Closing In on Foreclosure and Your Community Association
Wait a minute, and what happened to late fees and pulling swimming pool privileges? That’s what you might be thinking if you find a foreclosure notice from your homeowners’ association (HOA) or condominium association in the mail. That’s right, foreclosure over your association assessment account. Foreclosure isn’t just for mortgage lenders and state law probably gives your community association some muscle in getting you to pay up.
- Your community association may be first in line for foreclosure
- Florida condo associations use all options to get assessments paid
- Taking care of assessment accounts quickly saves added costs and headaches for owners
In Florida, where foreclosure rates lead the nation, it’s also very likely that any type of residence from a condominium to a single-family home is part of some type of community association. Running any association takes revenue, and that comes from owners’ assessment accounts. Expect your association to be quick to act, including using foreclosure measures, to collect on your account. Jane Bolin, of PeytonBolin, PL, focuses much of her practice on community association law and shared insights on how condo associations are coping with the foreclosure crisis and keeping their communities running.
Just Send the Rent to the Association: Getting Assessments Paid
When you own residential property and you’re an association member, you and your fellow owners have shared ownership interests. When even one owner doesn’t make assessment or dues payments, there’s a direct impact on the association budget. Generally, state laws give community associations the power to collect past due assessments using foreclosure, but the exact remedy and how much an association can collect varies.
What’s new in Florida? Bolin responds, "The demand for rent. It’s a huge change, allowing the association to collect rent from a tenant." Bolin further explained it’s common for condos to be rented, and new laws allow associations to collect rent directly, applying the funds to a delinquent owner’s account. This continues until the amount due is paid, or the tenancy ends.
Collecting rent comes into play when there has been a foreclosure sale, too. Bolin says associations are quicker to foreclose than lenders, and the best option can be to take back title to a condo and rent it out. And yes, the new tenant may be the former unit owner.
Is the "Super Lien" a Solution?
There can be competing interests in a foreclosure, and state laws can limit how much an association can recover. How does it work in Florida? Bolin says, "The ‘super lien’ provisions apply when a first mortgagee forecloses. There’s a safe harbor, and the lender is only on the hook for 12 months’ worth of assessments or 1 percent of the note, whichever is less." The problem? Bolin continues, "Most of the time the amount due is more than 12 months’ of assessments."
And foreclosure takes time. Bolin says, "Courts are stressed – it adds to the timeline for foreclosure. There are just too many cases on the docket."
So Is the Association a Bad Guy?
As an owner, you could very well be in disbelief, angry or frustrated if you get a legal notice from your association. There are two sides to the story, with both the owner and the association facing financial distress. Bolin finds in Florida, people are increasingly aware of what a community association is and the power it has when it comes to assessment accounts and foreclosure.
Still, associations tend to be misunderstood. On collections, Bolin explains, "Boards aren’t happy about it; they have to act. It’s a breach of fiduciary duty not to collect. Boards can’t pick and choose, and selectively enforce the assessments."
Action Plan for Owners
When there’s a problem paying your assessments, what should you do? Bolin stresses, "Don’t ignore it." Open your mail! Bolin continues, "When you receive a Notice of Intent to Lien, handle it immediately." Bolin explained as collection efforts continue, your consequences and costs are only going to go up, and the earlier your response, the better.
Don’t make things worse, either. Bolin says owners can make the mistake of not keeping the issues clear, and complicating an assessment dispute with complaints about unrelated rules violations or other issues. The result? Higher costs for the homeowner.
The foreclosure forecast isn’t looking up anytime soon, in Florida or around the nation. When making the tough choices on paying the bills, though, your assessment statement may deserve a place at the top of the stack.
Heather McGowan co-authors the Lawyers.com blog
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