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Last Update: 10/10/20

Learn How HOA Foreclosures Work And What Happens When An Investor Buys The Property; Problems For HOAs, Owners and Renters.

Florida homeowner association (HOA) foreclosures are where an HOA sues the homeowner because of the failure to pay their maintenance fees.  The associations are foreclosing in order to protect the community from blight.  One big problem here is often times, after the HOA forecloses, the HOA then turns around and sell these homes to investors 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 investors are buying these homes and condos 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 investor 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 investors 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.

This 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.

How Do Association Foreclosure’s Work?

Just like bank foreclosures, a homeowner’s association files a foreclosure lawsuit in the county where the property is located. However, the HOA must comply with law specifically written for these matters. Under Florida Statute 720.3085, a homeowner association (or condo association) must first give notice to the homeowner before a foreclosure lawsuit can be filed.

Florida law requires the HOA to send notice to the homeowner of their intent to record a lien. The HOA must “Provide the owner with 45 days following the date the notice is deposited in the mail to make payment for all amounts due, including, but not limited to, any attorney’s fees and actual costs associated with the preparation and delivery of the written demand. ”

Besides including the details of the amount owed and an opportunity to pay the amount before filing foreclosure, the notice must meet other requirements outlined in the Statute, including detailing any late fees or interest due.

A homeowner is entitled to raise defenses just like in a bank foreclosure, which can include defenses like lack of proper notice. The homeowner can also challenge the foreclosure based upon improper accounting and improper fees being assessed against the homeowner. A common defense to these lawsuits is the HOA failing to timely record the homeowner’s payments and the improper charging of late fees. The problem with these cases for a homeowner (if they just make their normal payment in successive months) is that the homeowner will always have a past due amount.

Example of investors not following the law; The Chancey Brothers Example

In the Tampa Bay Business Journal, there is an article about two brothers, Ralph and Michael Chancey, and how they were able to buy around 71 homes in Hillsborough County, Florida, for around $230,000 (that averages $3240.00 per property).  The estimated market value of the total purchases?  Over $8 million.

Surprise, surprise:  these properties had liens filed against them by Homeowners Associations because the maintenance fees were not being paid; it looks like the brothers were buying the properties cheaply for the purpose of collecting rent and not paying any of the property carrying costs.

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, 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 solutions for your HOA are not perfect.  Having your HOA foreclose on a home or condo doesn’t mean the Association will be made whole for past due assessments and the like (especially when you consider issues related to your governing Association docs and Florida Statute 718.116).

Florida Law Finally Caught Up To HOA and Condo Investors

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 an investor 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 investor owner of the property at the same time the renter is notified.  Under Florida Statute 720.3085(8), 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 investor.

What Should You Do?

Should you have a concern about an HOA foreclosure, then a good piece of advice is to speak with an experienced Florida real estate lawyer to learn about your rights. The good news is that most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.


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Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

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