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GRAZI & GIANINO, LLP
ATTORNEYS AT LAW
About Association Dues Collection Issues (Continued)
with its foreclosure and sell the property after it takes title, and it may be able to recoup its money from the equity in the property. Also in this scenario, it is more likely that the unit owner will be willing to resolve the matter to preserve their equity in the property. Here also, the Association will be allowed to rent the unit pending foreclosure by the first lender.
The second scenario is that there is no mortgage recorded against the subject property and the owner is in arrears. In this scenario, it will almost always be advisable for the Association to proceed forward with their own lien foreclosure, as the likelihood of a full recovery is enhanced greatly by the ability to re-take title to the property and dispose of it at the Association’s will by either sale to a third party or by renting of the unit and collecting the rental proceeds, both of which are authorized by statutes. It is unlikely that this scenario will occur. Due to the real estate boom, most unit owners took advantage of the low interest rates and high property values and either acquired their property by way of mortgage financing, or re-financed their property to take advantage of the increase property values and, as a result, the property now has a negative equity value.
The third scenario is when the owner is in arrears, and a mortgage has been recorded that in all likelihood is in excess of the fair market value of the property. In this scenario, a review of the public records will be necessary to determine whether a mortgage foreclosure action has been filed. If no mortgage foreclosure has been filed and the unit owner is currently residing in the property, the Association must still proceed forward with its claim to foreclose the lien, take title to the property, and remove the unit owner from the property. In this scenario, the ultimate disposition of the property may still occur, however, the sale of the property is limited by the Association’s ability to negotiate with the first lender of record to effectuate a short sale of the property to recover Association expenses, or even just to get a paying owner. The Association would also have the ability to rent the unit once it takes title, pending foreclosure by the first lender. It should be noted that the tenant will be protected by the Protecting Tenants Act of 2009.
The next two scenarios involve property with a mortgage foreclosure pending. These vary related to the time that the mortgage foreclosure has been pending. Currently, mortgage foreclosures are taking between twelve to eighteen months when the Defendant is not participating or actively defending the case. If the property is in a negative equity situation, the Association can either wait until the mortgage foreclosure finishes, or they can foreclose their own interest and then attempt to rent out the unit to recoup the Association expenses, or attempt a short sale to recoup the expenses. If there is equity in the property, then the same options are available, however, a sale may result in a full payoff to the bank and to the Association.
In all of these possible scenarios, if an owner is in arrears and does not physically reside in the unit, but is renting out the unit, the Association has the ability to collect the rent from the unit owner and apply it to the units future monetary obligations, including payments to the account. These would include payment of past due assessments, interest, attorney’s fees, and late fees. In situations where the owner is not residing in the unit or renting it, the Association has the ability to request that the Court appoint a receiver to take control of the property and rent the unit to recover the past due assessments. This option can be invoked even if the owner was at one time residing in the unit, but moved out.
Grazi & Gianino, LLP, has been in practice for many years in the Stuart area, and has vast experience representing Homeowners and Condominium Associations in collections as well as foreclosure matters. If you have any specific questions, concerns, or would like an evaluation of your specific Association collection matter or other related legal issues, please call us to set up a consultation appointment.
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|Peter T. Gianino|
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|Ryan S. Grazi|
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