Speedy Foreclosure Law – A New Way to Avoid Delay

delays

The average number of days it has taken a lender to foreclose in Florida has been estimated at almost 900 days!  In many of these cases the borrower has defaulted in the lawsuit or has otherwise abandoned the property, so responsibility for this delay has often rested with the lender.  

Why would a lender purposely delay obtaining an uncontested judgment?  For one, the lenders have been happy to postpone recognizing the loss on their books.  Lenders have also been adverse to the possibility of taking title without a purchaser ready to assume the responsibilities of ownership.  These responsibilities include maintenance and upkeep expenses, tax and insurance liability, but most notably as to associations, the obligation to pay not only a portion of prior assessments, but also the ongoing obligation to pay future assessments until the property is sold.  

Facing these liabilities, the orchestrated inertia that has permeated in lender foreclosures is certainly understandable.  Delay is beneficial for the lenders because it allows them to move their cases at their own pace and avoid liabilities they are not prepared to take on.  Delay is also beneficial to the borrowers as they receive the gift of an extended reprieve which often equates to months (and sometimes years) of rent free living.  Who does the delay hurt?  The associations, which have continued to bleed assessments as lender foreclosures crawl towards finality.  While some association attorneys, including me, have taken proactive measures to prod these cases along, it certainly helps to have more tools at our disposal.

Enter the new speedy foreclosure bill, HB 87, that was just recently signed into law by Governor Rick Scott.  Amongst other things, it provides associations with statutory leverage to push uncontested lender foreclosures towards completion.  Previously the law allowed only the lender to seek what is called an “order to show cause” where the borrower would have limited time to show cause as to why a final judgment should not be entered.  If the borrower failed to show such cause or otherwise failed to participate in the proceeding, a final judgment of foreclosure would be entered without the need for further litigation.  Of course, with the overarching culture of delay, this tool was seldom used by lenders.  With the new speedy foreclosure law,  this right has been extended to associations and now they too can force the borrower to show cause as to why a judgment of foreclosure should not be entered against them in the lender’s case.  

While HB 87 should facilitate the movement of uncontested lender foreclosures towards a quick resolution, it is important to realize that many lenders may decide to stall even the filing of their actions since they have now lost a degree of control.  Although this new law is certainly a beneficial development for associations, as the sign above suggests it will remain an inevitability to “Expect Delays”.

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999

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Association Assessments: Caveat Emptor? Not Anymore!

Losing Money

One of the longest standing duties of Florida condominium and homeowners associations has been pursuance of delinquent assessments through the lien and foreclosure process.  With the downturn in the economy, the remedy of foreclosure has already been significantly diminished as foreclosed properties often have no equity due to overpriced mortgages, which means that investors rarely purchase properties at the association’s foreclosure sale and instead, title to the valueless property usually reverts to the association.  Since there is no equity in these foreclosed properties, associations have endeavored to rent the units to which they take title as their only means of extracting value out of these properties until such time as the lender finally forecloses on their mortgage.

In recent years, when the lender did finally complete its foreclose, if a third party investor purchased the property at the lender’s foreclosure sale it was always liable to the association for the unpaid delinquency that had previously accrued.  This is where the old adage of “buyer beware” came into play and investors had to consider the monetary obligations they would owe to the association as a factor in their determination whether or not to purchase the property at the lender’s foreclosure sale.

However, a recent court ruling in the case of Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc. has essentially said: “Caveat Emptor? Not anymore!”

The court held that when associations foreclose on a property in advance of the lender, that because they became an intervening owner, they cannot later collect the unpaid debt that accrued on the property from a third party purchaser who later acquires ownership of the property at the lender’s foreclosure sale.  This ruling is problematic for board members because they now have to balance the duty of compliance with their governing documents and the applicable statutes, both of which encourage vigilance when its comes to delinquencies, with this brave new world in which pursuance of delinquencies may prove to be the wrong decision and result in an inability to collect pre-existing debt from future owners.

Bottom line: The court’s ruling has created a reality where condominium and homeowners associations are actually encouraged to sit on their rights because exercising their legal remedies may ultimately have a self-destructive effect–it needs to be overturned or the applicable statutes needs to be rewritten so that associations can confidently continue to pursue their delinquencies.  Until then, it is no longer “buyer beware” in these circumstances, but instead, at least for associations, it has become “seller beware”.

