The recent decision in Bermuda Dunes v. Bank of America, N.A., 5D12-4217 slip op. (Fla. 5th DCA 2014), gives some guidance on the still underdeveloped area of condominium collections. The Fifth District opinion does provide some clarity on disputes involving the narrow liability exception, a/k/a safe harbor.
The facts of the case are not all that unusual. Bank of America gave a mortgage to a borrower. BOA then assigned the note and mortgage, via a recorded assignment, to Freddie Mac. Freddie Mac brought the eventual mortgage foreclosure action and obtained final judgment in its favor. BOA then purchased the property at the subsequent foreclosure sale.
Bermuda Dunes Condo. Association took the position that BOA was a third-party purchaser and, therefore, jointly and severally liable with the prior owner for all amounts owed under section 718.116(1)(a), Florida Statutes. BOA argued that it qualified for the narrow liability exception in subsection (1)(b). BOA eventually filed an action for declaratory relief and for "compliance with section 718.116, Fla. Stat." At summary judgment, counsel for Bermuda Dunes pointed out that the evidence in the record did not support BOA's claims for summary judgment, in fact suggesting that Freddie Mac was the party with the rights under the note and mortgage. BOA countered that Freddie received an assignment simply as a servicing agent in order to bring the foreclosure action. The trial court in Orange County found that BOA had met its burden and granted summary judgment.
On appeal, Bermuda Dunes maintained the same argument - that by assigning the note and mortgage to Freddie Mac, BOA relinquished its rights and became a party with no interest in the note and mortgage at issue. BOA responded with two arguments. First, Freddie Mac received the assignment only as a servicer. Second, the narrow liability exception does not require a first mortgagee (original lender) to be a continuous holder of the note and mortgage.
The Fifth District sided with Bermuda Dunes in holding that the key is who has the rights and obligations of the note and mortgage at the time of foreclosure. The Court further noted that none of the record evidence supported BOA's claim that Freddie Mac was acting strictly as a servicer for BOA. The Court also rejected the second argument saying that, in order to qualify for the exception, the entity must be an actual holder at the time of foreclosure.