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

Rent Your Condo…I Don’t Think So!

It’s my property and I can do whatever I want with it, right?  Wrong!-at least when it comes to renting out a condominium unit.

Most condominium owners in Florida are allowed to rent their units subject to approval by the governing association.  However, when an owner is delinquent in paying assessments on a unit, the condominium association has the right under Florida Statute 718.116(4) to withhold approval of any lease on the unit, regardless of the reasonability of lease or quality of the tenant (provided, of course, that the governing documents of the condominium allow the association the right to approve or disapprove of leases).

While this law may prove frustrating for owners who might look to the rental income as a way to pay down their assessment debt, the purpose of this law is to prevent delinquent owners from entering into below market leases that they can afford only because of their non-payment of assessments and other obligations such as their mortgage.  Not only does this law protect the community from depressed rental values, but it also helps to avoid the stigma that might be associated with an association permitting a delinquent owner access to a stream of revenue where he or she has little to no expenses and little incentive to pay down their debt.  It also protects a prospective tenant from getting in over their head with a landlord who may have little to no interest in laying out any cash, including that which may be necessary to fund major repairs to the unit such as air conditioning or plumbing.

Now lets say a unit owner pushes hard for approval of their lease and it is at fair market value and the prospective tenant passes an initial screening.  An alternative to disapproving the lease in the manner described above is founded in another law, Florida Statute 718.116(11), that allows an association to demand and receive rental payments from a delinquent owner’s tenant.  If this can be agreed upon as a condition of approval, it may prove to be a viable option for the association and serve as a justification to the rest of the community as to why the lease was approved.  For more information on this option, see “Got Rent? Going After Delinquent Owners’ Rental Income“.

Either way, the association should make sure that it creates a policy for dealing with these scenarios to ensure that all unit owners are being treated fairly and uniformly.

Daniel Wasserstein

E-mail:  danw@wassersteinpa.com

561-288-3999