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CURRENT EVENTS
Anderson Auctions Inc.
385 Harbor Blvd.
Suite #102
Destin, FL 32541
Phone: 850.654.5300
Toll Free: 877.654.5300
Anderson Alliance Partners
For all your Real Estate Appraisal
needs contact:
Phone: 850-654-5000
CURRENT EVENTS
Associations Fight for Condo Fees
By Rachel Lee Coleman / Miami Herald
POMPONO
BEACH, Fla.
– In many condominium complexes, units sit
empty and association fees go uncollected when homeowners abandon their
property. In many cases, banks initiate foreclosure but postpone the final
order, effectively putting the condo in limbo because the bank doesn’t want to
become responsible for the unit’s obligations generally and homeowner
association fees specifically.
But some condos are trying a backdoor way of getting the banks to pay. Called a “reverse foreclosure,” the associations foreclose on the unit first.
The problem starts with struggling homeowners who can no longer pay their mortgage and who, in many cases, owe more on the mortgage than the unit is currently worth. In most cases, a homeowner who stops paying his mortgage also stops paying his association fees.
After months of no payments, banks may start the foreclosure process. However, that can take a few months or a few years, depending on a number of factors, many of which the bank controls. The unit, in financial limbo and usually empty, is not yet a draw on the bank because it’s not on their books; but it’s also not a revenue generator for the condo association.
To speed the process, condo associations are foreclosing first, which they may legally do when maintenance fees remain unpaid for a period of time. Under this reverse foreclosure, the association takes title to the unit; but since the bank has a lien on the property, the association cannot legally sell it. The association can, however, renounce its claim on the unit in court, effectively giving ownership – and an obligation to pay maintenance fees – back to the bank.
A reverse foreclosure is considered a hardball tactic, but condo associations with a large number of foreclosures have little choice if they hope to maintain common elements and keep the property safe. Without the power to make banks pay, condo owners current on their mortgage and dues could be assessed large special assessments to cover the unused units. Special assessments could then cause even more owners to go into default, compounding the problem.
Even with a reverse foreclosure, a bank does not have to pay all past-due maintenance fees. Florida statutes limit the obligation to the past 12 months of association fees – six months for condos – or 1 percent of the mortgage, which is less.
The cap is, in fact, a big reason why the banks aren’t in hurry. “There is no incentive for banks to foreclose” in a timely fashion, says Ben Solomon, an attorney with Association Law Group.
The Keys Gate Community Association in Miami-Dade survived a court challenge when it used a reverse foreclosure to take a four-bedroom home. After the foreclosure, the association found itself holding a vacant home it didn’t want with $5,320 in unpaid fees it couldn’t collect. The home lender, HSBC Bank USA, had also filed a foreclosure notice, but it had not done so not until two months later, and it was in no hurry to take back the property.
A Miami-Dade circuit judge, Jerald Bagley, upheld the reverse foreclosure. On Jan. 12, he ruled that the bank owed association fees, legal fees, court costs and taxes. The bank still avoided $3,819 on the maintenance fees, however, thanks to the cap in Florida law.
The Keys Gate Community Association now has 13 more reverse foreclosures in the pipeline.
But some condos are trying a backdoor way of getting the banks to pay. Called a “reverse foreclosure,” the associations foreclose on the unit first.
The problem starts with struggling homeowners who can no longer pay their mortgage and who, in many cases, owe more on the mortgage than the unit is currently worth. In most cases, a homeowner who stops paying his mortgage also stops paying his association fees.
After months of no payments, banks may start the foreclosure process. However, that can take a few months or a few years, depending on a number of factors, many of which the bank controls. The unit, in financial limbo and usually empty, is not yet a draw on the bank because it’s not on their books; but it’s also not a revenue generator for the condo association.
To speed the process, condo associations are foreclosing first, which they may legally do when maintenance fees remain unpaid for a period of time. Under this reverse foreclosure, the association takes title to the unit; but since the bank has a lien on the property, the association cannot legally sell it. The association can, however, renounce its claim on the unit in court, effectively giving ownership – and an obligation to pay maintenance fees – back to the bank.
A reverse foreclosure is considered a hardball tactic, but condo associations with a large number of foreclosures have little choice if they hope to maintain common elements and keep the property safe. Without the power to make banks pay, condo owners current on their mortgage and dues could be assessed large special assessments to cover the unused units. Special assessments could then cause even more owners to go into default, compounding the problem.
Even with a reverse foreclosure, a bank does not have to pay all past-due maintenance fees. Florida statutes limit the obligation to the past 12 months of association fees – six months for condos – or 1 percent of the mortgage, which is less.
The cap is, in fact, a big reason why the banks aren’t in hurry. “There is no incentive for banks to foreclose” in a timely fashion, says Ben Solomon, an attorney with Association Law Group.
The Keys Gate Community Association in Miami-Dade survived a court challenge when it used a reverse foreclosure to take a four-bedroom home. After the foreclosure, the association found itself holding a vacant home it didn’t want with $5,320 in unpaid fees it couldn’t collect. The home lender, HSBC Bank USA, had also filed a foreclosure notice, but it had not done so not until two months later, and it was in no hurry to take back the property.
A Miami-Dade circuit judge, Jerald Bagley, upheld the reverse foreclosure. On Jan. 12, he ruled that the bank owed association fees, legal fees, court costs and taxes. The bank still avoided $3,819 on the maintenance fees, however, thanks to the cap in Florida law.
The Keys Gate Community Association now has 13 more reverse foreclosures in the pipeline.
385 Harbor Blvd., Suite 102, Destin, FL 32541 • Phone: 850.654.5300 • Toll Free: 877.654.5300
Sold@AndersonRealtyUSA.com
Sold@AndersonRealtyUSA.com