MORTGAGE FORCLOSURES - EFFECT ON ASSOCIATIONS

Hi All,
The following question comes from the CV Q & A:
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Author: Jules Sitnick (---.miatflad.dynamic.covad.net)

Date: 03-02-09 09:47

Unbeknownst to the Board of our condo association, one unit owner, who is renting his unit, re-financed his unit and the lending institution has now served him with a foreclosure notice. How does this affect the building? How do we collect our monthly maintenance? Is the lending company now liable for the monthly payments? What happens to the money the renter would normally pay to this unit owner? Any enlightenment would be greatly appreciated.

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Before we launch into this the following advice is given: Engage an Attorney.

Just a few thoughts:

You are not alone; many folks in CV obtained Mortgages shortly after the hurricanes because they were not insured or they were underinsured. Others took out Mortgages at the height of the Reality Bubble, simply to tap into the equity in their Apartment.

Now, Home prices and thus equity have plummeted and interest rates on Mortages have escalated and many in CV as in the Nation are "Under Water"

When a Unit defaults, the Association must still pay it's bills. If they do not have robust Reserves the remaining Unit Owners must make up the difference, it is as simple as that.

There is a process that you MUST follow; in essence it goes like this:

1) Letter of demand.
2) Letter of intent to file a "Claim of Lien"
3) Filing of the "Claim of Lien"
4) Foreclosure

This is a Laymans description of a complicated process; there are many questions about who is first in line, EG:

1) Federal Taxes /State Taxes
2) W.P.R.F., Inc. (By way of the Rec. Lease)
3) Bank
4) The Association.

If the Bank takes Title; they are responsible for the Condo. Fees (for a short time); so many banks move slowly. There are changes in the legislature on this matter in train. (2009 session / J. Robaina / HB 1397)

Inaction is toxic; do not take on this process on your own; I say again,
GET AN ATTORNEY very early in the process..

Your attorney may be able to get a judge to divert the rent to the Association, this has happened in the past here in Florida. (2009 session / J. Robaina / HB 1397)

Good Luck Jules.

Dave Israel