Rent to the Associations

This would be from the proverbial “What We’ve Been Waiting for From the Legislature” Department. 

Community associations (HOA’s & condos) can now collect rent directly from tenants if the owner of the unit owes the association money. All it takes is a notice sent to the tenants. If the tenants do not comply, the Association has the option to evict them under Florida’s residential landlord/tenant law.

This new law, under 718.116 for condos and 720.3085 for HOA’s is a god-send for many associations nearing or at insolvency. Non-paying tenant occupied units have forced rising assessments in some communities, pushing owners past their budget-breaking-point in some cases.

This bill will assure not only that the rental units will pay on-going assessments, but that the past-due amounts will be paid, too.

The pertinent part of the bill follows below. It quotes 718.116, but the wording is very nearly identical for HOA’s, too.

SB 1196

718.116 Assessments; liability; lien and priority; interest; collection. –

(11) If the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may make a written demand that the tenant pay the future monetary obligations related to the  condominium unit to the association, and the tenant must make  such payment. The demand is continuing in nature and, upon demand, the tenant must pay the monetary obligations to the  association until the association releases the tenant or the tenant discontinues tenancy in the unit. The association must mail written notice to the unit owner of the association’s demand that the tenant make payments to the association. The association shall, upon request, provide the tenant with written receipts for payments made. A tenant who acts in good faith in response to a written demand from an association is immune from any claim from the unit owner.

(a) If the tenant prepaid rent to the unit owner before receiving the demand from the association and provides written evidence of paying the rent to the association within 14 days after receiving the demand, the tenant shall receive credit for the prepaid rent for the applicable period and must make any subsequent rental payments to the association to be credited against the monetary obligations of the unit owner to the  association.

(b) The tenant is not liable for increases in the amount of  the monetary obligations due unless the tenant was notified in  writing of the increase at least 10 days before the date the  rent is due. The liability of the tenant may not exceed the  amount due from the tenant to the tenant’s landlord. The tenant’s landlord shall provide the tenant a credit against  rents due to the unit owner in the amount of monies paid to the  association under this section.

(c)           The association may issue notices under s. 83.56 and may sue for eviction under ss. 83.59-83.625 as if the association were a landlord under part II of chapter 83 if the  tenant fails to pay a required payment to the association.  However, the association is not otherwise considered a landlord under chapter 83 and specifically has no duties under s. 83.51.

(d)          The tenant does not, by virtue of payment of monetary obligations to the association, have any of the rights of a unit owner to vote in any election or to examine the books and records of the association.

(e)          A court may supersede the effect of this subsection by appointing a receiver.

For associations wanting to take full advantage of this law, I would start right now! The law is effective July 1, 2010. Send notices to tenants immediately. Begin collecting rent the very day the law goes into effect.

• Say in the notice, in so many words, “July rent goes to the association or you will be evicted.”
•  Be sure the OWNER IS SENT NOTICE AT THE SAME TIME. (Even if it is an HOA!!!!!)
• “any monetary obligation” means legal fees, late fees, interest, fines, ANY MONETARY OBLIGATION to the Association.
  • Collect rent until ALL monetary obligations are satisfied.
  • Don’t be shy about costs or what the Association is entitled to collect.
  • EVICTION: the new statute gives the Association the power to evict without the obligations of actually being a landlord.

In other words, a new day has dawned for community association collections. (Yippee!)

Mediation Mandatory in Foreclosures

Mediation is now required before banks can proceed with foreclosure in Florida.

The Florida Supreme Court’s Administrative Order effectively forces banks to meet with homeowners face to face, and attempt mediation before the Courts will allow the action to move forward. It does not mandate a reformed loan for the financially stressed homeowner but it does give them some breathing space. Because a debtor is required to attend “foreclosure counseling” prior to the mediation, and the Order gives the homeowner up to 120 days (four months) to get that counseling, the Court’s Order effectively puts the brakes on the process, giving families more time to figure out an alternative to losing their homes.

