With condominium and homeowner’s associations still rebounding from the 2007 housing crisis, many communities are plagued with unit owners that have failed to meet their financial obligations. An association member’s failure to pay assessments can have dire effects on an association’s financial well-being and directly impact the prosperity, appearance, and operation of a community. Luckily, under Florida law, community associations can file a claim of lien on the delinquent member’s property in an effort to recover past due assessments. Filing a lien on a member’s property, however, if not done properly, can expose an association to liability. Once the association takes the steps necessary to file and foreclose on a claim of lien, the delinquent member and his or her counsel will undoubtedly scrutinize every aspect of the lien itself, as well as the association’s actions prior to the filing of the lien. It is not enough that the amounts owed are properly reflected in the claim of lien, but the association must be prepared to establish that the assessments were levied in accordance with its governing documents. Otherwise, the association could be exposed to a claim for slander of title.
In its most basic form, a claim for slander of title arises when a plaintiff can establish the malicious publication of a falsehood concerning title which impairs the marketability of the property.1 While malice is technically an element of a cause of action for slander of title, a plaintiff’s initial burden of proof in this regard is exceedingly light. Malice will be presumed upon a showing that the defendant communicated untrue statements to a third person which disparage the plaintiff’s title and cause actual or special damage.2 Notwithstanding this relatively easy burden, if the Association can show that it had a good faith belief that the statements in the claim of lien were accurate, the burden will shift to the plaintiff to prove “actual malice.”3
Once the plaintiff has established that the defendant communicated to a third party a false and malicious statement disparaging the plaintiff’s title, the plaintiff must then prove that the falsehood played a material and substantial part in inducing others not to deal with the plaintiff.4 Additionally, the plaintiff must demonstrate an actual pecuniary loss or damages. The last two elements are typically established when the plaintiff provides proof that it was unable to sell or lease its property as a result of the alleged improper liens.
Community associations often rely on third parties to prepare financial statements that properly reflect the amount of assessments owed by their members. Of course, there is no such thing as a perfect system, and on occasion the financial records prepared on the Association’s behalf may not accurately reflect the payments made by a unit owner. This type of clerical mistake could lead to a claim of slander of title should the association file and subsequently foreclose on a lien that contains misinformation. Of course, Florida Courts recognize contingencies such as this and developed what is known as the “good faith” affirmative defense. In addition to rebutting the presumption of malice, the “good faith” defense operates as a qualified privilege protecting an association who operates with a genuine belief in the truth of the statements set forth in the lien.5 In other words, the Association can defeat a claim for slander of title so long as it can show that it had a genuine good faith belief in the accuracy of the amounts reflected in the claims of lien. This, however, is a factual determination that will be left to the jury.6
Prior to filing a claim of lien against a delinquent member, it is imperative that an association take all reasonable efforts to confirm that the amounts reflected therein are accurate. Moreover, the association has the additional burden of proving that it complied with its own governing documents and procedures when it levied the assessments.7 As a result, it is essential that an association seek the advice and counsel of an attorney prior to taking any actions to collect past due assessments. Further, the attorney’s review should include not only the documents supporting the amounts contained in the lien, but a review of the actions taken by the association when it levied the assessments to ensure it was in conformity with its governing documents. While this will not necessarily be conclusive, it is certainly evidence that could support a finding of good faith.8
Ultimately, whether or not the association acted in good faith will be a question for the jury; however, taking extra time and effort to confirm the proper amounts owed, the propriety of the assessment itself, and discussing these issues with an attorney will help prevent any misstatements in the claim of lien, or in the alternative, establish a “good faith” defense. As the old adage goes, a stitch in time saves nine, and taking a few extra precautionary actions can go a long way to minimize liability exposure for slander of title claims.
1 Miceli v. Gilmac Developers, Inc., 467 So.2d 404, 406 (Fla. 2d DCA 1985).
2 Continental Development Corp. of Florida v. Duval Title & Abstract Co., 356 So.2d 925, 927 (Fla. 2d DCA 1978).
3 Residential Communities of America v. Escondido Community Ass’n, 645 So. 2d 149 (Fla. 5th DCA 1994).
4 McAllister v. Breackers Seville Ass’n, Inc., 981 So.2d 566 (Fla. 4th DCA 2008).
5 Allington Towers Condominium North, Inc. v. Allington Towers North, Inc., 415 So.2d 118 (Fla. 4th DCA 1982).
7 Berg v. Bridle Path Homeowners Association, Inc., 809 So.2d 32, 34 (Fla. 4th DCA 2002).
8 Allington Towers Condominium North, Inc. v. Allington Towers North, Inc., 415 So.2d 118 (Fla. 4th DCA 1982).
Our team is available to discuss the topics written here and ready to provide additional information contained in this article. Contact us for more information.