Hard-Hit HOAs Ramp Up Pressure On Foot-Dragging 1st Mortgage Holders To Force Legal Action Against Delinquent Unit Owners

In South Florida, the South Florida Sun Sentinel recently ran a story on how financially strapped condominium and homeowners' associations unable to collect substantial amounts of unpaid maintenance fees from unit owners are directing their efforts to stimulate collections at the banks holding the first mortgages on the delinquent units in an effort to stay afloat, as explained in this excerpt:

• Associations now are attempting so-called reverse foreclosures, which force lenders to seize homes more quickly than they otherwise would. Banks often delay taking back these troubled properties to avoid having to pay past-due assessments.(1)

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• Many boards felt they had little recourse, except to charge higher fees to the remaining owners. Last fall, though, the Association Law Group in Miami decided to try something different for one of its clients. The firm, representing the Keys Gate Community Association in Homestead, maneuvered to force a lender into court for a hearing that resulted in the bank seizing a home within the development.

• The association, which already had taken title when the owner stopped paying fees, asked a judge to assign a certificate of title to the lender on the same day as the hearing. The judge granted the request, making the bank the legal owner. And with that came the responsibility of paying association fees.

• Since then, the firm has completed at least 10 reverse foreclosures in Miami-Dade and Broward counties and has dozens more in the pipeline, said Ben Solomon, co-founder of the Association Law Group.

• "We came up with this new legal strategy to address the flagrant stalling of lenders," Solomon wrote in an e-mail. "Each month of delay by the bank in its foreclosure process will typically turn into an additional month of bad debt to the association, which then must be paid unfairly by the [existing] owners."

For the story, see South Florida homeowner associations get tough collecting delinquent fees.

(1) The story points out that while the crash in condo prices during the past few years pushed many unit owners into foreclosure, banks have been dragging their feet in foreclosing on the apartments, causing widespread maintenance fee delinquencies vacancies leaving the state's 50,000 community associations starving for cash to pay for such services as cable, water and building maintenance & repair.