Homeowners and condo associations may or may not be affected by the Court’s Order. The Order only applies to actions based on the foreclosure of loans that fall under the Truth In Lending Act. (TILA) It does not, necessarily, apply to foreclosure of an association’s claim of lien for delinquent assessments. The Court Order did, however, leave a loophole for Circuit Court Judge’s. At the local level, the court has the discretion to require mediation in any foreclosure action if the property is homestead property. The Plaintiff in the action, usually the banks, are required to pay for the counseling and all costs of the mediation.

There are no exceptions for property that is not homesteaded. This means actions against investment properties, second or vacation homes, would proceed without mediation being required.

Homeowners and condo associations with lengthy delinquencies from properties in foreclosure, should consider filing their own actions because they can usually move those actions faster through county court if they choose to, and now, because of the Supreme Court’s Order, may be able to foreclose months before the bank’s action can be completed. This advantage may be used to pressure the owner into some payment plan.

Homeowners themselves, should take full advantage of the Order to rework or otherwise renegotiate their mortgages, either through the mediation process, or prior to the bank’s filing the foreclosure action. The lengthy process, plus the additional cost being applied against the banks, may give them incentive to work with the homeowner to find a solution they both can live with, without an action in foreclosure ever having to be filed.

Give the Condo His Due

Condo associations can collect the full assessments that are due them from absentee owners and units facing foreclosure. It is true. This is happening.

Some Florida courts understand the Condo Crisis and are giving Receivers the authority to collect rents directly from tenants, before the money has a chance to reach the owners, and then using it to pay the condo assessments FIRST, before the unit owner has a chance to get his hands on it.

This is an extraordinary solution prompted by extraordinary times. Florida’s condo statutes were not written to give Associations the power to enforce payment of assessments even in the face of an overwhelming number of foreclosures and the pressures felt by investor-owners struggling to stay out of foreclosure.

Receivers, court-appointed for no other purpose than to collect rents from tenants, can step in. Once the money is in their hands, Associations get paid first; well, almost first. The Receiver takes his fees off of the top, then pays the Association second. If money is left over after these dues are paid, the unit-owner gets it.

The plan is working, bringing financial health back to condo associations and stabilizing property values.

Accepting Partial Payments

“All or nothing”  may not be an option for owners associations anymore.

On June 11, 2008, Florida’s Third District Court of Appeal ruled in favor of a homeowner who was being foreclosed on because he did not present the maanagmeent company with full payment, but only offered partial payment.  The Court in that case said the managmeent company was assured of eventual full-payment by 718.116. The association should have mitigated its possible damages and accepted the partial payment offered, therefore leaving a “miniscule” amount and making the foreclosure unnecessary.

This ruling, intended by the Court or not, gives support to homeowners who want to dispute some smaller part of their overal obligation, such as a charge for attorney’s fees, or to withhold a special assessment because they take issue with the quality of pool maintenance. The association’s right to record a lien on the property and then foreclose that lien, is weakened from a practical standpoint. In this case, the offered payment only left $25 outstanding. A court is unlikely to order a foreclosure over such a small amount and, probably, will chastise any association’s lawyer for pressing such a suit and even award attorney’s fees and costs to the homeowner.

Therefore, in practical terms, the Court just handed homeowners a powerful weapon. If they do not want to pay some particular charge on their statement, they can offer partial payment withholding that amount, and the Association must accept it. If it is “miniscule” enough in the Court’s eyes, it is unlikely that the association will ever be able to realistically threaten an action to collect the money.

Welcome to the Neighborhood. You owe us MONEY!

Did you get a great deal on foreclosure property? 

Are you sure?

Did you buy it from the foreclosing bank? Did you buy it from someone else and THEY bought it from the foreclosing bank?

If you did, don’t be surprised if the HOA or condo association hits you up for more money.

