I recently
explained how lucky the banks are when they foreclose on a unit
or a home and take back ownership. The law protects them, and
despite how much the unpaid condo or HOA assessments are, the
bank is only responsible for the lesser of one year of
assessments or 1% of the mortgage. Many of you are outraged
over that and I’m with you.
The
association always hopes that a 3rd party buys the
property at the bank’s foreclosure sale instead of the
foreclosing bank, because under the law, a 3rd party,
unlike the bank, would owe all past due assessments to the
association.
But even
though the law requires some payments to the association, your
condo or HOA may get zero because of a terrible provision that
may be looming in your governing documents. Despite the fact
that the law requires banks to pay the lesser of one year of
assessments or 1% of the mortgage, and requires a 3rd
party purchaser to pay all past due assessments, many of you
have provisions in your governing documents that say the banks
owe nothing when they take back ownership of a home or unit
after a foreclosure and that a 3rd party purchaser
owes nothing if they buy the property at a foreclosure sale.
That’s right, not a penny is owed to the association. You are
wiped out.
So what
controls, the law or your governing documents? In May Florida’s
Third District Court of Appeal ruled in Old Cutler Lakes by the
Bay Community Association v. SRP SUB . A third party purchaser
took title to a unit within the community via a bank mortgage
foreclosure auction.
The
governing documents contained the following provision:
“The sale
or transfer of any Lot pursuant to the foreclosure or any
proceeding in lieu thereof of a first mortgage meeting the above
qualifications, shall extinguish the lien of such assessments as
to payments which became due prior to such sale or transfer.”
The Third
DCA concluded that the 3rd part purchaser at the sale
is not liable for any of the past-due assessments, attorney’s
fees and/or costs that accrued prior to its acquiring title.
So what do you do now? Check your governing documents. Make
sure they don’t contain a similar provision. If they do, you
certainly want to talk you’re your attorney about amending them
properly so you at least get the crumbs owed to the association
when a bank forecloses.
