HOAleader.com - Tip of the Week - August 12, 2011
Published: Mon, 08/08/11
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The 5-Step Strategy One HOA Used to Refill Its Coffers
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This week's tip is culled from the true story of Lancaster
Condominium Association in Hialeah, Fla. The association went
from having more than half of its 90 units in foreclosure--with
an even greater number delinquent in assessments to the
association--to financial solvency by pursuing an aggressive
legal strategy against delinquent owners.
Step 1: File Liens and Foreclose
Until a year ago, more than half of the 90 units at Lancaster
Condominium were in foreclosure, and even more were delinquent
in association assessments. Lancaster faced a big problem.
Banks weren't in any hurry to take title to their foreclosed
units, which meant that condo owners weren't paying assessments
and neither were banks.
Under Florida law, condos can file liens against owners who are
severely behind on their maintenance fees and then foreclose to
satisfy the liens. Lancaster foreclosed on about 10 units
whose owners were each $5,000-$10,000 behind in assessments.
The association did so to rent those units to recoup delinquent
amounts until the lenders completed their foreclosure process.
The move wasn't without risk. First, the banks could restart
their foreclosure proceedings at any point, so Lancaster might
not hold title to the properties long enough to recoup its
delinquencies. In addition, Lancaster would arguably lose the
right to require lenders to pay, per Florida law, 12 months
of delinquent assessments or 1 percent of the total outstanding
mortgage amount, whichever is lower.
"I don't know if it's been officially determined yet by Florida
courts, but an association could lose its right to even collect
that from the lender if the association takes intervening
title," explains Andrew Lewis of Eisinger, Brown, Lewis, Frankel
& Chaiet PA in Hollywood, Fla., who specializes in representing
community associations.
Another risk? Lancaster wouldn't be able to rent the units.
"Landlords have to disclose in their lease the possibility
that there's a mortgagee that has superior rights to the unit
and that eventually that mortgagee could take over," explains
Lewis. "So it's not always easy to get tenants to rent if
there's a possibility they could be forced to move out soon."
Lancaster, however, was lucky. By offering the units at 75-85
percent of their market value, it was able to rent all 10
units within 30 days of getting possession. "That's not going
to be the case everywhere," says Lewis. "You have to be in
the right rental market, have a marketing strategy, set your
rent at a reasonable level, and have the staffing to become a
landlord. Not every association is set up to do that."
To find out the other four steps Lancaster pursued, see our new
article: http://www.hoaleader.com/members/612.cfm
Best regards,
Matt Humphrey
President
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