HOAleader.com - Tip of the Week - March 25, 2011
Published: Sun, 03/20/11
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HOA Foreclosing to Rent Units? First, Know the Risks
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In this week's tip, we suss out the pros and cons of whether to
foreclose on a delinquent owner with the intent to rent out the
unit to recoup your HOA's fees.
"A couple of years ago, I'd have told my clients asking about
foreclosing and renting, 'Don't expect to recoup all your money
through a lease because the mortgage company's going to foreclose
on the unit pretty quickly,'" explains Michael S. Hunter, an
attorney and partner at Horack Talley Pharr & Lowndes PA in
Charlotte, N.C., who represents associations.
"Now I'm not so quick to say that because banks are taking so
long to foreclose. Now associations can collect 6-12 months of
rent before the bank forecloses," he told us.
Jed L. Frankel, a partner at Eisinger, Brown, Lewis, Frankel &
Chaiet PA in Hollywood, Fla., who advises community
associations, is cautious when he advises clients on the
foreclosure-to-rent strategy. "I've had some clients doing that
for a couple of years, but it's very dangerous," he says. "Once
the association owns the unit, it becomes a landlord--assuming
you rent it out. Florida is a very pro-tenant state, so you
become responsible for upkeep and insurance for the unit. That
opens the association up to economic liability."
Even if you can't rent out a unit you've foreclosed on, there
are benefits to foreclosing, says Ben Solomon, an attorney and
founder of the Association Law Group in Miami Beach, Fla., who
advises more than 500 associations and also represents
developers through his second law firm, Solomon & Furshman LLP.
"When associations say, 'We're not going to wait for the bank,
and instead we'll pursue our own legal remedy,' it puts direct
and indirect pressure on the bank," explains Solomon. "If
there's no competing interest for title to the property, you've
given a lot of extra breathing room to the bank. But when the
association files foreclosure, there are varying results, but
there can be good results. For example, when a short sale is
presented while the association is foreclosing, that puts a lot
of pressure on the bank to accept the short sale. It also tends
to speed up the lender's own foreclosure because lenders realize
there isn't going to be anything to work out with the borrower.
That's why associations should be foreclosing. But the way
lawyers charge legal fees makes it cost prohibitive."
For more insight on foreclosing-to-rent, see our new article:
http://www.hoaleader.com/members/555.cfm
Best regards,
Matt Humphrey
President
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Recent articles posted at HOAleader.com:
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How Should an HOA Divide Repair Costs? Discussion Forum Follow-Up
A reader asks, "Our HOA has both condos and stand-alone homes.
The condos vary in size, as do their roof and siding areas. They
pay an additional assessment for the HOA to take care of many
items, including the roofs and siding. When the roofs have to be
replaced, does the HOA decide whether all the condos will pay an
equal assessment or one based upon their respective roof areas?
The CC&Rs and bylaws are ambiguous. Also, it is the contention of
the board that it has the authority to mandate the replacement of
roofs when necessary rather than having a vote by the condo
owners." Here, our experts offer their insight on allocating
repair costs and determining when owners' input is required for
expenses.
Click here to read full article:
< http://www.hoaleader.com/members/557.cfm >
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What Your HOA Should Know About the Foreclosure-to-Rent Strategy
The takeover of foreclosed units by condominium and homeowners
associations to rent them out and recoup delinquent fees has been
one of the fastest-growing solutions to the rise in foreclosures.
But it's not without cost. Here we explain what your HOA board
needs to know about the risk when acquiring a unit for rental and
the expense involved in foreclosing on a property to rent it out.
Click here to read full article:
< http://www.hoaleader.com/members/555.cfm >
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Is Your HOA Getting Fleeced? Know the Signs of Financial
Shenanigans
In this week's tip, we discuss two signs that your HOA is being
defrauded or suffers from sloppy financial recordkeeping. Either
way, you're losing money, and you should start digging deeper to
staunch the flow.
Click here to read full article:
< http://www.hoaleader.com/public/553.cfm >
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HOA Finances: Five Signs of Fraud or Financial Sloppiness for
HOAs
Typically before HOAs learn of fraud or financial ineptitude on
the part of their treasurer or manager, there are small signs
that should have been red flags. Here we provide five signs that
your HOA funds may be in jeopardy.
Click here to read full article:
< http://www.hoaleader.com/members/552.cfm >
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HOA Governing Documents Explained
HOA gurus freely banter about the terms "CC&Rs," "bylaws," "rules
and regs," and "governing documents." But what exactly are those
documents, and which are the most and least powerful? In this
article, we lay out what constitutes each governing document and
sort out which ones have more authority than others.
Click here to read full article:
< http://www.hoaleader.com/members/551.cfm >
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