Q. An investor, who recently bought a unit at a bank foreclosure sale, is suing our association. He is only willing to pay 12 months of delinquent monthly maintenance fees, claiming that is the maximum liability under Florida law for a foreclosure property. We have routinely collected all past due assessments, interest, late fees and attorney’s fees from investors who buy foreclosures on the understanding that they owe everything charged to the prior owner. We need to engage legal counsel to defend the suit, but do you have any sense on who is correct here? – V.G.
A. This continues to be a popular debate among community association attorneys and lender attorneys. While there is still controversy over the lender’s liability if it purchased the property at its own foreclosure sale, there has never been much debate with respect to third party investors who win the foreclosure auction and get title. The prevailing practice among community association attorneys and title agents is to require payment in full from these new owners. Some investors, who have been stuck with large homeowners association balances, have sued associations, but they have not been successful. We are aware of at least three judges in South Florida who have agreed with the HOA on this issue, in addition to an appeals court that reviewed the law and agreed that these new owners owe all past due maintenance fees, interest, reasonable attorney’s fees and costs incurred by the association.
Q. We have an owner who is seriously delinquent and lives up north year round. However, he allows friends to visit and use the unit from time to time in the winter months. His guests use the pool and the other amenities and it is really causing a stir with other residents. What can we do to deny access to the unit? – S.R.
A. Unfortunately, the association must allow the owner and his invited occupants to have access to the units. The association cannot legally suspend the rights to use common elements needed to access the unit, parking spaces or elevators. However, the association can suspend the right to use all other amenities, common elements and association property by sending a single notice, approved by the board, to the owner and any occupants. If the association has the technology to disable key cards that provide access to the pool area, clubhouse and other common areas that are not needed to allow access to the unit, this can be an effective enforcement tool and should be done for all owners who are delinquent more than 90 days.
Q. Our association owns a parcel of waterfront land that would be ideal for a marina. Some unit owners are expressing interest in building the marina and buying slips. We are wondering what is needed legally to get this done? – J.P.
A. Substantial additions to association property require approval of the unit owners in most circumstances. This is almost certainly one of those cases, as the board would be hard pressed to argue that it can legally add this amenity without membership approval. Unless your declaration of condominium states otherwise, your association will need approval from 75 percent of the total membership in order to spend association funds on this project. If you can obtain this approval, the association can raise the funds either with a special assessment, a bank loan or combination of the two. You did not specify in your question, but your association needs to consider whether it wishes to allow transferability of the boat slips independent of unit ownership, or whether the marina rights will attach to and transfer with the unit. You will need to discuss these points with your association’s legal counsel and obtain the proper approvals, as many associations end up in litigation if these large projects are not done properly.
Q. Our association has recently foreclosed on a few units and they are in rentable condition. However, we have had a few prospective tenants decline a lease because of lingering bank foreclosures and the fear that the bank could foreclose and kick them out during the lease. We also want to protect the association from this possible outcome. What solutions might we have? – R.M.
A. This apprehension is understandable, particularly if there is confusion on the law and what the bank can and cannot do. It is becoming more common for associations to rent units while banks continue to stall foreclosures. The rental income can quickly help the association recover lost revenue from delinquencies. However, we have seen associations lose potential renters because of the fear that the bank can change the locks and evict them. Here is the law. First, an association has the legal right to possess and rent the unit if it obtains ownership. However, most banks are not aware when this happens. If the bank’s representatives change the locks or otherwise interfere with the association’s tenant, the association’s counsel should get involved to defend the association’s rights. Further, if the bank does ultimately finish the job and complete the foreclosure, the tenants have the right to remain in the unit for at least 90 days if the buyer at the bank foreclosure sale intends to occupy the home. If the buyer at foreclosure does not wish to occupy the home, the new owner must honor the balance of the tenant’s lease. These legal rules should allow the association and tenant to plan an appropriate lease term. To protect the association, there should be language in the lease providing full disclosure on the bank’s right to foreclose and an early termination right for each party in the event that the bank moves quicker than expected.