Collections / Foreclosure
Q: If my condominium association or HOA forecloses its lien for unpaid assessments and takes title to a home, is the association responsible for the mortgage payments?
No. Only the homeowner/borrower is responsible for payments on the mortgage note. However, any first mortgage lien and tax liens are superior to the association’s lien and will remain as encumbrance(s) on title.
Q: What debts and other obligations will fall on the condominium association or HOA if it forecloses its lien for unpaid assessments?
Like any unit owner, the association will be responsible for taxes, utilities, insurance and maintenance. The association should secure the unit or home and make sure the HVAC and other systems are functioning properly. It is not necessary to pay the real estate taxes because eventually the property could be sold at a tax sale, which results in a new owner taking over responsibility for condominium or HOA assessments. Our Helpful Resources page features an article discussing the dilemma of condominium/HOA lien foreclosure in the current bank foreclosure crisis.
Q: Does the association’s lien for unpaid assessments expire?
Yes, for condominiums. Under Florida law, a condominium lien expires one (1) year after recording and, thus, the condominium association must file its lien foreclosure action within that one (1) year period. For an HOA, the lien does not expire by state law, but the delinquent assessment can become uncollectible over time due to the applicable statute of limitations.
Q: What can a condominium association or HOA do if a delinquent owner is renting the home?
Effective July 1, 2010, a condominium or homeowners association can make written demand to the tenant(s) for payment of rents to the association until all assessments and other charges are current (can include unpaid fines). If the tenant fails to comply, the association can evict the tenant under the landlord-tenant statute by serving a three-day notice to pay or vacate.
Q: If a bank forecloses on a home in my condominium association or HOA, how much does the bank owe the association for delinquent assessments?
Whether condominium or HOA, the bank owes twelve (12) months of assessments or one percent (1%) percent of the first mortgage debt, whichever is less, For condominiums, the bank’s liability was increased from six (6) months to twelve (12) months pursuant to changes in Florida law effective July 1, 2010. This limitation only applies to qualifying first mortgagees, which can be determined with the assistance of the board’s legal counsel.
Q: Should the condominium association or HOA foreclose on its lien if the owner is in mortgage foreclosure?
It depends. We approach these delinquent accounts on a case-by-case basis. If the property is vacant and the owner appears to have “walked away,” lien foreclosure is not likely to compel payment and the association might be better served pushing the bank foreclosure to a conclusion and pursuing the new owner for the outstanding balance owed. However, if the property is owner-occupied or rented, pressure from the condominium association or HOA can often compel a positive financial result for the association. We recommend that the Board of Directors, with assistance of its counsel, adopt a strategy for each delinquent account and be aggressive in the right spots, rather than taking the same approach “across the board”. Our Helpful Resources page features an article with more detail on this subject.
Q: What can the condominium association or HOA do to recover past due assessments if it forecloses on its lien and takes title?
Pursuant to Florida law, the association as the owner can sell or lease the unit. In the vast majority of cases, however, the property remains encumbered by a first mortgage lien making a sale at market value impossible unless the mortgage can be eliminated with the assistance of legal counsel. Regardless, the condominium association or HOA is free to lease the unit at market value. Any repair and maintenance costs can be assessed to that individual property and likely be recovered from the future owner. If the board is considering this option, it should work with its legal counsel on the appropriate lease and consider the impact of any pending bank foreclosure.
Q: Are the legal expenses incurred by the condominium or HOA in collections recoverable from the unit owner?
Yes. Pursuant to Florida condominium & HOA law, legal fees and costs incident to the collection process are recoverable from the unit owner and secured the association’s lien.
Q: Should the condominium association or HOA negotiate its payoff in connection with a short sale?
In most cases, no. In pre-foreclosure sales (including short sales), the parties are liable for all amounts owed to the condominium or HOA. Often, the realtor(s) and/or title company involved in the short sale approach the condominium or HOA collections attorney for a reduced payoff to “make the deal happen.” Often, they tell the condominium or HOA attorney that the bank will not approve payment of all condominium or HOA dues or employ some other strategy to get a reduced payoff. If your association receives such a request, it should contact its legal counsel for an analysis of all factors impacting the deal including the status of any bank foreclosure. If pressure is applied correctly by your collections attorney, most if not all of the delinquent charges can be recovered.
Q: Should the condominium association or HOA handle its own collections and liens?
No. While the association may save a few dollars by sending reminder notices and perhaps a notice of intent to lien, collections without legal counsel is ineffective and risky. Further, the preparation of a claim of lien by a non-attorney is considered unauthorized practice of law and the collection of a debt requires careful compliance with federal and state fair debt collection laws. Once the file is turned over to the condominium or HOA’s attorney for collection, the only communications to the homeowner regarding the debt should come from the attorney.
Q: Should a condominium association or HOA accept payment plans for unpaid assessments?
It depends. When the economy was better, the association had little motivation to accept payment plans because the lien truly gave the association some leverage. Now, however, the association’s lien is often behind a first mortgage lien that exceeds the property value and a payment plan should be considered in select cases with the assistance of legal counsel.
Q: Can fines and suspensions of amenities be effective against a problematic owner or tenant?
Fines, if done properly, can be useful tools to compel compliance with your community rules. Nobody wants to pay a fine, particularly daily fines of $100 up to the statutory maximum of $1,000. In the majority of cases, the owner and/or tenant who is fined will respond by disputing the fine and may even request a hearing before the association’s fining committee. In these cases, the Board of Directors can use the fine as additional leverage to compel the owner and/or tenant to bring the property into compliance (which is the Board of Directors’ ultimate goal).
In other cases where the owner and/or tenant ignores the fines, the condominium association or HOA may need to consider stronger action, such as suspension of use rights or mandatory pre-suit mediation (HOA) or arbitration (condominium) or court action. If your amenities physically allow your Board of Directors to suspend certain privileges, that can also be an effective tool. For HOAs (not condominiums), fines of $1,000 or more can now become a lien against a home pursuant to recent changes in Florida law. Therefore, if the fines accrue for ten (10) days or more resulting in $1,000 in fines ($100 per day at ten (10) days), an HOA board can consider filing a lien as additional pressure on the owner.
Regarding rented homes, fines can now be collected by pursuing the tenants’ rents. Under the new condominium and HOA laws effective July 1, 2010, the association can demand rents if the owner is delinquent in any monetary obligation, which can include fines.