Florida’s condominium owners may have won a few legal battles that could teach a thing or two to peers facing foreclosure related hardship in other states.
A legal strategy pioneered by the Association Law Group of Miami enables homeowners’ associations and condominium associations to collect “mounting unpaid maintenance fees” from prior owners after banks take the property title through a mortgage foreclosure proceeding.
“Total recovery” proceedings appear to have established a legal precedent that helps minimize losses incurred by the collective when condo owners go into foreclosure and do not pay maintenance fees. According to Ben Solomon, co-founder and partner at ALG, it was created to enable associations to “recover accumulated debt on foreclosed properties despite the statutory cap on assessments afforded to lenders.” It targets debt on foreclosed units after statutory obligations paid by first mortgagees.
Statutory caps on the amount payable to associations often turn “significant amounts of bad debt” into the collective responsibility of the condo community since debt collected from lenders “rarely covers the full amount due to associations.” Thus the other homeowners who are paying maintenance fees inherit debt that financially burdens thousands of condo communities.
While debt recovery issues are “very common,” the law firm argues, ALG revitalized a legal tactic that in the past has been used by lenders mostly to recover post-foreclosure deficiencies from borrowers, guarantors and other liable parties.
The strategy helped settle a case that involved a foreclosed home at the Keys Gate Community in South Florida that hosts over 3,000 properties. The lender (U.S. Bank National Association) was forced to take the title to a home from Keys Gate Community Association Inc. through the so-called reverse foreclosure process in March 2010. However, once U.S. Bank paid the association the limited statutory amounts due, the association could not recover another $4,300 in past-due maintenance fees. ALG filed a motion for deficiency judgment against the prior unit owners for $4,300 and then secured “a writ of garnishment from the court against the prior owners’ bank account” for the amounts due to the association.
The strategy worked. The previous condo owners’ bank account was eventually frozen allowing the association to collect $2,160 immediately. In February after working closely with ALG, the debtor agreed to establish a payment plan based on a Stipulation for Entry of Final Judgment of Garnishment. It was a feasible payment plan that took into account the financial circumstances of debtors but also paid back the association in a timely fashion. In addition, ALG waived its legal fees.
ALG, which specializes in the representation of homeowner and condominium associations throughout Florida, finds it is “a growing problem” because the state is one of the hardest hit by the crisis. It is another reason why ALG’s legal tactic continues to gain popularity. In June ALG was granted another
Total Recovery judgment in Miami-Dade in the amount of $23,717 and has filed other such actions across Florida representing associations of properties ranging from high-rise condominium towers, to large master communities, small townhouses and low-rise condominiums. In addition to Total Recovery it provides other debt collection strategies including “Blanket Receivership,” “Reverse Foreclosure” and the “Mortgage Terminator.”
Solomon expects the new legal tool will help other distressed communities across Florida “get back on track.”