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Landmark U.S. Supreme Court Decision on Community Associations!

By Alan B. Garfinkel, Esq.

A major victory for Community Associations!  The United States Supreme Court provides new protections for Community Association Home Owners.

In Bank of America, N.A. v. Caulkett, The United States Supreme Court said “NO” to Lien Stripping in Chapter 7 Bankruptcy cases. In many instances,properties owned by delinquent owners are “underwater” – meaning the owner owes more money on the property than it’s worth.  Prior to this United States Supreme Court ruling, delinquent owners filing a Chapter 7 Bankruptcy to avoid payment of their debts (including the payment of maintenance assessments owed toCommunity Associations) could ask the Bankruptcy Judge to remove the Association’s lien due to lack of equity in the property.  If there was no equity in the property, the Bankruptcy Judge would order that the Communiy Association lien be eliminated. As a result, the Association was unable to recover ANY maintenance assessments, late fees, interest, or attorney fees and costs that the lien was intended to secure.  The Association would then have to absorb all amounts due prior to the delinquent unit owner filing for bankruptcy. You and every other owner in the Community would then be forced to foot the extra bills. This contributed to financial hardships facing many owners and residents of Community Associations.

On June 1, 2015, The U.S. Supreme Court ruled that delinquent unit owners cannot escape their responsibility in a Chapter 7 Bankruptcy.*

A United Stated Supreme Court decision affecting Community Association living is very unusual. This ruling was a huge win for Community Associations since it allows an Association’s claim of lien to survive a Chapter 7 Bankruptcy – leaving the Association’s assessments fully secured and collectible. This Supreme Court Decision provides greater ability to collect delinquent amounts and greater financial stability for all Community Associations.

The law firm of Katzman Garfinkel was extremely forward thinking, and the only law firm we are aware to file specific court motions requesting postponement. Katzman Garfinkel argued that courts should not discard communities lien rights until after The Unites States Supreme Court made its Decision in this landmark case.  “By filing these court motions, we were able to prevent Community Association liens being eliminated in many Chapter 7 Bankruptcy cases,” said Tennille Shipwash, Katzman Garfinkel Senior Associate.  ”We felt strongly that the Supreme Court would ultimately make a positive decision for Community Associations and put an end to lien stripping in Chapter 7 Bankruptcy Cases,” said MaryAnn Chandler, Katzman Garfinkel Partner.

*The delinquent unit owner may have remedies available under Chapters 13 and 11 of the Bankruptcy Code.

2015 Special Session Moves Forward

Legislators in both the House and Senate spent this week in further budget negotiations. According to Senate President, Andy Gardiner (R-Orlando), legislators could have a final budget to vote on by Tuesday. That gives the Appropriations Chairs Representative, Richard Corcoran (R-Land O’Lakes) and Senator Tom Lee (R-Brandon), today and the weekend to reach an agreement on any outstanding items that the Conference Committees could not settle.

We will continue to keep you apprised of this high-wire act happening in Tallahassee.

Update on Pending Legislation

Many of the proposed laws passed by the House and Senate during the Regular Session are still moving through the legislative process. The following bills affecting Community Associations were supported by CAN, presented to Governor Scott on June 1, 2015 and signed into law on June 11, 2015: 

HB 791 – Residential Properties – This comprehensive Community Association bill was signed by the Governor on June 3, 2015 and will go into effect on July 1, 2015. Click here to read the breakdown of this bill.

Thank you for your continued support, comments and readership.

Yours in community, 

Alan B. Garfinkel, Esq.

Katzman Garfinkel, Founding Partner

and Community Advocacy Network, Chairman

Source: Can FL Alerts

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