720.312 Declaration of covenants; survival after foreclosure

Good point! I am not an attorney either, but I have extensive experience in real estate law stemming from my professional career. When I read the BOD's proposed "rule" that penalty assessments against a property would survive a foreclosure sale, I thought "huh??". If a sheriffs sale even wipes away back property taxes (although taxing authorities get first priority on the proceeds of the sheriff's auction, which is why a mortgagor requires a property tax escrow), how could a penalty assessment from the homeowners' association survive a foreclosure?
I believe your interpretation is correct. The statute only refers to the survivorship of the covenants, i.e. the entity who acquires the property through a foreclosure action must still abide by the HOA covenants as they pertain to building restrictions, new HOA assessments, etc. Old HOA assessments and fines, however, are wiped away by the sheriff's deed. The only ways for the HOA to attempt collection of old assessments would be either by seeking a personal judgement against the former owner or by bidding on the foreclosed property at the sheriff's sale.

I think we are saying the same thing in different ways. A foreclosure sale, sometimes referred to as a sheriff's auction, extinguishes all outstanding liens and encumbrances on the property. A lien holder such as the homeowners association can still seek debt recovery by suing the former owner and obtaining a judgement against any assets the former owner may still have. With respect to the party who purchased the property at the sheriff's auction, he/she is not liable for the delinquent HOA fees. However, if the new owner acquired the property through a conventional sale from the old owner, all outstanding liens and encumbrances remain on the property.

Interesting that you bring up the example of a resale by the homeowners' association. Last year there was a notice posted on the front office billboard regarding an invitation to bid on a unit taken over by SLohA. I was interested in bidding but first I asked how the property was going to be conveyed (warranty deed?? quit claim deed??). I received no answer so I declined to bid. My suspicion was that SLohA was merely "quit claiming" its lien interest on the property. In order to obtain clear title, the winning bidder would have to settle up with all other lien holders, like the bank for the balance owed on the mortgage and/or the county for delinquent property taxes.
A sheriffs auction is different. It's like a Chapter 7 bankruptcy for real estate. In essence, the sheriff sells off the property for whatever he can get. The proceeds of sale are then divvied up among all the lien holders. If money is still owed to the lien holders, their only recourse is to S u e the former owner for a "deficiency judgement". They can't go after the property anymore, however, because their liens were extinguished as a result of the sheriffs auction.
As a cautionary note I would urge all prospective buyer of units in S-bag to require a conveyance by "warranty deed" that is insured by a ALTA-certified title company. That's what I did when I bought my place three years ago, and, boy, am I glad I did. I bought my place from an estate and, sure enough, the title company found some title problems dating back to the early 1980's. It took the seller nearly 6 months and about $800 in attorney fees to get those problems cleared up. But I refused to close on the sale until that was accomplished.