Condo/HOA FAQs

Collections/Foreclosures

Q: If my condo or HOA forecloses on its lien for unpaid assessments and takes title to a home, is the association responsible for the mortgage payments?
A:
No. Only the homeowner/borrower is responsible for payments on the mortgage note. However, any first mortgage liens and tax liens are superior to the association’s lien and will remain as encumbrance(s) on title. Our Helpful Resources page features an article discussing the elimination of “abandoned” first mortgage liens, allowing your condo or HOA to potentially sell the unit at market value if it takes title to a home.

Q: What debts and other obligations will fall on the condo or homeowners association if it forecloses on its lien for unpaid assessments?
A:
Like any unit owner, the association will be responsible for taxes, utilities, insurance and maintenance. The association should secure the unit or home and make sure the HVAC and other systems are functioning properly. It is not necessary to pay the real estate taxes because eventually the property could be sold at a tax sale, which results in a new owner taking over responsibility for condo or HOA assessments. Our Helpful Resources page features an article discussing the dilemma of condo/HOA lien foreclosure in the current bank foreclosure crisis.

Q: Does the association’s lien for unpaid assessments expire?
A:
Yes, for condominiums. Under Florida law, a condo lien expires one (1) year after filing and thus the condo association must foreclose on its lien within that one (1) year period. For an HOA, the lien does not expire by state law, but the delinquent assessment can become uncollectible over time due to the applicable statute of limitations.

Q: What can a condo association or HOA do if a delinquent owner is renting the home?
A:
Effective July 1, 2010, a condo or homeowners association can make written demand to the tenant(s) for payment of rents to the association until all assessments and other charges are current (can include unpaid fines). If the tenant fails to comply, the association can evict the tenant under the landlord-tenant statute by serving a 3-day notice to pay or vacate.

Q: If a bank forecloses on a home in my condo association or HOA, how much does the bank owe the association for delinquent assessments?
A:
For either condo or HOA, the bank owes 12 months of assessments or 1 percent of the first mortgage debt, whichever is less, plus interest, late fees and legal fees secured by the association’s lien. For condos, the bank’s liability was increased from 6 months to 12 months pursuant to changes in Florida law effective July 1, 2010. This limitation only applies to qualifying first mortgagees, which can be determined with the assistance of the board’s legal counsel.

Q: Should the condo association or HOA foreclose on its lien if the owner is in mortgage foreclosure?
A:
It depends. We approach these delinquent accounts on a “case by case” basis. If the property is vacant and the owner appears to have “walked away”, lien foreclosure is not likely to compel payment and the association might be better served pushing the bank foreclosure to a conclusion and pursuing the new owner. However, if the property is owner-occupied or rented, pressure from the condo association or HOA can often compel a positive financial result for the association. We recommend that the board with assistance of counsel adopt a strategy for each delinquent account and be aggressive in the right spots, rather than taking the same approach “across the board”. Our Helpful Resources page features an article with more detail on this subject.

Q: What can the condo association or HOA do to recover past due assessments if it forecloses on its lien and takes title?
A:
Pursuant to Florida law, the association as the owner can sell or lease the unit. In the vast majority of cases, however, the property remains encumbered by a first mortgage lien making a sale at market value impossible unless the mortgage can be eliminated with the assistance of legal counsel. Regardless, the condo association or HOA is free to lease the unit at market value. Any repair and maintenance costs can be assessed to that individual property and likely be recovered from the future owner. If the board is considering this option, it should work with its legal counsel on the appropriate lease and consider the impact of any pending bank foreclosure.

Q: Are the legal expenses incurred by the condo or HOA in collections recoverable from the unit owner?
A:
Yes. Pursuant to Florida condo & HOA law, legal fees and costs incident to the collection process are recoverable from the unit owner and secured the association’s lien. Should a bank foreclose, it will likely pay these expenses if demanded by your legal counsel and particularly if incurred in the 12 months prior to completion of the bank foreclosure.

Q: Should the condo association or HOA negotiate its payoff in connection with a short sale?
A:
In most cases, no. In a pre-foreclosure sale (including short sales), the parties are liable for all amounts owed to the condo or HOA. Often, the realtor(s) and/or title company involved in the short sale approach the condo or HOA collections attorney for a reduced payoff to “make the deal happen”. Often, they tell the condo or HOA attorney that the bank will not approve payment of all condo or HOA dues or employ some other strategy to get a reduced payoff. If your association receives such a request, it should contact its legal counsel for an analysis of all factors impacting the deal including the status of any bank foreclosure. If pressure is applied correctly by your collections attorney, most if not all of the delinquent charges can be recovered.

Q: Should the condo association or HOA do its own collections and liens?
A:
No. While the association may save a few dollars by sending reminder notices and perhaps a notice of intent to lien, collections without legal counsel is ineffective and risky. Further, the preparation of a claim of lien by a non-attorney is considered unauthorized practice of law and the collection of a debt requires careful compliance with federal and state fair debt collection laws. Once the file is turned over to the condo or HOA’s attorney for collection, the only communications to the homeowner regarding the debt should come from the attorney.

Q: Should a condo association or HOA accept payment plans for unpaid assessments?
A:
It depends. When the economy was better, the association had little motivation to accept payment plans because the lien truly gave the association some leverage. Now, however, the association’s lien is often behind a first mortgage lien that exceeds the property value and a payment plan should be considered in select cases with the assistance of legal counsel.

FINES/SUSPENSIONS

Q: Can fines and suspensions of amenities be effective against a problematic owner or tenant?
A:
Fines, if done properly, can be a useful tool to compel compliance with your community rules. Nobody wants to pay a fine, particularly daily fines of $100 up to the statutory maximum of $1,000. In the majority of cases, the owner and/or tenant who is fined will respond disputing the fine and may even request a hearing before the association's fining committee. In these cases, the board can use the fines as additional leverage to compel the owner and/or tenant to bring the property into compliance (which is the board's ultimate goal).

In other cases where the owner and/or tenant ignores the fines, the condo association or HOA may need to consider stronger action such as suspension of use rights or mandatory pre-suit mediation (HOA) or arbitration (condo) or court action. If your amenities physically allow your board to suspend certain privileges, that can also be an effective tool. For HOA's (not condo’s), fines of $1,000 or more can now become a lien against a home pursuant to recent changes in Florida law. Therefore, if the fines accrue for 10 days or more resulting in $1,000 in fines ($100 per day at 10 days), an HOA board can consider filing a lien as additional pressure on the owner.

Finally, regarding rented homes, fines can now be collected by pursuing the tenants' rents. Under the new condo and HOA laws effective July 1, 2010, the association can make demand for rents if the owner is delinquent in any monetary obligation, which can include fines.