MONEY JUDGMENTS - A CREDITOR’S CHOICE©
By James R. De Furio, J.D.
Cianfrone and De Furio
A Partnership of Professional Associations
Introduction
This Article contains general advice and comment regarding the collection of past due Homeowner’s Association assessments and Condominium Association assessments by obtaining a money judgment. It is not an exhaustive treatment of the subject. Many issues are omitted because of space and time constraints. The reader is encouraged to discuss the issues of a particular case with their attorney.
Community Associations have two remedies to collect money from a unit owner who is in default in the payment of their Association assessments.1 The most common remedy is to record in the public record a lien upon the unit; foreclose the lien; then, gain ownership and possession of the unit through a judicial sale to satisfy the debt that is owed.2 Another remedy is to obtain a money judgment against the unit owner. This latter remedy should become more common as the value of units secured by Association liens fall well below the debt secured by the first mortgages on the units.
1 The principles described in this article are applicable to both Condominium and Homeowners Associations in the State of Florida, unless noted otherwise. Any reference to an “Association” or a “Community Association” means both a condominium Association and a Homeowners Association unless otherwise noted. Any reference to a “unit” means both a condominium unit and a lot in a mandatory membership homeowner’s association.
2For a full discussion of liens and foreclosing liens for past due community Association assessments, see Assessment Collection: General Principals and Strategies, by James R. De Furio, J.D.
It is recommended that one first read and consider Assessment Collection: General Principles and Strategies, by James R. De Furio, J.D., before reading this article.
Why Obtain a Money Judgment rather than Foreclose a Lien?
When an Association decides to file a lawsuit to collect past due assessments, the lawyer will file one complaint that will describe two separate remedies. One remedy will be to foreclose the Association’s lien. The other remedy will be for a money judgment.
After the suit is filed the Association will choose one of the remedies. It can’t have both; only one. If it chooses to foreclose the lien the unit will be sold to the highest bidder at a judicial foreclosure sale. When market real estate prices are depressed and the unit is encumbered by a first mortgage, the Association will most likely obtain title to the unit. Thus, if the Association chooses to foreclose the lien, it should be prepared to own the unit.
The Association must be cognizant of the likely fact that the unit is encumbered by a first mortgage that secures a sum of money that exceeds the value of the unit. When the Association takes title to the unit, the first mortgage will continue to encumber the unit. Hence, when the Association takes title to the unit through foreclosure of its lien, the Association will not be in a position to sell the unit because of the encumbrance of the first mortgage. The Association may rent out the property. However, at some point the party holding the first mortgage will foreclose its mortgage interest in the unit and gain possession of the unit from the Association.
Associations that do not want to take title to the unit may choose to obtain a money judgment instead.
What is a Money Judgment?
A money judgment is entered by a court after a lawsuit has been filed by the Association against the delinquent unit owner. A judge, after either hearing testimony at a trial or considering affidavits on a motion for summary judgment, will determine the amount of money owed to the Association including principal, interest, late fees, attorney fees and costs of suit. This total amount is called the “judgment amount.” This judgment amount is placed in a Final Judgment. (For our purposes we will call the Final Judgment a money judgment) The Association becomes the “judgment creditor.” The unit owner is the “judgment debtor.” The money judgment allows the judgment creditor to collect the judgment amount from the judgment debtor. The money judgment earns interest at an annual rate adjusted annually by Florida law.
The Money Judgment May Become a Lien
Once a money judgment is entered by the judge, it may become a lien against non-exempt assets owned by the judgment debtor. The money judgment becomes a lien against real property (also known as real estate) when a certified copy of the money judgment is recorded in the public record in the Florida county where real property owned by the judgment debtor is located. The money judgment becomes a lien against personal property (personal property consists of things like boats, cars, jewelry, etc) when a Judgment Lien Certificate is filed with the Department of State for the state of Florida.
Execution and Levy
When the judgment creditor has identified non-exempt property owned by the judgment debtor, the clerk of the court will issue a writ of execution. The sheriff will then “execute” the writ by seizing (levying) the property. Once seized, the property will be sold at public sale to satisfy the debt.
Not all assets owned by a judgment debtor may be seized. Assets that cannot be seized are called “exempt.” Assets that may be seized are called “non-exempt.” Examples of property that cannot be seized include a judgment debtor’s homestead, personal property worth $1,000.00, and one motor vehicle worth $1,000.00. There are many other exemptions, and legal counsel should be consulted before levy is attempted.
Priority
There may be other liens on the judgment debtor’s property that have priority over the Association’s judgment lien. This may limit the proceeds that the Association may receive from a sheriff’s sale.
Judgment liens on real property remain liens on real property for a period of ten years, but may be re-recorded to extend the lien for an additional ten years.
Judgment Lien Certificates remain a lien on personal property for five years, but may be re-filed at five year intervals.