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999

Going Green to Save Some Green – Installing Solar Panels to Reduce Energy Costs

Solar Panels

When it comes to aesthetics, associations in Florida generally try to maintain the uniformity of the community by making sure owners are staying consistent with the original design.  Minor alterations, modifications or additions are usually permissible but many decisions that would otherwise be within an owners control, such as the color of their house or installation of an outdoor enclosure, are often disallowed when one submits to association living.  So long as they are not selectively enforced, these aesthetic restrictions are justifiable because they help to preserve everyone’s property value by maintaining the integrity of the community, and with the economy the way it has been, homeowners certainly need to preserve every dollar of their property’s value.

So what about all this we hear about “going green”.  Sounds like a great idea, right?  That is of course until it shows up in the form of ugly black solar panels on your neighbor’s roof .  Under the aesthetic restrictions just discussed, you would think that your association would be able to preclude your neighbor from installing such an eyesore, right?  Wrong!  The Florida Statutes (section 163.04 for those scoring at home) specifically allow owners in HOAs and condos the right to install solar collectors on their home or on the roof of their condo free from any deed or covenant restrictions that the association would normally seek to impose.  If installed on a roof, the association is only allowed to determine the location where the solar collectors may be placed, but even then the location must be within an area with a southern orientation and the selected location must not impair the effectiveness of the solar collectors.

So it seems that just when you think the association has absolute control over aesthetics, renewable energy proves to be the higher power.

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999

Pipe Burst – Who’s Responsible?

A pipe burst in a condominium can be everyone’s worst nightmare.  Its usually a haphazard, unpredictable event causing significant damage, but the aftermath can be even more challenging to filter out than the displaced water.  Both the Association and the affected unit owners will be carefully evaluating the nature of the damage, potential insurance coverage as well as causation, and all of this can certainly put a damper on carefree condo living.

Since most major pipe bursts are random occurrences, the Association should initially focus its efforts on repairing the pipe, analyzing the damage and preparing a claim to be submitted to the Association’s general liability insurance carrier.  The Association is obligated to maintain the common elements and the sooner it can obtain the insurance funding, the sooner the Association can replace certain items such as drywall (or in this case, wetwall) so as to prevent further damage to the common elements and potential health risks.

But what about poor Mrs. Unit Owner who had her hard wood floor coverings, her fancy drapes and her antique furniture damaged by a haphazard pipe burst?  Surely the Association’s insurance must cover those items too, right?  Actually, Florida Statute 718.111(11), which governs insurance requirements for condominium associations, requires that an Association’s insurance specifically exclude coverage for these types of personal property found within a unit and puts the obligation squarely on the unit owner to self insure against this type of loss.

So is Mrs. Unit Owner out of luck if she did not have insurance on her personal property?  Not entirely.  This is where the issue of causation comes into play–what caused the pipe to burst?  It could indeed be that another unit owner was negligent in attempting to make alterations which inadvertently caused damage to the common element pipe.  Alternatively, it could have been a situation where the Association was warned by a professional that a particular common element pipe was weak and preventative maintenance was never taken to address the issue.  In either case, the negligent party could be on the hook for all the resulting damage, not only the damage to the common elements but also to the internal surfaces, components, fixtures and personal property contained inside all affected units.

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999

Term Limits for Condominium Directors

FDR was certainly not a fan of term limits.  What about Obama and Romney?  One thing that is clear is that since 2008, the State of Florida has been a fan of term limits, at least for directors of condominiums.

In 2007 and prior, Florida Statute 718.112(2)(d) read:  “If there is no provision in the bylaws for terms of the members of the board, the terms of all members of the board shall expire upon the election of their successors at the annual meeting.”  This essentially meant that so long as your bylaws outlined some sort of term limits, whether they be 12 months or 12 years, those would be the limits imposed on the directors of your condominium association.

However, an amendment to this statute was passed in 2008 which changed it to read:  “Except in a timeshare condominium, or if the staggered term of a board member does not expire until a later annual meeting, or if all members’ terms would otherwise expire but there are no candidates, the terms of all board members expire at the annual meeting, and such members may stand for reelection unless prohibited by the bylaws.”  Notice that the key language from the first sentence of the 2007 version that allowed a condominium association to defer to the term limits in its own bylaws was removed.  The effect is that now, unless your association has staggered terms, directors’ board membership always expires at the annual meeting, effectively limiting all terms to 1 year regardless of what your bylaws might otherwise say!

