Can Complaints About Association Operations Become a Defense Against Foreclosure?

One of the principles I learned when I first became a member of this Law Firm has now been called into question, at least somewhat, by a new ruling issued by the Fourth District Court of Appeal. 

I initially learned that the obligation of the association to maintain and care for the property is completely independent of and not contingent upon the obligation on the part of the owners to pay assessments.  I also learned that, conversely, the obligation to pay assessments (pursuant to a properly levied budget or properly levied special assessment) was likewise independent of and not contingent upon claims that the Association failed to maintain the property or otherwise failed to meet expectations.

Associations have become embroiled in litigation over the past several years.  Many times the response to a foreclosure lawsuit comes in the form of an attack against the board. Nonpaying owners have tried to justify their actions due to claims of neglect of the property, inefficient management or wasteful spending.  In the past those claims were not considered a proper defense in the foreclosure case.  The owner may, in fact, have a viable claim against the association (however, in many cases there is a non-actionable difference of opinion) and those claims would need separate consideration by the Court, but those allegations would not serve as an excuse for non-payment.

Recently the appellate court overturned a summary judgment ruling in favor of an association.  The ruling in E. Qualcom Corp. v. Global Commerce Center Association, Inc. is not final yet.  If the ruling becomes final then associations may have to jump through another hoop and avoid another obstacle to collect delinquent assessments.

Qualcom owned a unit in a commercial condominium and stopped paying assessments.  One of its defenses to the association’s foreclosure included a claim for set-off.  The owner alleged that the association’s failure to fix the roof led to damages to its property and loss of revenue.  The owner claimed it should be entitled to a reduction (or set-off) in the amount owed based on its losses.  How many times have you heard something similar?

The appellate court found it was improper to grant a summary judgment for the association in light of these unrefuted allegations.  The court said the association should have been required to refute these allegations or to show that the defense was legally insufficient.  What is odd is that prior case law found those types of defenses (the lobby isn’t clean, the pool is shut down, there is water leaking into my unit) legally insufficient.

I’m sure community leaders and managers would agree that associations already face too many obstacles.  Let’s hope this case does not create an additional one.