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Condo Associations Must Ensure That Accepting Partial Payments From Delinquent Unit Owners Won’t be Considered Payment in Full
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Condo Associations Must Ensure That Accepting Partial Payments From Delinquent Unit Owners Won’t be Considered Payment in Full

November 25, 2014 Community Association Industry Legal Blog

Reading Time: 3 minutes


Condominium association budgets suffer significantly when unit owners become delinquent in paying assessments. Moreover, the burden for those unpaid assessments falls on the responsible unit owners who must make up the shortfall in the next yearly budget, which often results in higher assessments across the board. For this reason it is important that associations have collections policies in place to pursue unpaid assessments. However, associations must ensure that in their zeal to collect unpaid assessments that accepting partial payments from delinquent unit owners won’t be considered payment in full of the entire debt owed. This Blog post will discuss a recent court case which serves as a loud warning to all associations when accepting partial payments from delinquent unit owners.

In August, 2014, Florida’s Second District Court of Appeal issued an opinion in the case of St. Croix Lane Trust v. St. Croix at Pelican Marsh Condo Ass’n, Inc., which held that a delinquent unit owner’s partial payment will be considered payment in full if it is designated as such on the check or in a letter accompanying the payment. See 2014 Fla. App. Lexis 12220 (Fla. 2d DCA Aug. 8, 2014). In that case, the association foreclosed its lien on a unit due to unpaid assessments. After the foreclosure sale, and once the St. Croix Lane Trust obtained title to the unit, the association wrote a letter to the Trust demanding payment in full for all past-due amounts owed. Id. at 2. At that time, the total outstanding debt owed to the association was over $36,000.00. Id.

The Trust failed to respond to the association’s demands and never paid the past-due balance, which resulted in the association filing another claim of lien against the property. The Trust’s attorney responded by sending a letter expressly disputing the total past-due amount owed but offering to pay $840 (the current quarterly assessments only). Id. at 3. Enclosed with the letter was a check from the Trust to the association for $840. Id. The letter included the following restrictive endorsement concerning the check, “this check is tendered in full and final satisfaction of all claims made against the Trust and the property for the amounts demanded. . . .” Id.

The association cashed the check and then responded to the Trust by stating the funds were being applied as partial payment only. Id. at 4. The association then demanded the total remaining past-due amount owed. The Trust again refused and the litigation began shortly thereafter. Id.

The appellate court ruled in favor of the Trust, stating that, “when the association negotiated the Trust’s check that was tendered in full and final satisfaction of the association’s disputed claim, an accord and satisfaction resulted.” Id. at 7. In other words, the remaining debt was extinguished because the Trust’s check was an offer for payment in full, which the association accepted by cashing the check. The court further explained that, “if the association did not wish to accept the $840 check in full settlement of its claims in accordance with the Trust’s conditional tender, then it should have returned the check instead of negotiating it.” Id. The lesson for associations is that they should not accept any partial payment for past-due amounts owed that are in dispute if that partial payment comes with restrictive language stating it is in full satisfaction of the entire debt owed. In that situation, the association should return the check to the debtor with clear instructions that it will only accept payment in full for the total past-due amount owed.

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