Homeowners and condominium associations were doing an adequate job of collecting monies. This is due to them including write-offs that were so troublesome or hard for the association to deal with.
This is all before the market crashed in 2008. The court system became highly overwhelmed with mortgage foreclosures. And, unchallenged cases would typically take at least 3 years to finalize. Associations have had to make changes in their collection policies because of submissive terminology in their governing documents and Florida statutes. The number of write-offs has caused the association to propose more special assessments, raise their monthly assessment payments, or go as far as to file for bankruptcy.
Law in Florida
Florida law states that when the bank that is in first-line position forecloses on a property, they are exclusively responsible for all unpaid fees for up to 12 months of assessment payments prior to taking ownership of said property. Or, 1 percent of the initial mortgage debt, whichever one is less; including the entire amount of fees racked up from the moment the bank took over the property until the property is sold. Due to the lengthy amount of time that it takes for a bank to foreclose on a property, associations no longer have the luxury of time, financially speaking, to wait for the bank to foreclose and a new owner to pick up where the bank left off in order to secure past due assessments. If associations wait for this to happen, they will nearly always have substantial write-offs.
Minimizing risk and costs while maximizing collections should be the objective for all associations. There are associations out there that have not changed their collection policies. And, that are still under the impression that assertive debt collection will not always lead them to larger write-offs. But, that it can take them to surpluses instead because said associations would not allow wasting of time and money while the bank takes 3 or more years to foreclose on a property. According to the Condominium Associations Institute, Florida has 46,000 associations. This makes it the largest amount of associations throughout the country at 14.2 percent.
RealtyTrac Inc. Data on Associations
RealtyTrac Inc., states that there are about 21,000 homes going through the foreclosure process. And, chances are that these homes are also behind on their association dues. If associations wait to pursue delinquent homeowners, they are directly contradicting their duties. The moment the association received notification that a property has been served a foreclosure complaint, they need to establish representation. Moreover, they need to immediately start taking action. One of the most beneficially and least used tool associations possess is collection rent from properties in foreclosure. A demand letter can be sent to the tenant, creating an agreement with the former owner. Or, the association itself can put a tenant in the unit. These are all great ways to collect or even create a surplus while the foreclosure process finishes.
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