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WHERE HAVE ALL THE
FORECLOSURES GONE?
By
Eric Glazer, Esq.
Published September 19, 2016
Boy what a difference a few years makes.
Remember the days where foreclosures were the talk of the town?
Remember when a large percentage of the units or homes in your
community were not paying their assessments and the association
was struggling to pay its bills? Remember when banks began
owning units in your community and even the banks were refusing
to pay their monthly assessments? Well, to a large degree, that
problem is gone. The question is, can those days return and what
have we learned from what was a very scary situation?
One thing we learned is that The Florida
Legislature will do nothing to help the situation. As all of you
know by now, and as many of you learned the hard way, that when
a bank forecloses on a home or unit, they don’t need to pay all
of the unpaid assessments on the unit. The law protects the
banks and they only have to pay the lesser of one year of
assessments or 1% of the mortgage. Associations across our state
lost millions of dollars and continue to lose as a result of our
legislature protecting the banks.
We learned that the laws created
by The Florida Legislature to help the associations with these
problems were for the most part a waste of time. Delinquent
owners didn’t suddenly start paying their assessments because
they were prohibited from voting or running for the board or
using the gym.
We also learned that associations who saved
money before the crisis hit, did better than associations who
didn’t. Associations who went into the foreclosure crisis with
huge reserves were able to borrow (with approval from the
owners) from these funds in order to meet monthly bills.
Some associations who thought it was a good
idea to prohibit owners from renting their unit for the first
year or two of ownership found out that these owners were unable
to pay their assessments without collecting rent from a tenant,
thus compounding the problem. Many associations had to forego
funding reserve accounts because with so many people not paying
their assessments, any funds collected from the owners that were
paying needed to be used to pay regular bills, never mind about
putting away money for reserves.
For the most part delinquencies have resumed
to normal levels in most Florida communities. I would say that
in most associations only about 5% of the owners are actually
delinquent. In some buildings we represented during the
foreclosure crisis containing hundreds of units, delinquencies
exceeded fifty percent. The numbers were staggering.
So can the foreclosure crisis happen again? I
think it can. There is another condo boom happening right now.
It seems the cranes are everywhere again. Most of the new
construction is certainly not considered affordable housing to
the average family. Money is cheap to borrow and investors are
borrowing money to buy these units. Instead of people buying
these units in order to live in these units, we see desperate
attempts to rent out these units by the day or week on various
internet sites. Associations are fighting back against these
daily rentals. But if the associations succeed, maybe these
owners won’t be able to pay their assessments any longer. And if
interest rates eventually go north, and they will, maybe more
owners won’t be able to afford their condo assessments any
longer because their adjustable rate mortgage has just gone up.
Sound familiar?
I’m not pretending to be a crystal ball, the
bearer of bad news or a fortune teller. All I’m saying is that
history often repeats itself and that associations are wise to
learn from the past and whenever possible, save some money for
that rainy day, because in Florida it certainly may rain again.
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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 more than 2
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decades and is the owner of Glazer
and Associates, P.A. a seven attorney law firm with offices in
Fort Lauderdale and Orlando and satellite offices in Naples,
Fort Myers and Tampa.
Since 2009, Eric has been the host
of Condo Craze and HOAs, a weekly one hour radio show that airs
at noon each Sunday on 850 WFTL.
See:
www.condocrazeandhoas.com.
He is the first attorney in the
State of Florida that designed a course that certifies
condominium residents as eligible to serve on a condominium
Board of Directors and has now certified more than 10,000
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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