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A New Tool For Condos and HOAS

ChristineThe days of a community association (condo, hoa or cooperative) waiting years for a bank to foreclose so that the association can once again begin to receive much needed due and owing assessments is now history (for the most part).  On June 7, 2013, Governor Rick Scott approved HB87, Relating to Mortgage Foreclosures.  This new law goes into effect on July 1, 2013 and provides for important changes to Section 702.10(1), Florida Statutes that will allow community associations to move stalled mortgage foreclosure cases by filing for an expedited order to show cause.  We all know that if an owner is not paying his/her/its mortgage, the owner is also not likely paying dues/assessments owed to the community association (condo, hoa, or cooperative).   With the crash of the housing market and the stalled economy, more and more units and homes have fallen into foreclosure. The result of the lack of assessment income to the association has created a burden on those residents and owners that do and can pay their legally obligated assessments to ensure that the association can meet its budget and properly function.  Further, if at the conclusion of the foreclosure case, the bank takes title to the unit/home, the bank has a statutory “safe harbor” that limits the bank’s responsibility for past due assessments to 12 months past due assessment or 1 percent of the original mortgage debt, whichever is less. Since foreclosures have been taking two to three years to complete, the association typically is unable to recover all past due assessments that are due and owing relating to such unit/home from the bank, and the shortfall in turn still becomes a burden to be absorbed by the remaining owners. Therefore, it is in the best interest of associations that the units/homes make their way through the foreclosure process as quickly as possible so they can be transferred to new owners who will begin to pay assessments to the association.

Practically, how does this work? If a junior lienholder (including a condominium, cooperative or homeowners’ association) requests an order to show cause be entered, the judge must immediately review the request and the court file without a hearing and, if the file meets the requirements of the statute, the judge will promptly issue an order directed at all other parties named in the lawsuit to show cause why a final judgment of foreclosure should not be entered.   The order to show cause procedure in Section 720.10(1), Florida Statutes, applies even if the residence is owner-occupied. Prior to the passage of this new law, Florida law only provided a bank (or the foreclosing person/entity) with the ability to file a request for an order to show cause.   Now, this right extends this right to other lienholders.  

Christene M. Ertl, Esq. represents numerous community associations and owners living within community associations.  Ms. Ertl is actively involved both locally and statewide in legal issues and the development of laws involving community associations.