortgage would be subject to a statute of limitations defense due to the passage of time and that it might be possible to acquire title to a property free and clear of any mortgages through foreclosure of the claim of lien in favor of the community association and then a subsequent lawsuit by the community association to quiet title to the same property.
However, as a result of a recent appellate court decision, there is now uncertainty on this issue and it is no longer clear that a lender cannot pursue foreclosure against an owner who went into default on the mortgage more than 5 years ago with no action pending to enforce the mortgage within 5 years from the date of default by the homeowner when the lender had accelerated the amounts due by the homeowner. The recent decision by the Fifth District Court of Appeal in U.S. Bank Nat. Ass’n v. Bartam, Case No. 5D12-3823, (Fla. 5th DCA, April 25, 2014), held that the acceleration claim in relation to the mortgage for all unpaid amounts following any non-payment in a lawsuit that was subsequently dismissed does not automatically preclude the lender from claiming that payments that would have continued to become due by the homeowner but for the acceleration could not serve as a new basis for default if the action is brought within the applicable time frame for such missed payments. In other words, acceleration by a lender of the amounts due by a homeowner in connection with a mortgage is not necessarily final and a lender may be able to “undo” its acceleration decision to be able to bring a claim that would otherwise be barred due to the passage of time after the amounts due in connection with the mortgage were accelerated. As a result, there are now different decisions on this same issue from different appellate courts in Florida and it will be up to the Florida Supreme Court to reconcile the recent decision in U.S. Bank Nat. Ass’n v. Bartam with the decision in Greene v. Bursey that reached a different conclusion.
What this means for community associations is that there is uncertainty about whether community associations may expect that property in their communities could be free and clear of the claim of a mortgage when the lender accelerated the amounts due by the homeowner in connection with the same property but no action is pending to foreclose the mortgage within 5 years from the date the amounts due were accelerated. Until the Florida Supreme Court reaches a decision on this issue, community associations need to be selective in how they pursue collections in their communities due to this issue and may not be able to count on the passage of time with no action by a lender to be favorable for their claims in relation to mortgages.