Foreclosing Banks hate paying delinquent assessments to associations. They may argue the “takings clause” of the constitution, or other contrary interpretations against Florida legislation but the underlying reason is that, what with America’s financial crisis (you know, the one they helped create) they think assessments are the least of their problems and don’t pay them even when there is no argument that Florida law says they owe them, as in the case of condominiums under Sec. 718.116 Florida Statutes.

Clients are coming to see me holding big fat invoices in their hands. The unexpected bills are for association assessments that were not paid by:

 a) the previous owner; or

b) the previous owner and the bank that foreclosed on the previous owner or

c) the previous owner, the bank that foreclosed on the previous owner, and the owner who bought the foreclosed property at a huge discount from the bank and who then flipped it to my client or

d) all the above.

Sure, the banks should have paid SOMETHING, especially if the foreclosure invovled a condo. Foreclosing banks owe the association 1% of the original mortgage or 6 months assessments, whichever is less (Fla. Stat. Sec. 718.116) but, guess what? The banks didn’t pay anyway: what are you going to do? They foreclosed, owned the property for about as long as it takes you to say ”government bail-out!” and then they sold it to someone who they presume will take the hit for them. If you want to track down the person at the bank who will take responsibilty for this ”oversight” in their vast, labyrinthine organization, good luck with that. I’ll give you a telephone, a case of Super-Caffeinated soft drinks and in six weeks, help you find a good therapist.

So, if you buy a house or a condo and get slapped with several years’ past due assessments and interest, do you really have to pay it? Well… yes, and… no. (I’ll remind you, this IS written by a lawyer, after all!)

On the “yes, you owe them” side of the answer, HOA and condo statutes hold both the new and the old owners as “jointly and severally” liable for unpaid assessments, along with the interest, the legal fees, court costs, and the whole nine-yards. The good news is the bank is liable along with the previous owner. The bad news is that even if you could find the people responsible at the bank OR locate the previous owner, it would take a lawsuit to get either one of them to contribute their fair-share to the payment of the bill.

Is it entirely “legal” for the association to come after YOU for money owed by everyone under-the-sun EXCEPT you? I mean, you just got here, for pity’s sake! Why should YOU pay? Well, if you want to argue on principle, you can spend an amount of money equivalent to what it takes to fill a scoop on a front-end-loader, twice, on a lawsuit to find out. Brain-replacement surgery is probably more fun.

What do you do instead? Before you close your “great foreclosure property deal” make sure your closing papers include title insurance. Your title company or agent or both should have contacted the HOA or condo association and gotten an estopple letter BEFORE you sat down at the closing table. If there was money due, you should have known about it. If you didn’t, they didn’t do their job and now they may be liable for paying whatever money is due.   

For associations, this is who they should go after to collect the money that is probably well deserved. (Remember: the HOA/condo association didn’t create the financial crisis, either. They have bills to pay like everyone else.) The association’s estoppel letter is something that should be secured by sellers/buyers all the way down the chain of title: when the bank forecloses, when the bank passes the hot-potatoe to some middle-market entity, and especially when it transfers to the person intending to make that property their own home. This is the last person who should be surprised with a letter saying, “welcome to the neighborhood, now pay up!”

Florida Legislature Lets Homeowners Down

Attempting to help homeowners, the Florida legislature ended up hurting them somewhat with revisions to Section 720.3085 this past session. The statute was supposed to make new owners in HOA communities liable for all overdue assessments, no matter how they acquired the property. This applied to private sale, deed in lieu, or foreclosure sales. At foreclosure sales these days, the bank is the buyer more often than not. Faced with the unexpected high costs, in some cases, they balked at this change in the law. Now they are challenging its constintutionality in each individual foreclosure action and circuit judges are ruling in their favor, agreeing that HOA’s liens are extinguished along with other junior lienholders if there is no money left in the property after the mortgage is satisfied.