Some people may love this change.  Some people may hate it.  If a dispute does develop as to whether your association is subject to the amended 2008 version of this statute, an analysis of your governing documents may be helpful.  For example, and as further discussed in the post titled “The Magic Words”, many condominium associations’ governing documents contain language stating that they are governed by the Condominium Act “as amended from time to time”.  Although such documents may predate 2008, and could be 20, 30 or even 40 years old, the fact that they contain these “magic words” means that they are subject to the most current version of the Condominium Act.

Alternatively, for condominium association documents that state that they are simply governed by the Condominium Act or governed by the Condominium Act as it exists at the time the documents were recorded, it may be argued that only those amendments to the Condominium Act that predate the recording of the governing documents are applicable to that particular association.  So, if your condominium association has bylaws permitting say 4 year terms for directors and those bylaws were originally recorded in 2007 or prior and your governing documents nowhere state the magic “as amended from time to time” language, you could argue that the 4 year term for directors still apply.

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999

Donations to the Association: To Give or Not to Give

While donations are usually very much appreciated, the old adage “no good deed goes unpunished” may apply, especially when it comes to associations in Florida!

First, it should be known that there is no statute or regulation that precludes an association from accepting donations, but it is preferable that the donations be monetary. If an owner decides to donate their time instead, and performs repairs, modifications or alterations to common elements, they need to understand that they will be held to the same standard as a contractor, meaning that they must perform the work in a professional and workmanlike manner and that they may be held responsible should they fail to complete the work or should they cause damage to the property. If the donating owner is not a licensed and insured professional with regard to the work they undertake, and something goes awry, the board may also be held responsible for allowing unqualified individuals to perform such work. These concerns should certainly be considered before allowing an owner to donate their time.

It is also important to remember that most associations have restrictions on changes to the aesthetics of the community so if someone does give a monetary donation, they need to understand that such generosity does not allow them the right to make material changes on which they get to unilaterally decide. While it may be that a donating member believes that they are improving the community’s aesthetics, other members may see such changes as an unacceptable departure from the aesthetics of the community that they expected to be kept intact when they bought their property. Actions such as painting a room a certain color or modifying landscaping could be deemed a material alteration if they are a departure from what was originally in place and such action would require a vote of the membership.

While donations are certainly rare and may indeed be beneficial for the community, it is important that the association and the owner consider the preceding information before making a decision.

Look for this article to be published in an upcoming edition of the South Florida Cooperator publication!

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999

Is Your Association Down with OPP?

During the current economic crisis, associations across Florida have searched for novel and alternative ways to combat their mounting assessment delinquencies.  Taking control of OPP, also know as “other people’s property,” has become a common way for associations to recoup their losses, but this may prove to be naughty, by nature.

The most traditional and legally sanitary way for associations to take control of delinquent properties in the community is through the foreclosure process.  Once a property becomes delinquent, an association can file their lien (after complying with all statutory pre-conditions) and then foreclose on a property through the court system.  If the resulting foreclosure sale does not yield a third party buyer, then title is vested in the name of the association.  The association is then free to sell the property, or, as more commonly occurs, rent it out until such time as the mortgage lender forecloses their superior lien and takes title.  The association can take such actions because, of course, the association legally owns the property.

But what about the situation where the association has not obtained title to a particular property in the community, but believes it to have been abandoned by its owner?  This is not such an uncommon occurrence, especially where many properties in Florida were purchased during the real estate boom as second homes or investments.  When the economy went sour, the owner may have simply decided to walk away because they either could no longer afford the property or because they were upside down on their mortgage, or both.  From this situation, emerged a new strategy whereby associations began renting out these abandoned properties without actually taking title to them or obtaining consent of the owner (come to think of it, my friend owes me $100, maybe I should rent out the treadmill in his garage–I know for a fact he abandoned that piece of equipment long ago!).

While the renting of abandoned properties may derive well-needed income for the association and the actual owner may never know, or for that matter, care, this author does not recommend the practice.  Renting a property is one element of the “bundle of rights” that only an owner has with respect to their property.  Such rights can only be conveyed to third parties, such as the association, if provided for by Florida law.  While the Florida Statutes were indeed amended in 2010 to allow an association the right to collect rental payments from the tenant of a delinquent owner, they do not allow for an association to change the locks and actually place a tenant in a property owned by a delinquent owner–a key distinction.

The bottom line is that while the businessman sitting on one shoulder is telling me that this is a great way to score some needed cash for associations with the motto “it isn’t wrong unless you get caught” the lawyer sitting on my other shoulder is reminding me of all the ponzi schemers, robo-signers, etc. that lived by that same mantra and we all know how they have fared over the last few years.

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999