West Palm Beach Condo Association Looking to Flip Script on Bank
Homeowners associations are suffering greatly as a result of many homes in their associations being in foreclosure. When the homeowner stops paying their mortgage they usually stop paying their homeowner association fees and special assessments. The remaining homeowners have to take up the slack for all the necessary maintenance. When a foreclosure is finished, the property passes from the old homeowner to either the bank or a third person who buys it at the foreclosure sale. At that foreclosure sale the homeowner association usually gets all or at least a part of the past owed dues and assessments. Then the new owner is responsible for future dues and all dues and assessments from that point forward.
Apparently in this case, the bank became the new owner and it did not pay the future assessments. It is not clear if they paid the past assessments as they are obligated to do as part of the foreclosure sale. The bank also failed to bring the place into proper repair.
All homeowners associations have the right to foreclose on any of their homes for failure to pay assessments and dues, and for failure to keep the place of proper repair. We see homeowner associations bringing their own foreclosure actions at the same time as the banks are completing their foreclosures before the banks. They then become the owners, but they take it subject to the existing past-due mortgage. They do not have to pay the mortgage because they never received the money from that loan. Remember, it was the previous homeowner that received the loan and used it to pay the prior owner when they bought the house. So now the homeowners association is the owner and therefore has possession, but they don't have to pay the mortgage. They typically rent the unit and pocket the rental money to help with all of the association expenses. The bank gets nothing. When they do this they are still subject to the bank completing its own foreclosure. The new tenant will have to vacate once the bank finishes the foreclosure action. A month-to-month tenancy would solve this problem.
In this case, the bank as the new owner is liable for all association dues and has the obligation, as any homeowner, to keep the place in good condition. When the homeowners association won their own foreclosure against the bank, it was not able to get anyone to buy it for an amount greater than what the association had spent to repair the place. This was the amount they sued the bank for in the foreclosure. The difference between these two sums is called the “deficiency,” and the bank as the current owner remains responsible for this amount. Apparently, the bank decided that it was better to walk away from this unit than to spend the money to pay the association, and continue with the responsibility of maintaining and marketing this unit. The bank now has no further responsibility arising from this unit. The homeowners association will probably win in this case.
For more details on the case Frank Albear, esq. is referring to: http://www.palmbeachpost.com/news/news/local/cerabino-surburban-west-palm-condo-assocation-look/nR3pK/