Condominium Association Recovery of Attorneys’ Fees in Florida
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When deciding whether to pursue legal action, a condominium association board of directors may ask “can we recover the attorneys’ fees?” The good news for associations is that Florida Statutes and the governing documents of the community provide entitlement to the recovery of attorneys’ fees in many legal actions. The bad news is that this recovery is not without limitation. This blog will explore limitations on the recovery of attorneys’ fees and the provisions that may be important to include in the governing documents for the community.
Florida Statutes, Chapter 718, also known as the Condominium Act, includes statutory provisions that entitle the association to recover its attorneys’ fees. The first section is Section 718.116, Florida Statutes, which is a meaty section of the Condominium Act that generally governs collections. Section 718.116(3), Florida Statutes, provides as follows:
Any payment received by an association must be applied first to any interest accrued by the association, then to any administrative late fee, then to any costs and reasonable attorney fees incurred in collection, and then to the delinquent assessment. (emphasis added)
This section is oftentimes cited to for the allocation of payments – interest, late fees, attorneys’ fees, and then assessments, respectively. However, Section 718.116, Florida Statutes, includes limiting language on attorneys’ fees that could have some effect on the total attorneys’ fees to be collected from a unit owner. Oftentimes, a unit with a delinquent account will only have the attorneys’ fees that were incurred in collections, so this limitation has no consequence. The association may recover the attorneys’ fees from the very beginning of its collections efforts, from the demand letters, all the way through to receiving a judgment against the delinquent owner.
However, to see how the limiting language may affect the recovery of fees, let’s look at a common example of a lender foreclosure action. When a lender forecloses on a unit owner, the association is named defendant because of their interest in the condominium unit. Participation in the lender foreclosure action causes the accrual of attorneys’ fees. Unless the declaration for the association includes a provision allowing for the recovery of fees associated with a lender foreclosure action, Section 718.116, Florida Statutes, does not permit the recovery of such fees because they were not incurred during collections. As this is a scenario that condominium associations face regularly, this may call for a review of the governing documents.
As a second example of how the limitation affects associations, let’s say that there was an action involving the unit, such as a quiet title action, that occurred prior to the delinquency and prior to the initiation of collections. The association would inevitably be a named party in the quiet title action due to its interest in the unit. Again, although the association incurs legal fees associated with a particular unit, these fees are not recoverable under Section 718.116, Florida Statutes, because they were not incurred during collections. For purposes of this example, the participation in the quiet title action would not be recoverable, but any fees incurred to collect the subsequent delinquency would be recoverable. While this scenario may not occur often, it is something to keep in mind.
Another statutory provision that permits the recovery of attorneys’ fees is Section 718.303(1), Florida Statutes, which provides in pertinent part:
Actions for damages or for injunctive relief, or both, for failure to comply with these provisions may be brought by the association or by a unit owner against:
(a) The association.
(b) A unit owner.
(c) Directors designated by the developer, for actions taken by them before control of the association is assumed by unit owners other than the developer.
(d) Any director who willfully and knowingly fails to comply with these provisions.
(e) Any tenant leasing a unit, and any other invitee occupying a unit.
The prevailing party in any such action or in any action in which the purchaser claims a right of voidability based upon contractual provisions as required in s. 718.503(1)(a) is entitled to recover reasonable attorney’s fees.
Section 718.303, Florida Statutes, awards attorneys’ fees to the prevailing party in actions for damages or injunctive relief. Legal actions that may fall under this section may include actions brought for money damages, actions seeking injunctive relief to require a unit owner to stop violating the rules and regulations, actions challenging decisions made by the board of directors, etc. What is important in this section is that the prevailing party is entitled to fees. So while the association can recover its fees if it prevails, the association may also be required to pay the legal fees of the opposing party if it loses the case. Even more important to point out is the following:
A unit owner prevailing in an action between the association and the unit owner under this section, in addition to recovering his or her reasonable attorney’s fees, may recover additional amounts as determined by the court to be necessary to reimburse the unit owner for his or her share of assessments levied by the association to fund its expenses of the litigation
Section 718.303(1), Florida Statutes. If the unit owner is the prevailing party in an action brought by the association, the association may be held liable for more than just an award of attorneys’ fees. As imposed by the aforementioned section, the association may also be required to reimburse the unit owner his or her share of the assessments that funded the litigation. While this reimbursement is typically a very small amount, it is not without consequence. Associations must be mindful to pursue legal actions that have a reasonable basis and are supported by the law and governing documents.
Also notable in Section 718.303, Florida Statutes, is that the award must be for reasonable attorneys’ fees. The reasonable standard is applied for almost every attorney fee award, regardless of the nature of the lawsuit. Therefore, while this may be looked at as a limitation, it is a foreseeable limitation that many practitioners are well aware of and bear in mind while representing its client.
Outside of the statutory authority permitting the recovery of attorneys’ fees, one of the main sources to look to for entitlement to fees is the declaration of the association. The declaration, also referred to as covenants, conditions, and restrictions, is a legal document that sets forth the guidelines for the community. Stated differently, the declaration is the rulebook for the community. Many declarations will cite to or include provisions that state the same as Sections 718.116 and 718.303, Florida Statutes. Additionally, some declarations will include other attorneys’ fees provisions that would cover the association for its participation in other actions. As it relates to our examples above of the lender foreclosure actions and the quiet title actions, it may be important for associations to reconsider the provisions in its declaration and to include for instances beyond those governed by the Condominium Act. Associations may want to consider grey areas that do not fall squarely under the statutory authority and include declaration provisions for attorneys’ fees.
The Condominium Act is very favorable to Florida Condominium Associations and the recovery of attorneys’ fees in many instances. Additionally, associations have the security blanket of their governing documents to ensure that they are not left holding the bill when they take legal action. The so-called limitations discussed in the blog are not burdensome limitations and are just simply something to discuss with the community association’s attorney and to keep in mind when moving forward with or participating in particular actions.