Q: Our HOA is having more difficulty collecting from foreclosing banks and investors who purchase foreclosed properties. It used to be fairly standard to collect 12 months of unpaid assessments and a healthy portion of interest, late fees and legal fees, but some banks and foreclosure investors are now claiming that they owe nothing to the HOA pursuant to our documents. Can our documents really hurt us? I thought that the Florida law guaranteed us at least 12 months of assessments after a foreclosure?
A: This is not as much of an issue for condominiums because the condo statute has imposed liability on foreclosing banks since 1992. For HOA’s, however, the law imposing liability on foreclosing banks is fairly new, and if the HOA’s documents were written before the change in the law then the documents could actually hurt the HOA on this issue depending on the language. Some documents simply provide that the bank or foreclosure investor owes whatever the statute provides, which currently is the most recent 12 months of assessments as you state (or 1% of the original mortgage debt, if that amount is less). Other HOA documents, however, provide that the new owner is not liable for any assessments or fees charged to the prior owner. This language can cost the HOA tens of thousands of dollars, and we are seeing banks and savvy investors do their homework and get aggressive even when the association attempts to collect the standard 12 months. If your HOA has documents that were written and recorded prior to 2007, it is imperative that the association’s attorney review the language regarding the liability of new owners following a foreclosure or deed in lieu of foreclosure. The attorney will probably find other provisions that should be updated and cleaned up, such as provisions on pets, leasing, guests, parking and other popular issues in your community.