Saturday, July 31, 2010

Does the FDCPA Allow an Association to Communicate with a Tenant Under the Florida Condominium Act's Recent Amendments?

The Florida Condominium Act, Chapter 718, Florida Statutes, was recently amended to provide that if a unit is occupied by a tenant and the unit owner is delinquent on any monetary obligation to the association, the association may demand in writing that the tenant pay future rents and other monetary obligations of the tenant directly to the association until the association releases the tenant or the tenant vacates the premises, in order to satisfy the unit owner's obligations to the association. At first glance, it would appear that taking such an action on the part of the association would constitute a violation of the Federal Fair Debt Collection Practices Act (FDCPA), particularly 15 U.S.C.A. § 1692c's prohibition on communication with third parties regarding the debt. For several reasons, however, we believe the Condominium Act's amendments are not always inconsistent with the FDCPA.

In order to more fully understand the operation of the amendment, we must review its actual language, which can be found at Chapter 2010-174, Laws of Florida (beginning on page 47). It provides, in pertinent part:

"If the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may make a written demand that the tenant pay the future monetary obligations related to the cooperative share to the association and the tenant must make such payment. The demand is continuing in nature, and upon demand, the tenant must pay the monetary obligations to the association until the association releases the tenant or the tenant discontinues tenancy in the unit. The association must mail written notice to the unit owner of the association’s demand that the tenant make payments to the association. The association shall, upon request, provide the tenant with written receipts for payments made. A tenant who acts in good faith in response to a written demand from an association is immune from any claim from the unit owner."

It should first be noted that the provision states that the association "may" elect this remedy, not that it must. Therefore, it cannot be said that this provision is in direct conflict with the FDCPA, because the association can simply choose not to elect this remedy if it fears it will violate the FDCPA in doing so. There is no Morton's Fork involved, and therefore little likelihood that the state law is conflict preempted under the Supremacy Clause (U.S. Const. art. VI, cl 2.) (click here for more information on these doctrines, in the context of the Arizona immigration law).

That being said, one can understand why an association would want to exercise its rights under this provision. In order to determine if it's possible to do that without violating the FDCPA, let's look at the relevant Federal provision. 15 U.S.C.A. § 1692c(b) provides:

"Except as provided in section 1692b of this title [to ascertain the debtor's location information], without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector."

For this provision to apply, the communication must concern a debt, it must come from a debt collector, and the communication must not fall within an exception to the provision. Whether these criteria will be met will depend on the facts of each specific case.

Is the communication in connection with the collection of a "debt"?

The FDCPA defines debt as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment." 15 U.S.C.A. § 1692a(5). Association dues and assessments are usually considered debts under the FDCPA, but fines assessed by the association for violation of association rules are not. Durso v. Summer Brook Preserve Homeowner's Ass'n, 641 F.Supp. 2d 1256 (M.D. Fla. 2008). The Florida law at issue provides that the tenant may be required to pay rent to the association if the owner is delinquent on "any monetary obligation due to the association." Presumably, this would include both dues and fines.

Is the party attempting to collect the amount owed to the association a "debt collector"?

The FDCPA defines "debt collector" as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 1692f(6) of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests."

Under this definition, the association itself would not be subject to the FDCPA (unless it uses another name in collecting the debt), since it is a creditor in this scenario, not a debt collector. See generally Madura v. Lakebridge Condominium Association, Inc., 2010 WL 2354140 (11th Cir. 2010). But a management company probably is (see Id.), and a collection agency and an attorney definitely are.

Does the Florida Condominium Act's amendment fall under any exception to § 1692c(b)?

Even if the communication concerns a debt and emanates from a debt collector, the communication will not violate the FDCPA if it falls under one of the exceptions to § 1692c(b). According to its terms, § 1692c(b) does not apply to communications (1) made with the prior consent given directly to the debt collector, (2) made with the express permission of a court of competent jurisdiction, or (3) as reasonably necessary to effectuate a postjudgment judicial remedy. It is likely that the first exception will not be met with respect to existing unit owners, although it should urge all associations to place a written consent into the documents prospective owners must sign in order to avoid liability in the future. It is also likely that the second exception is not met, unless the notice is being sent in litigation and upon the court's order. The third exception does not appear to have any application to the Florida Statute at all.

Additionally, the FTC staff commentary to the FDCPA provides that "an attorney may communicate with a potential witness in connection with a lawsuit he has filed (e.g., in order to establish the existence of a debt), because the section was not intended to prohibit communications by attorneys that are necessary to conduct lawsuits on behalf of their clients." It is not clear where this came from, or if a court would consider this a valid exception (FTC commentary is not binding on the judiciary). However, parallels can be drawn between the need to contact witnesses for the purposes of litigation and the need to contact tenants for the purposes of the Condominium Act amendment. Both involve remedies that need not be elected- just as the Act's amendments provide that the association "may" notify the tenant, in principal a creditor need not elect to file a lawsuit and seek judicial remedy. So if an exception is going to be made to allow the creditor to elect one legal remedy- a lawsuit, why not make an exception to allow the creditor to elect another legal remedy- charging past due amounts to the tenant?


The issue of whether electing remedy under the amendments to the Condominium Act will subject an association or its agent to FDCPA liability has not been litigated. It is likely that this issue will be addresses by a court of competent jurisdiction at some point however, given the state of the economy and of Florida real property in general. Associations should prepare for this battle by amending their association documents to provide for the unit owner's consent to elect the remedy provided in the Condominium Act's amendments, and by being prepared to establish the existence of an exception to § 1692c(b)'s application in the specific circumstances.