This means that homeonwers who are paying their assessments are also getting hit with bigger HOA fees because they are forced to make-up the shortfall created by the non-paying members. Little or no equity in the foreclosed property leaves nothing for the HOA if the banks or new owners are not held responsible for past-due assessments and costs of trying to collect the money from the delinquent member.

The legislature should address this problem in its next session, but meanwhile HOA boards are left to figure out how to come up with an annual budget that meets the needs of their community and takes into account a record foreclosure rate with the consumate loss of revenue.

Purchase-Sale Contracts: “Did I Mention Godzilla’s Eggs?”

The number one question asked of real estate lawyers is probably something like, “Hey, I’m not getting cheated here, am I?” It may not be phrased exactly like that but it almost always has something to do with a purchase/sale contract for a house, condo, or timeshare agreement.  

Don’t get me wrong: you should have a lawyer look at the contract. Always. No exceptions. Having said that, there are “red flags” an average buyer can use to eliminate a property without having to pay a lawyer in order to confirm that it’s probably a bad deal.  

Maybe the first thing to consider is whether the piece of paper in your hand is a standard “FAR-BAR” contract. This is one approved by the Florida Bar Association in cooperation with the Florida Association of Realtors. An experienced realtor or lawyer can tell at a glance whether it has gone through any serious alterations. If it has, read every word. (You should anyway.) 

There should be general fairness in the contract to the buyer and seller as far as rights of inspection, binders, return of the binder if a party backs-out of the deal, and who pays for what inspections and other necessary costs of the sale. If the seller is paying all of the expenses, that’s a red flag. As the purchaser, you should ask yourself why the seller is being so generous. It may be a distraction so the buyer doesn’t notice a material defect.

All “material facts” affecting the property value should be disclosed by the seller, no matter what the “as is” rider may say. “Material facts” are defined in Florida case law as, among other things, any hidden defects in the property or structure itself that are known to the seller but would not be readily apparent to the average buyer; even one who makes a ‘reasonable’ inspection of the property.  

In practice, examples of such hidden defects that should be disclosed by the seller would be things like:

a) the fact that the lower floor floods every time it rains or even every other time it rains; 

b) the foundation footings were poured without the requisite reinforcing steel bars;

c) Godzilla previously nested in the backyard and her eggs are still incubating somewhere under the snapdragons.  

These serious hidden defects could affect a potential buyers’ decision and they should be disclosed.  Also, a seller cannot make a FALSE claim about a property (of a material fact) and expect the “as is” clause to limit their liability for such things as fraud, fraudulent misrepresentation, breach of contract and the usual gamut of charges that can arise from lying about something significant. (Not that anyone would do such a thing: just pointing it out.)  

No clause that I am aware of can relieve a person of responsibility when that person has intentionally lied and their lie caused some harm to another. This is one of the great things about the law, in general.

It may offer some confidence to a home buyer, but it still is no substitute for getting those independent inspections done and, by all means, hiring a lawyer to look at the contract. 

That’s just in case you are looking out into the backyard one day and start yelling at your wife, ”Hey! Was that FIRE I just saw coming out of that baby lizard’s mouth, or what?!”    

Gate River Run Photos

Welcome to tedbrownlaw.com (emphasis on condo/homeowner association & related real estate law in Northeast Florida).

Congratulations and good job to you folks competing in this year’s Gate River Run in Jacksonville.

About 300 pictures were taken at the 3-mile mark on River Rd, from the first runner going by until my digital camera ran out of memory: anywhere from 5 to 10 minutes. 

If you were in that group, chances are I got a picture of you: maybe even a picture of you with that cold St. Johns River water spray blowing by you from the incredible wind.

Follow the link below and take a look. Help yourself to the image. It’s my way of saying thanks for the inspiration. If I can ever figure a way to get my knees, ankles and other body parts to move backward in time, maybe I’ll be out there with you guys someday.

