17th Mar 2015
Always inspiring to see the Legislature leap to the aid of Community Associations.
Here’s a quiz:
Who (1) caused and (2) reaped the most financial benefit from the collapse of the housing bubble and onset of the Great Recession:
(a) the Banks
(b) Community Associations
(c) Spongebob Squarepants
(d) Definitely not (b).
If you answered (a) or (d), very good. If you answered (b), wrong and why are you reading this blog? If you answered (c), then you should seek professional help.
Certain members of the Florida Legislature, however, have become convinced that community associations are cashing in on the end of the foreclosure nightmare that has gripped this state for the last six or seven years and, as a result, introduced HB 611, which provides stricter rules governing estoppel letters issued by associations that detail how much the purchaser of the property owes towards past due assessments, costs and reasonable attorney’s fees.
Some of the “highlights”:
The association cannot charge in advance to prepare an estoppel, but will only be paid at closing;
- The time to prepare an estoppel is reduced from 15 days to 10 days;
- The association may charge a maximum of $100 to prepare an estoppel (with some additional fees, such as $50 if the account has gone to an attorney for collection and another $50 if expedited, etc.);
- The amount listed must be good for 30 days;
- If the association fails to comply with any of the above, the association WAIVES its claims for any monies due
Seriously, Florida Legislature, what is your deal? While there have been some admittedly questionable practices by associations, management companies and attorneys in preparing estoppels (in particular, the charges for preparing an estoppel sometimes look less like an attempt to recapture the cost of the service and more like an attempt to mine a new revenue source), it hardly seems as if this is the place to start in addressing the abuses still present in the Florida housing market.
For one thing, the average length of a foreclosure case in Florida is still hovering around the 800 day mark. For another, while the banks wait those 800 days to conclude their foreclosure cases, they aren’t paying the associations’ assessments and neither are they paying to maintain the common elements or, really, doing anything at all about the hundreds of properties around the state that have been sitting without electricity or A/C for years as they turn into veritable science projects for the cultivation of new forms of mold, spores and fungus.
And, at the conclusion of the farce known as mortgage foreclosure in Florida, the banks pay a mere pittance – the statutory “cap” of the LESSER of 12 months past due assessments or 1% of the original mortgage. For those of you doing the math at home, 800 days is almost 27 months, so even in the ideal situation, the association is out an average of over one year’s worth of assessments.
But, apparently, it’s a bigger issue when the Empty Arms Condo Association charges 200 bucks for preparing its fifth estoppel for the fifth alleged short sale for Unit 602.
And, yes, let’s make sure to put in there that if the association gets the estoppel letter out on Day 11, then it forfeits everything it’s owed on the property. That’s fair, seeing as how if the bank doesn’t pay the association for ANY of the past due after a bank takes title, the penalty is … nothing. That’s right. If a bank doesn’t pay the monies owed as detailed in the estoppel letter there is NO PENALTY. The association has the right to pursue collections, but that’s it. The bank doesn’t lose any rights or remedies based on its delays. In fact, the state of the law in Florida REWARDS banks for delays. And those delays punish associations and their members by decreasing their overall assessments, increasing their bad debts and collection costs and, ultimately, raising the assessments for all of the members who have been dutifully paying all along.
If we’re going to start addressing some of the negative effects of the mortgage foreclosure crisis, I suggest the Florida Legislature give the banks an incentive for moving their cases through the system quicker. For example, let the banks take as long as they want to conclude their foreclosure cases, but if they take over a year, they should pay for the privilege, i.e. start paying the Association’s assessments if they haven’t foreclosed in a year.