It seems as if the foreclosure crisis is certainly not as bad as it once was, even though Florida is still the worst state in the nation, with approximately one in every 346 homes in foreclosure. The percentage of delinquencies in our community associations are certainly down from where they were just a year or two ago and hopefully things will remain this way.
Even though the worst may be behind us, associations and their owners have taken a tremendous financial beating for nearly a decade. It happened, because the association laws are simply designed to protect the banks and not the owners. As most of you know, if a bank loans money to someone who purchases a unit or home in a community, and that unit owner does not pay the assessments to the association, if the bank forecloses on the property and becomes the owner, the bank only has to pay the association the lesser of one year of unpaid assessments or 1% of the original amount of the mortgage. So typically, even the owner is indebted to the association for thousands or tens of thousands of dollars, the association gets peanuts from the bank.
It got even worse this week for condominiums when the 3rd District Court of Appeals issued an opinion in a case called Aventura Management v. Spiaggia. In this case, the condominium foreclosed on a delinquent unit owner and took ownership of a condominium unit. The bank then foreclosed, but a third party purchased the unit at the bank’s foreclosure sale. The condominium demanded that the purchaser at the bank’s foreclosure sale pay the association all of the assessments owed by the delinquent owner. The 3rd DCA held however that the purchaser only owes the unpaid assessments from the time the association became the owner. In fact, if the association rented out the property during the time it owned the unit, the new buyer at the foreclosure sale may not owe the association a dime. So…..bottom line…..on the day when the condo forecloses and takes back title to a unit, the account ledger goes to zero.
Currently, there is a bill filed in The Florida Legislature which seeks to make the banks pay more if they foreclose and become an owner. It would make the bank liable for 2% of the original amount of the mortgage or 2 years of assessments, whichever is less. While I hope it passes, I believe it has little or no chance whatsoever.
So, why do the banks have so much more influence with The Florida Legislature that Joe Citizen? For the same reason why Dillinger thought it was a good idea to rob a bank. BECAUSE THEY GOT ALL THE MONEY.