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Community living: Unpaid association fees lost in short sale

Q: We are about to close on a short sale in a condominium association. We understand that many condos in this building are available on a short sale status, and we have heard that the bank is negotiating with the builder on unpaid homeowners association's fees for our unit. We are concerned that when the property moves from the builder to the association, all these unsold short sale units will be pending liabilities for the community. Should we be worried?

A: You ask an important question in today's economic situation. The unfortunate answer is that most of the delinquent fees will not be recovered. The short sale has nothing to do with the delinquent amounts except unpaid fees will be lost. The good news is that when a unit is sold short, the association gains a buyer who will start paying fees. The sooner the units are sold, the sooner the association can collect the fees.

Setting the rules for rental of units

Q: In the past, you have referred to a rental policy for associations. Any information about this policy would be greatly appreciated. With the slow sale market, many owners need to rent their units.

A: Your association documents must allow the board to screen and approve/disapprove prospective buyers and renters. Few prospective residents can be denied residency under segregation law, and failure for the board to follow specific policies can cause many legal problems. I suggest your board, under the direction of the association attorney, create a written guideline for standard official procedures and a written list of questions for the screening committee to follow. In these procedures, your association can establish reasons to deny residency, such as criminal background. If your association documents do not allow for a screening by the board, the only way to enact screening is to have the members approve a modification to the documents, which will require an attorney to provide proper procedures.

Quick action is key in foreclosure dealings

Q: I am the president of a condominium association. One owner was already in foreclosure with his bank when he stopped paying his monthly assessments and special assessments two years ago. The former president was advised that our foreclosure would be secondary, and it would be a waste of money for us to pursue action, so the board did not move to foreclose. Several months passed, and close to the sale date, the owner made a deal with the bank. The sale date was dropped. We filed a lien and began foreclosure action. Before our foreclosure action matured, the owner was again in default and the bank scheduled a new sale date. The attorney said our foreclosure is stayed until the sale date, which is again several months away. Although this owner is the only one out of several who are behind on their payments, he owes a significant amount. What else can we do?

A: Based on the information you provided, it is too late for the association to do anything except wait for the bank to finalize the foreclosure. I have heard many stories like yours, which is why I recommend fast and strict collection policies in today's economy. I do recommend fast foreclosure action because it forces the owner to vacate and may result in a faster bank foreclosure.

Richard White is a licensed community associations manager. Write to him at 6039 Cypress Gardens Blvd., No. 201, Winter Haven, FL 33884-4115 or you may e-mail him at Please include your name and city.

Community living: Unpaid association fees lost in short sale 10/09/09 [Last modified: Friday, October 9, 2009 4:30am]
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