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MAKE SURE YOUR DOCS DON’T COST YOU MONEY
By
Eric Glazer, Esq.
Published July 31, 2023
Let’s start with what some of you
already know……..foreclosures are on the rise. Incredibly, this
is happening before huge special assessments are kicking
in for many of you and before mandatory reserves go into
effect. If foreclosures are already on the rise, what’s going
to happen when special assessments and reserves take hold of
most communities?
If a bank forecloses on either a home
in an HOA or on a unit in a condominium, the association is
likely to take a huge financial hit if that home or unit is also
delinquent to the association. When a bank forecloses on a
property, most of the time that bank winds up becoming the owner
of that property because nobody bids against the bank at a
foreclosure sale. For example, if an owner fails to pay the
mortgage, the bank eventually forecloses and gets a final
judgment against the owner for the amount of the delinquency
plus interest and attorney’s fees. The judge sets an auction
date. At the auction, the bank usually bids the amount of their
final judgment, there are no other bids and the bank winds up
owning the property.
Now that the bank owns the property,
do they have to pay all of the assessments that are owed to the
association on that home or condominium unit? Not even close.
The law states that the bank would only have to pay the lesser
of:
So, let’s say the bank is foreclosing
on a $300,000.00 mortgage. One percent of that mortgage is
$3,000.00. Let’s say the assessments are $600.00 per month.
One year of assessments is $7,200.00. Therefore, at most the
bank is responsible for $3,000.00 and not $7,200.00 and this is
even if the prior owner has not paid for several years. There
can be $15,000.00 in delinquent assessments owed on the unit ---the
bank would still only have to pay $3,000.00 at most.
Here’s where the association can
really get stung. If the governing documents let the bank off
the hook and state that the bank does not have to pay anything
if they wind up foreclosing and owning the property. Even
though the law would require the bank to pay $3,000.00 in the
above example, the association’s governing documents may
allow the bank to pay zero! SO……………MAKE SURE YOUR GOVERNING
DOCUMENTS DO NOT CONTAIN SUCH A PROVISION AND IF THEY DO – AMEND
IT IMMEDIATELY BEFORE FORECLOSURES IN YOUR COMMUNITY POSSIBLY
BECOME ROUTINE! DON’T LET THE BANKS OFF THE HOOK!
Next week we’ll talk about what
happens when a third party buys the property at a foreclosure
sale and not the bank. You definitely will want to find out the
good and the potential for disaster.
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About
HOA & Condo Blog
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Eric Glazer graduated
from the University of Miami School of Law in 1992 after
receiving a B.A. from NYU. He has practiced community
association law for three decades and is the owner of
Glazer and Sachs, P.A. a five attorney law firm with
offices in Fort Lauderdale and Orlando.
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Eric is Board Certified by The Florida Bar in
Condominium and Planned Development Law.
Since 2009, Eric has been the host of Condo Craze
and HOAs, a weekly one hour radio show that airs at 11:00 a.m.
each Sunday on 850 WFTL.
See:
www.condocrazeandhoas.com.
Eric is the first attorney in the State of
Florida that designed a course that certifies condominium and
HOA residents as eligible to serve on a Board of Directors and
has now certified more than 20,000 Floridians all across the
state. He is certified as a Circuit Court Mediator by The
Florida Supreme Court and has mediated dozens of disputes
between associations and unit owners. Eric also devotes
significant time to advancing legislation in the best interest
of Florida community association members.
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