Daily Development for Thursday, August 5, 1999

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

ASSOCIATIONS; ASSESSMENTS; PRIORITY; PURCHASE MONEY MORTGAGES: Where declaration provides that association liens prime subsequent mortgages, liens have priority as of time of recording of Declaration even as against purchase money mortgages arising thereafter.

Association of Poinciana Villages v. Avatar Properties, Inc., 724 So.2d 585 (Fla. 5th DCA 1998).

Florida is not a Uniform Common Interest Ownership Act state, and apparently does not grant statutory priority to assessement liens, or at least did not do so as of the operative facts of this case. Earlier Florida authority had held that association liens take priority as of the time that they are filed, and not from the time of recording the declaration. The authority, however, had allowed that if the Declaration expressly provided for priority of the assessments as of the time of recording of the Declaration, such priority would be honored.

In this case, the Declaration did not expressly provide for priority of liens from the time of its declaration, but stated simply that association liens primed " any mortgage placed on the properties" (with certain listed exceptions). The appeals court held that this expression of intent, duly recorded in the Declaration, gave adequate constructive notice to subsequent mortgagees that the liens had priority over them, and reversed a trial court holding for the mortgagee here.

The mortgagee then proceeded to argue, however, that it had priority due to the "purchase money mortgage superpriority doctrine." Basically this commonly recognized doctrine provides that a purchase money mortgage primes judgment liens and other after acquired property claims that attach to the property as of the moment that the mortgagor/purchaser acquires title, even if they are recorded later. A prior Florida case, BancFlorida v. Hayward, 689 So.2d 1052 (Fla. 1997), the DIRT DD for November 13, 1997, applied that doctrine in Florida to give priority to a purchase money mortgagee over prior-in-time equitable lien claimants against the mortgagor. But the court here responded that the Declaration establishing the priority of the associations liens attached to the property long prior to the purchase money mortgage, even prior to the acquisition of the property by the individual mortgagor involved in this case. Consequently, the doctrine had no application here.

Comment: The case is correct. The purchase money mortgage superpriority doctrine is designed to protect those who advance credit for the acquisition of property, and thus create a nominal title in their mortgagor, from losing their priority to "after acquired property" liens as to the title that they just financed. Judgment lien claimants are the classic example. Prior to the acquisition of the property, the judgment lien claimants had a claim on their debtor's assets, and had a right to follow those assets into any property the debtor would acquire. But they should not be able to reach beyond their debotr's preexisting assets to get a primary claim against the additional wealth nominally in the debtor's hands as a consequence of the purchase money mortgage.

The principle does not apply here. The function served by the assessment lien is quite distinct from the debt collection function of the judgment lien. The entire community relies upon the ability of the Association to recover its costs of operation. In accordance with this goal, the Declaration limited the title acquired by each unit owner to a title subject to a primary claim for assessments levied to recover these costs. The assessments are like property taxes, which enjoy a similar superpriority. Put another way, they are like easements or servitudes that are part of the community arrangement. When the purchase money mortgagee financed the acquisition of the unit, it financed only the acquisition of a title subject to the possibility of prime liens for association assessments.

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