Bulletin: FL2008006

Dear Associates:

The Legislature recently passed Senate Bill 1986 which amends Sec. 720.3085, F.S. and is effective July 1, 2008. This bill will necessitate that certain exceptions be made in Stewart Title Policies when insuring property subject to homeowner's association assessments. Pertinent changes are as follows:

I. FIRST MORTGAGEE'S LIABILITY FOR ASSESSMENTS

For first mortgages recorded on or after July 1, 2008 the bill limits the liability of a first mortgagee or its successor or assignee who acquires title to a parcel by foreclosure or deed in lieu for unpaid assessments that became due before the mortgagee's acquisition of title. The first mortgagee is liable for up to 12 months of assessments or 1% of the original mortgage amount, whichever is less.  This limitation applies only if the homeowner's association is joined as a defendant in the mortgage foreclosure suit. However, joinder of the homeowner's association is not required if, on the date the foreclosure complaint is filed, the association is dissolved or did not maintain an office or agent for service of process at a location that was known or reasonably discoverable by the mortgagee.

II. PRIORITY FOR ASSESSMENT LIENS

The new legislation does not affect the priority of homeowner's assessment liens, mortgages, and other liens recorded before July 1, 2008. However, effective July 1, 2008, except for first mortgages recorded on or after that date, homeowner's assessment liens shall relate back to the recording date of the original declaration creating the assessment rights. As for first mortgages, the lien is effective from the recording for the claim of lien.

As a result, a lender with a second mortgage recorded on or after July 1, 2008 will hold an interest inferior to a lien for homeowner's assessment.

• NEW STG TITLE EXCEPTION:
  
  All mortgagee policies with an effective date on or after July 1, 2008, and endorsements thereto changing the policy's effective date to July 1, 2008 or later, involving real property subject to homeowner's assessments, should take the following exception:
  
  "Any loss or damage caused by a lien for assessments pursuant to Sec. 720.3085, F.S., notwithstanding assurances to the contrary in any attached Florida Form 9 or ALTA 5 PUD Endorsement."

Furthermore, you are encouraged to only issue the ALTA 5.1 Endorsement when issuing the PUD endorsement.

III. ASSESSMENT LIEN FORM

Sec.720.3085 (1) (a), F.S., now requires that a recorded claim of lien for unpaid assessments filed on or after July 1, 2008 must contain the following:

• Description of the parcel
• Name of the record owner
• Name and address of the association
• Assessment amount due, and the due date

Please do not hesitate to contact me or any of the underwriting attorneys should you have any questions or concerns regarding this matter.

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