Case Law Update – St. Croix Lane Trust v. St. Croix at Pelican Marsh
By Candice Gundel
In August of this year the Second District Court of Appeals issued yet another appellate ruling which has a tremendous effect on community associations throughout Florida. The case of St. Croix Lane Trust v. St. Croix at Pelican Marsh Condominium Association, Inc., 144 So. 3d 639 (Fla. 2d DCA 2014) establishes critical new information for the acceptance of payments from delinquent owners.
Under current Florida statutes for condominiums, homeowners associations, and cooperatives any payment received on a delinquent account must be applied to the interest, late fees, costs of collection, attorney fees, and then to the delinquent assessments. The statutes also provide that the payment must be applied in this order regardless of any restrictive endorsement or instruction accompanying the payment. Since the enactment of this law community associations have been required to accept an owner’s payment, even if it is a partial payment and apply the payment pursuant to the statute. After application of the payment the owner would then remain liable for the remaining balance.
The St. Croix case significantly changes the acceptance and application of payments. The court held that if a partial payment is tendered and that payment is accompanied by an offer to settle or accord and satisfaction language then the acceptance of that payment is acceptance of the settlement offer and the association will not be entitled to pursue any balance due. If a partial payment is received with this type of restrictive endorsement or instruction and the association accepts the payment then no further amounts may be collected.
In response to this decision our office has adopted new procedures for the review and application of payments to ensure the associations we represent can continue to pursue all of the amounts due and owing on a delinquent account.
What should your association do to protect itself? For those accounts that are delinquent and with an attorney for collections, all payments received should be immediately forwarded to your attorney, along with any correspondence accompanying the payment. If you have accounts that are not with an attorney, your association should have procedures in place to review payments and any documents that accompany a payment prior to the payment being accepted and deposited. If the payment is accompanied by an offer to settle for less than the total amount owed, the association should only deposit the payment if it intends to accept the settlement offer. If the payment is accompanied by a statement that the payment is in full satisfaction of the debt, payment in full, or similar language than the association should only accept and deposit the payment if it intends to write-off any balance remaining after the application of the payment.
When considering when to accept a partial payment on a delinquent account the association must consider the ramifications of settling the account or writing off a balance. Acceptance of less than the full amount owed may expose an association to liability for selective enforcement or statutory liability for failing to provide the same reduction to all owners.
If your association receives a partial payment which may jeopardize the balance due and owing under the St. Croix opinion, and you do not intend to accept the payment then the payment must be returned to the sender within 90 days. If a partial payment is inadvertently accepted and deposited the association may refund the payment to the sender within 90 days. If a payment is returned or refunded the association must notify the sender why the funds are being returned and continue to pursue the entirety of the debt.