Here’s the link: http://picasaweb.google.com/tedkbrown/RiverRunTedBrown

And again, congratulations even if you only made it as far as our “Waffle Station”. It was the 4th year for us doing this, and my daughter’s idea when she was only 4 years old. You’ll see her in the pictures. She’s the seven-year-old who is ’pretty in pink’ handing out the waffles. 

Hope you enjoyed the run as much as we did watching all of you run it!

thanks again.

Sincerely, Ted K Brown

“No Dogs Allowed: Except Pit Bulls”

If condominiums ever go to the dogs you can bet, right up to your last dollar, that the last breed of dog they go to will be Pitbulls. 

Pet restrictions are found in virtually every declaration of condominium in the state of Florida. The restrictions are written by lawyers, but the limitations placed on pets are usually dictated by developers claiming to be listening to their marketing departments; or maybe they are listening to the little voices speaking to them inside their heads which come from their own prejudices, personal fears or past experiences.

Some pet restrictions are species-based. (“No dogs or cats, but cockatiels and rattlesnake hat-bands are okay.”) 

Some pet restrictions are based on breed. (“Cats okay. Dogs okay as long as they are not Doberman pinchers, Rottweilers, bullmastiffs, cadaver dogs, or that wrinkly-breed that always makes me want to rush out to the nearest hospital for an emergency face-lift.”)

The majority of pet restrictions seem to be weight based. (“No pet that weighs more than 35 pounds. No pet-owner that exceeds 21% body fat. Oh, wait…”)

If you think this is funny, well, what may be funnier is that all of these restrictions are likely to hold up in court. (Except the one about body-fat.)

Florida’s Condominium Act, Section 718, gives condo developments tremendous latitude in pet restrictions. As long as the rules are clearly spelled out in the governing documents and consistently enforced throughout the association, they will usually be upheld. 

Efforts to change the limitations after-the-fact, once recorded with the county clerk, become something beyond ”tough”. Most declarations require a 2/3rds majority for passage of any amendment, including those that allows such things as a fierce, fat, Fido onto the property as a permanent resident.

Pet-loving, potential condo buyers should read the declaration carefully before signing on the dotted line and if they do not see anything specifically addressing the issue of pets, they should not take the word of the real estate agent or seller of the property that none exists. They should contact either a board member of the association or an officer (not an employee) of the association’s management company in order to get a definitive answer to the question of pets that are allowed by owners, or by renters, of the property. 

When asking keep in mind: there are always restrictions. The likelihood that NO pet restriction exists in the governing documents of a condominium is about as likely as Pitbulls replacing Dalmations on fire-engines. (They may not be as pretty but then again, you don’t have to worry about anyone messing with the firehoses.) 

Mediation Solves Problems

Going to court can cost you money.

Mediation costs money, too, but not as much.

When Florida homeowners violate community restrictions, association boards look for ways to persude them to come back into compliance. If persuasion didn’t work, court was the only solution up until 2004. That’s when the legislature passed a law requiring mediation before court.

This was a move in the right direction, but the 2004 statute was cumbersome. The program was overseen by the Dept. of Land Sales, the filing cost was high, and it took six weeks just to find out whether or not the Department would assign a mediator to your case.

Those stumbling blocks were pushed aside in a 2007 revision of the statute. Mediation is still required but now an association can go directly to the homeowner with their request. The homeowner, in turn, has 20 days to agree to the voluntary mediation before a court action can be filed. The cost of the mediation is evenly divided, but this can be negotiated.

After more than a dozen mediations since passage of the new law, I have yet to see one case go to court. This works out best for everyone involved, except maybe the lawyer who doesn’t get to charge those billable hours in preparing for and going to court to resolve what should be issues more easily resolved between, what amounts to, neighbors.

It’s one source of revenue this particular lawyer doesn’t mind missing out on because the real goal in any such dispute is to keep those restrictions and covenants contained in every Declaration doing what they are supposed to do: unite the homeowners behind a set of ideas that work to the benefit of each person living in the community.