Associations want faster foreclosures
For condos, lenders are only responsible for six months' worth of back assessments. Policymakers in Washington, as well as at the state and local level, have been working feverishly lately to develop programs aimed at stemming the massive tide of foreclosures sweeping the housing market. Billions of dollars are aimed to be spent, with hundreds of billions more already used to help bail out ailing banks.
But in an ironic twist, as the government tries to get banks to hold off on seizing peoples' property through foreclosure, many of Florida's community associations are worried about the opposite: banks that are not foreclosing fast enough.
That is because the lender does not have to start paying the regular association assessments on a property until it formally takes title at the very end of the foreclosure process. Under current state law, they are only responsible for unpaid assessments going back a certain period of time -- meaning any process drawn out beyond that equals lost revenue for associations already struggling financially.
For condominiums, lenders are only responsible for six months' worth of back assessments, or up to 1 percent of the unit's value. Single-family homes are a little different, where banks have to pick up the tab for an entire year's worth.
Some community associations -- especially condo associations -- have been complaining that banks are initiating foreclosure proceedings against owners, but then taking their time when it comes to actually pulling the trigger to take title. In other cases, the courts are so backed up with foreclosure cases that getting to a resolution simply takes more time than ever before. As a result, the process frequently goes beyond the six-month liability period for condos, and leaves condo associations with months' worth of assessments that will never be repaid. For homeowners associations, the problem is less intense, but still a concern.
The Community Association Leadership Lobby, a lobbying group that represents about 4,000 community associations in Florida, plans to push for new laws during the upcoming legislative session that would shift more of the responsibility for unpaid assessments to lenders.
"The situation financially for many associations is bad, and it's getting worse," said CALL's co-executive director David Muller, a Sarasota lawyer. "They need help to relieve the strain of unpaid assessments from foreclosures that is eating away at their bottom lines."
Muller, also a community association attorney with Becker & Poliakoff, said at a time when banks are receiving hundreds of billions of dollars in federal bailouts from taxpayers, it was appropriate for some of those funds to be used to help aid associations. He did not advocate direct infusions of taxpayer money that would go to associations, but rather said indirect support would come by requiring banks to take on a larger share of unpaid assessments when they foreclose. Muller admitted that the state's banking associations would likely not be thrilled about his proposed initiative.
A new statewide survey CALL conducted of more than 1,500 of its members found considerable financial pressures being caused by the foreclosure crisis. More than 65 percent of respondents living in communities hit by mortgage foreclosures said they were "causing a revenue shortfall that is placing a burden on the association's finances," according to CALL. Nearly 38 percent said the foreclosure-related revenue losses resulted in "postponements of major capital investments in upkeep or repair" of buildings and other property.
The survey also found more than 50 percent of respondents reported more vacant units compared to a year ago thanks to foreclosures. Nearly 70 percent of those reported vacancy rates from 1 to 9 percent as a direct result of foreclosures, while 15 percent had such a vacancy rate greater than 10 percent. Nearly 60 percent of respondents said that getting lenders who had been slow to foreclose to pay unpaid assessments "has proven difficult." Looking ahead, things were not looking any better. Three-quarters of the CALL survey's respondents expected the foreclosure situation would not improve, and may even get worse, over the next year.
From the Sarasota Herald Tribune - March 2, 2009
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