Restrictive Endorsement

Jonathon Ellis

Restrictive endorsements when coupled with payment are still applicable to associations.

As many may remember, The Florida Legislature amended Florida Statutes §718.116 and §720.3085 to include language relating to the applicability of restrictive endorsements, designations or instruction accompanying payments made for delinquent assessments.  Specifically, Florida Statutes §718.116(3) and §720.3085(3)(b) state as follows:

§718.116

(3) Assessments and installments on assessments which are not paid when due bear interest at the rate provided in the declaration, from the due date until paid. The rate may not exceed the rate allowed by law, and, if no rate is provided in the declaration, interest accrues at the rate of 18 percent per year. If provided by the declaration or bylaws, the association may, in addition to such interest, charge an administrative late fee of up to the greater of $25 or 5 percent of each delinquent installment for which the payment is late. 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’s fees incurred in collection, and then to the delinquent assessment. The foregoing is applicable notwithstanding any restrictive endorsement, designation, or instruction placed on or accompanying a payment. A late fee is not subject to chapter 687 or s. 718.303(4).

§720.3085

(3)  Assessments and installments on assessments that are not paid when due bear interest from the due date until paid at the rate provided in the declaration of covenants or the bylaws of the association, which rate may not exceed the rate allowed by law. If no rate is provided in the declaration or bylaws, interest accrues at the rate of 18 percent per year.

. . .

(b) Any payment received by an association and accepted shall be applied first to any interest accrued, then to any administrative late fee, then to any costs and reasonable attorney fees incurred in collection, and then to the delinquent assessment. This paragraph applies notwithstanding any restrictive endorsement, designation, or instruction placed on or accompanying a payment. A late fee is not subject to the provisions of chapter 687 and is not a fine.

Many associations assume this means that any type of restrictive endorsement on a check or other payment, including “full and final satisfaction”, “payment in full”, etc. are inapplicable and that an association can accept payment regardless of the restrictive endorsement.

In St. Croix Lane Trust & M.L Shapiro v. St. Croix at Pelican Marsh Cd’m. Ass’n., Inc., 144 So.3d 639 (Fla. 2nd DCA 2014), the Second District Court of Appeal, held that the language in Fla. Stat. §718.116(3) relating to restrictive endorsements or other similar instructions applies solely to restrictive endorsements regarding the application of the payment in a manner other than that set forth in the statute.  However, the Second District Court of Appeal also held that the restrictive endorsement language of Fla. Stat. §718.116(3) did not otherwise alter the law relating to accord and satisfaction and, therefore, restrictive endorsements stating “full and final satisfaction,” “payment in full,” or similar language remains in full force and effect. Id.

Specifically, the Court in St. Croix Lane Trust did not alter Fla. State. §673.3111.  Fla. Stat. §673.3111(1) and (2) states as follows:

§673.3111 Accord and satisfaction by use of instrument

(1) If a person against whom a claim is asserted proves that that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, that the amount of the claim was unliquidated or subject to a bona fide dispute, and that the claimant obtained payment of the instrument, the following subsections apply.

. . .

(2) Unless subsection (3) applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.

(3) Subject to subsection (4), a claim is not discharged under subsection (2) if either paragraph (a) or paragraph (b) applies:

(a) The claimant, if an organization, proves that:

1. Within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office, or place; and

2. The instrument or accompanying communication was not received by that designated person, office, or place.

(b) The claimant, whether or not an organization, proves that, within 90 days after payment of the instrument, the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted. This paragraph does not apply if the claimant is an organization that sent a statement complying with subparagraph (a)1.

As a result, to the extent the Association receives a check or other tender of funds for “full and final satisfaction,” “payment in full,” or the like, an association should not negotiate the instrument unless the Association intends to accept the funds as full satisfaction of the debt. An association should not rely on Fla. Stat. §718.116(3) or §720.3085(b)(3) as a basis to avoid the restrictive endorsement such as “full and final satisfaction,” “paid in full,” etc.   If an association does negotiate payment with a restrictive endorsement indication “full and final satisfaction” or “payment in full”, accidently, the association should immediate consult counsel.

If you have questions regarding restrictive endorsements, please do not hesitate to contact a member of the Community Associations practice group at Shumaker, Loop & Kendrick, LLP, 813.229.7600.