A New Case Interprets First Mortgagee’s Safe Harbor for Past Due Condominium Assessments

Florida Statute § 718.116(1)(b) limits a foreclosing first mortgagee’s liability for past due condominium assessments by providing that liability will be the lesser of twelve months of past due assessments or one percent of the original mortgage provided the association is named as a defendant in the lawsuit.

Although the term “first mortgagee” is not defined within F.S. 718, a recent decision from the 5 ^th DCA provides some clarity as to who fits into this category. In Beltway Capital, LLC v. The Greens COA, Inc., Beltway Capital brought a foreclosure action in which The Greens COA, Inc., a condominium association, was a named defendant. Beltway Capital obtained title to the property through the foreclosure sale. Thereafter, The Greens filed a motion to determine the amount of past due assessments due from Beltway Capital as the new owner of the property. The Greens argued, and the trial court agreed, that since Beltway Capital was not the original lender or the original lender’s direct assignee, it was not entitled to the safe harbor provisions under F.S. 718.116(1)(b). Based upon that determination, the trial court found that the entire amount due from the previous owners was now due from Beltway Capital. The trial court reached its decision by finding that the term “first mortgagee” means only the “original lender” and its direct successor or assignee.

The 5 ^th DCA disagreed with the lower court’s interpretation of the term “first mortgagee”, holding that the terms “original lender” and “first mortgagee” are not synonymous and that the term “first mortgagee” is much broader than “ original lender”. In its opinion, the court noted: “ ‘first’ refers to first in priority of lien, not first in time”. In reaching its decision, the court looked to Black’s Law Dictionary which states that a first mortgage is “a mortgage that is senior to all other mortgages on the same property” and a mortgagee is “one to whom property is mortgaged; the mortgage creditor, or lender.” As such, the court found that since Beltway Capital was the holder of the first mortgage when it obtained title to the property through the foreclosure sale, that it was entitled to the safe harbor provision, regardless of the fact that it was not the “original mortgagee.”

This case stands for the proposition that the “safe harbor” provision applies not only to the original first mortgage lender, but also to all subsequent assignees of the first mortgage holder.