Protecting Associations During Mortgage Foreclosures

April 5th, 2019

Posted in Business & Corporate Law,Real Estate Law

It has been roughly a decade since the Great Recession began and fortunately the U.S. economy has rebounded significantly since the late 2000s.  During the recession, community associations experienced a record number of delinquencies and mortgage foreclosures.

Mortgage foreclosures can be particularly hard on community associations due to the “safe harbor” provisions contained within 718.116 & 7620.3085, Florida Statutes, which limits the liability of a foreclosing mortgage holder who thereafter takes title to 12 months’ worth of assessments or 1% of the original mortgage amount, whichever is less.  To make matters worse, some associations governing documents have “lender friendly” language which can further limit or entirely eliminate an association’s ability to collect the past due assessments attributable to the former owner.  These “lender friendly” provisions exacerbated the economic issues faced by community associations during the downturn in the economy.  Fortunately, these provisions can likely be removed from the governing documents via an amendment.  Associations should take advantage of the prosperous times and prepare for the next economic slowdown by revising their collection practices and potentially removing these unfavorable provisions from their governing documents.  Associations are strongly encouraged to contact their legal counsel to review for any of these “lender friendly” provisions and determine whether an amendment to their governing documents would be appropriate.

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