Is a First Mortgagee's “Safe Harbor” Obligations Expanded?

Generally speaking, as a result of sections 720.3085 and 718.116, Florida Statutes, lenders who acquire property as a result of their own foreclosure of their first mortgage against their borrower only owe the association the lesser of 12 months back assessments or 1% of the initial mortgage, whichever is less. This is referred to as the lender’s “safe harbor” obligation. But, if the lender refuses to make timely payment to the association, is the lender also responsible for the costs and fees incurred by the association or is the lender only responsible for the “safe harbor” obligation? This was at issue in Emerald Estates Community Association v. U. S. Bank National Association, as decided by Florida’s Fourth District Court of Appeal on April 4, 2018.

Ultimately, U.S. Bank paid Emerald Estates Community Association the “safe harbor” monies it owed. Under protest, it also paid the costs and attorney’s fees incurred and demanded by the association for its collection efforts associated with the unpaid assessments. Then, U.S. Bank filed a lawsuit against the association. U.S. Bank asserted it was only required to pay the 12 months of unpaid assessments that accrued prior to the bank taking title and demanded reimbursement of the costs and attorney’s fees associated with the association’s collection efforts that were incurred due to the unpaid assessments that accrued after U.S. Bank acquired title. The trial court agreed with U.S. Bank and granted a summary judgment in its favor. (A trial court grants a “motion for summary judgement”, when there are no disputed material facts and the moving party is entitled to judgement as a matter of law.) In granting U.S. Bank’s motion for summary judgment, the trial court reasoned that the association was not permitted to charge for costs and attorney’s fees that accrued prior to U.S. Bank taking title. Thereafter, the association appealed the trial court’s decision.

While the appellate court agreed with the trial court’s aforementioned position, that the association was not permitted to charge for costs and attorney’s fees that accrued prior to U.S. Bank taking title, the appellate court also correctly noted that the association was claiming reimbursement for costs and attorney’s fees incurred in its collection efforts associated with the unpaid assessments which accrued after U.S. Bank acquired title.

The Fourth District Court of Appeal reasoned that when the motion for summary judgment decided in favor of U.S. Bank was granted by the trial court, a genuine issue of material fact did, in fact, exist as to whether the association’s requested costs and attorney’s fees associated with the unpaid assessments accrued before or after U.S. Bank acquired the property. Therefore, the appellate court reversed the entry of the trial court’s summary judgment and remanded the case back to the trial court so a determination could be made as to when the association incurred the costs and attorney’s fees it demanded U.S. Bank pay – before or after U.S. Bank took title.

What can be gleaned from the Fourth District Court of Appeal’s decision? If the appellate court did not believe that U.S. Bank could be responsible for the association’s attorney’s fees and costs that were incurred after U.S. Bank acquired title, then the appellate court would not have remanded the case back to the trial court. Sadly, the case does not address whether U.S. Bank, in addition to not paying its “safe harbor” obligation, also failed to pay the regular assessments that came due after U.S. Bank acquired ownership of the property. Nevertheless, without addressing it head on, this appellate court decision strongly infers that if a first mortgage lender acquires title as a result of its own foreclosure, and then the lender fails to timely pay its “safe harbor” obligation, and likely other assessments that came due after the lender acquired title, too, then the lender is responsible for the association’s attorney’s fees and costs incurred in its collection/foreclosure efforts against the lender.