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Across Florida, and particularly in South Florida, condominiums and homeowners’ associations are having to deal with problems that arise when a condo owner defaults on his or her condo mortgage.  One of those problems is the growing amount of unpaid assessments and fees on that defaulted condo.

Enter the Florida Legislature with proposed legislation, HB 319. This is a proposed law, now just a bill moving through the Tallahassee statehouse, that tries to deal with the problem of foreclosures and their affect on homeowners’ associations’ (HOAs) ability to collect outstanding assessments and fees.

In essence, HB 319 will make it legal for HOAs to collect the overdue and outstanding assessments and fees from the buyer of the foreclosed property.

Sometimes.  Not always.

Specifically, as currently drafted, HB 319 states:

718.116 Assessments; liability; lien and priority; interest; collection.—

(1)(a) A unit owner, regardless of how the unit owner has acquired his or her title has been acquired, including, but not limited to, by purchase at a foreclosure sale or by deed in lieu of foreclosure, is liable for all assessments that which come due while he or she is the unit owner. Additionally, a unit owner is jointly and severally liable with the previous unit owner for all unpaid assessments, late fees, interest, costs, and reasonable attorney fees incurred by the association in an attempt to collect all such amounts is jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of title. This liability is without prejudice to any right the present unit owner may have to recover from the previous unit owner the amounts paid by the present unit owner.

(b)1. The liability of a first mortgagee or its successors successor or assignees who acquire title to a unit by foreclosure or by deed in lieu of foreclosure for the unpaid assessments, interest, administrative late fees, reasonable costs and attorney fees, and any other fee, cost, or expense incurred in the collection process that became due before the mortgagee’s acquisition of title is limited to the lesser of:

a. Only the unit’s unpaid common expenses and regular periodic assessments that which accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or

b. One percent of the original mortgage debt.

Sounds like a solution, right?  When you buy a property, you go into the deal knowing that you’ve got to bring the assessments current.  Consequently, you’ll keep that in mind when you negotiate your purchase price. This is true unless you are a bank that becomes an owner at it’s own foreclosure sale.

If you are a bank and you foreclose, HB319 treats you differently:  banks won’t have to pay like individual home buyers will have to pay.

The banks get a freebie.  The individual home buyer has to fork over cash and the foreclosing bank doesn’t.  An individual buyer’s only hope of getting reimbursed for paying those past due assessments is if they sue the previous property owner who walked out without paying them in the first place.  Good luck with that one.

When the bank takes legal ownership of that home or condo via a foreclosure, the law limits the bank to paying the lesser of (1) assessments that accrued or came due during the 12 months preceding the acquisition or (2) one percent of the original mortgage debt.

Larry’s Tip

So, what does this all mean?  If this bill becomes law, HB319 means everyone, except banks, lose.  Consider this:

1.  Home owners lose because their homeowners’ associations are going to have to write off unpaid assessments and expenses for each condo that is foreclosed upon by a bank.  These home owners are already dealing with their HOAs raising assessments on those that are diligently paying their assessments in order to meet expenses.

2.  Another problem for these home owners: their HOAs are also having to stop providing amenities because they need to cut back due to defaulting condo owners.  HOAs are having to tighten their Homeowners’ Associations belts because the defaulting owners aren’t paying assessments and fees – and this is hurting those who are still living in the community in ways they didn’t predict when they bought their property way back when.

3.  Home buyers lose because they are going to have to fork over every last penny of past due assessments and fees, no special treatment here like the banks are getting.

4.  The only thing that may make some Floridians smile:  those bill collectors are upset about HB319 — seems that they are looking at the proposed law as hurting their ability to hound people who have past due assessment balances.

You can read the latest (February 2012) version of the full text of HB 319 online in downloadable pdf format here.

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

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