Homeowners’ Associations Foreclosure Sales: Is This Another Florida Real Estate Mess to be Cleaned Up? Do Florida Home Owners and Renters Need to Be Wary?

Posted By on March 22, 2012

Here’s another example of how the Florida real estate market is just a Wild West; a chaotic mess that will take years to clean up.  Wildcatters are taking advantage of Florida homeowner association (HOA) foreclosures by going after those homes in HOAs that haven’t paid their maintenance fees and are being foreclosed upon by the Homeowners’ Association (not the mortgage lender here).  The associations are foreclosing in order to protect the community from blight.  After they foreclose, they then turn around and sell these homes to these wildcatters who are looking to buy condos and homes at rock-bottom prices.

Which sounds like a win-win, until you wait awhile.

All too often the wildcatters are buying these homes and then renting them out to innocent tenants, who are unaware of all the machinations going on behind the scenes.  For one thing, the bank is still sitting out there looking to be paid.  Lots of Florida renters are surprised to find that their new leased home is now being foreclosed upon by the bank in a foreclosure action against the wildcatter and/or the prior owner.  Result?  If the renter is lucky, the bank will respect the lease and they’ll have some time before they have to move.  Again. (There are some federal laws here that help the blindsided tenant.)

For another thing, some of the wildcatters at the HOA foreclosure aren’t doing much with the properties after they buy them – other than to rent them out for hundreds or even thousands of dollars per month as soon as possible.  No inspections and repairs of the properties.  And, all too often, no payment of future maintenance fees to the HOA.

Which leaves the HOA in the same, or worse, position than it was before the initial foreclosure action and the community as a whole still dealing with a blight problem.

The Chancey Brothers Example

In the Tampa Bay Business Journal this week, there is a short article revealing that the wildcatting brothers Ralph and Michael Chancey were able to buy around 71 homes in Hillsborough County, Florida, for around $230,000 (that averages $3240.00 per property).  Estimated market value of the total purchases?  Over $8 million.

Surprise, surprise:  these Chancey Brothers properties reportedly are having liens filed against them by Homeowners Associations now, because those same old maintenance fees are not being paid.

Interestingly, Ralph Chancey wrote a comment to the Business Journal article implying without specifics how things weren’t exactly how the Business Journal was reporting things to be.  Mr. Chancey opines that the Journal has relied upon a longer piece in the Tampa Bay Times which he suggests is not totally accurate.

Bank Foreclosures After HOA Foreclosure and Resale

These “race to auction” HOA Foreclosure Sale bargains are turning out to be a race to get a tenant in place and collect those rents before the bank shows up to foreclose.  Even though the bank foreclosure will take years to process (especially since the Florida Fair Foreclosure Act failed to pass this year), many of these homes are re-entering limbo within a short time after the HOA took action in the first place.

Larry’s Tip

If you are planning to rent a home for your family, it might be wise to have a legal professional check out that property before you invest the time, money, and planning into a house and neighborhood where your kids will be going to school and things like that.  Unless moving within a year of moving into that rental doesn’t matter to you.

If you own a home in a community with a Homeowner’s Association, recognize that most blight solutions are not perfect.  Having your HOA foreclose on the property sometimes isn’t enough to fix things.  One suggestion may be for the HOA to keep the property and rent the home itself. (A proposed solution with its own pros and cons.)

In the end, it’s smart for the HOA to file a foreclosure lawsuit, since the amount of unpaid association fees usually allows the HOA to avoid the bottlenecks in Florida district courts and file their foreclosure suits in less-burdened county courts.  Unlike Florida mortgage foreclosure suits, these HOA fee foreclosures have a hope of proceeding through the judicial system with some efficiency.

However, once taking ownership of the foreclosed property the HOA is selling in a manner than may well be akin to the old adage of “biting off the nose to spite the face.”  Attorneys’ fees for that foreclosure may exceed the unpaid community fees, and when the buyer continues to let the fees mount up, the HOA’s decision to foreclose may not seem so smart in hindsight.

As for those rental properties with investor-owner delinquencies, a law was passed a couple of years back (in 2010; SB1196) that provided Homeowners’ Associations some relief in collecting money … the Florida Legislature responded to the situation of a wildcatter taking rents in the one hand while not paying maintenance fees with the other and passed a state law that lets the HOA do some “self-help” with the approval of the State of Florida.

Under this statute, Florida HOAs can go to the tenant in the property and serve a written notice (demand) that the renter start paying the fees and assessments that are due on the unit and Florida law will then require the tenant to do so as long as the wildcatter is past due to the HOA.  The HOA has to notify the wildcatter owner of the property at the same time the renter is notified.  Under Florida law, any tenant who acts in good faith by paying the HOA in accordance with the HOA notice is legally protected from any claim for unpaid rent against the renter made by his landlord, the wildcatter.

However, this law was set to expire this summer (on June 30, 2012) unless other 2012 legislation allowed it to continue (more on this later).

If you have questions or comments, please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com or (954) 458-8655.

Comments

6 Responses to “Homeowners’ Associations Foreclosure Sales: Is This Another Florida Real Estate Mess to be Cleaned Up? Do Florida Home Owners and Renters Need to Be Wary?”

  1. gary says:

    Hay Larry;

    Did the hoa ability to collect rent expire?

  2. Dee Wilkins says:

    Good Morning!
    I would like to know if the law regarding HOAs accepting rent has been extended from June 2012.
    Thank You and Have a Blessed day!

  3. Hi Dee,
    Thank you very much for writing.
    Rather than respond here in a comment, we’re going to take your question and turn it into a blog post next week – where it may be more easily found by other people who may have an interest in knowing about HOAs and rent than if it’s an issue sorta hidden here in the comments of a post.
    Appreciate you bringing this issue up – great question!
    Larry

  4. Hi Gary,
    This is the topic of an upcoming blog post. Stay tuned!
    Thanks for writing,
    Larry

  5. Sara lopez says:

    My home was sold today ona HOA foreclosure They bought it. What happened now? my lender is willing to pay them the money and increase my mortgage which im fine with it but is there is possible to do so as they bought it today! How long do i have in florida for redemption? The final judgment was for almost $15k and they sold to plaintiff in $100 How much does my lender will need to pay or i already loose my home? Also how long can i stay here? Is there any chance to have my home back?

  6. Hi Sara,
    Please know that everyone here at the firm shares a compassion for you in losing your house in a foreclosure. We’re sad to hear that this has happened. Insofar as answering questions on your specific circumstance, I’m not able to do that in a blog comment but if you are interested in chatting with me over the phone, I’m available to discuss the situation with you (no charge, of course). I don’t answer personal queries in the comments section not to be frustrating, though I know it might be so to you, but instead out of concern that a future reader might take that discussion and assume to their harm that it fit their case too.
    Thanks for writing,
    Larry

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