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Abandoned Unit Becoming a Nuisance?
Abandoned Unit Becoming a Nuisance?
Restoring Power to Mitigate Further Harm
By Mark D. Friedman, Esq.
Foreclosures are at an unprecedented level in Florida resulting in many units standing vacant for extended periods, often without electricity to run the air conditioner. In Florida’s generally hot and humid climate, a closed unit without air circulation may lead to the proliferation of mold. Condominium Association Boards often ask if they may restore the power to the unit.
It would be the rare set of condominium documents which specifically addresses this issue. However, in a condominium setting, Section 718.111(5), Florida Statutes, permits the Association the irrevocable right of access to a unit for “maintenance, repair, or replacement of any common elements or of any portion of a unit to be maintained by the association pursuant to the declaration or as necessary to prevent damage to the common elements or to a unit or units.”
If mold proliferates in a unit damage could result not only to that unit, but to adjoining units and the common elements. The statutory right of entry does not specifically deal with restoring electricity to keep the air circulating. However, it allows the association the ability to enter a unit and take the actions necessary to prevent damage to the condominium property. As one of the simplest ways to prevent mold is to remove the moisture from the air by restoring electricity and running the air conditioner the condominium association board may arguably take this step.
The problem has been the restoration of power. Becker & Poliakoff has worked with Florida Power and Light to determine a standard operating procedure for such restoration of power. The basic steps are: 1) setting up a master account in the Association’s name; 2) when the power is disconnected the Association must contact Florida Power and Light to restore the power in the Association’s name using the funds in the master account; and 3) contact FP&L to expedite the restoration of power. Your community association attorney can assist you with contact numbers and further details to ensure the most current information.
Please note that the foregoing is only for Florida Power and Light customers and may not apply to customers of other power companies throughout the State of Florida.
We are often asked whether the Association can recover the cost of restoring power to the unit. It is unlikely that these costs can be recovered from the foreclosed unit owner, especially if the property is worth less than the amount of the first mortgage on the unit. There is a possibility (not a guarantee) of recovering these costs if the bank or other third party has received Certificate of Title to the unit and refuses to turn on the power. This is something that must be evaluated on a case-by-case basis with your community association attorney. However, the Board has a fiduciary duty to the remaining unit owners and it is less expensive to pay a small electric bill to keep the air circulating and protect the condominium property than it is to pay thousands of dollars to remediate a unit once it turns black with mold and threatens the rest of the property.
Mark D. Friedman, Esq. is a senior attorney at the law firm of Becker & Poliakoff, P.A. This article originally appeared in the Firm’s Community Update magazine. Mr. Friedman may be contacted at CondoLaw@becker-poliakoff.com.
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Abatement lien?
ReplyDeleteMr. Friedman,
ReplyDeleteIf I may ask an off topic question - On a forclosure, if the bank has determined that they will never forclose on the unit and have charged off the amount, what can the Board do if the owner decides not to allow a sale to go forward if we have a buyer, even if the bank approves a short sale? The owner is in arrears to us for thousands. Can we do anything to force his hand short of filing a lien against the owner's 2nd home up north?
Let me answer both posts in this reply.
ReplyDeleteAn abatement lien is a lien filed by a municipality's code enforcement bureau and is used to notify prospective buyers or lenders of the building violations that exist. This would not be the type of lien a condominium association would utilize for non-payment of assessments. A condominium association may place a lien on the property, pursuant to Section 718.116, Florida Statutes, for non-payment of properly levied assessments.
As to the second posting, if the owner is in arrears for thousands of dollars and the bank is taking no action the Association may wish to consider placing a foreclosable lien against the unit. Assuming the unit is in good condition you could eventually foreclose on the lien, take title subject to the existing mortgage and rent the unit to recover lost revenues. The Association has no authority to unilaterally file a lien against property in another state that is not subject to its Declaration of Condominium. Once the Association takes title to the unit you can then work directly with the bank to attempt a short sale. Each collections case is fact specific and the strategy employed depends on the amount owed, the condition of the property, whether the unit owner is still in residence, whether the unit is currently being rented, the financial wherewithal of the unit owner and how the bank is dealing with the property. Therefore, the generic answer set forth above is only meant to suggest one possible course of action and is not intended to be legal advice or to suggest that this is the only course of action. I recommend that you consult with your collections attorney for specific guidance and strategies in this manner.
P.S. "Nova law school" is the law school I graduated from and inadvertently ended up displayed as my posting name. That has since been rectified. Blogging is new to me and I ask for your patience. Thank you.
ReplyDeleteIn Nevada an abatement lien can be filed for expenditures corrected by the association for violation issues.Firing up the A/C to correct possible HSW of other unit owners could fall into that category in this state and could be collected for reinbursement before even the super priority. I'm still reading Fla law and unaware of many of the differances.
ReplyDeleteThanks Mr. Friedman. If I may throw a monkey wrench into the mix - Say the assn does file a foreclosable lien on the property. There is another entity, WPRF, the recreation arm, that has priority over us in obtaining title, just as the bank does. If they foreclose, we have wasted all the money in legal costs to foreclose. With that said, am I correct in saying that whether the assn or WPRF forecloses, neither can sell the property (short sale)without the permission of the current owner (deed holder) and approval of the bank (mortgage holder that has a lien filed for the debt owed)? So what advantage would the assn have in going through the foreclosure process at all? What other alternatives could be undertaken by the assn to stop the bleeding? Sounds like the assns are in a catch 22 situation.. The assn could rent, but again, they'd need permission from the owner. If the owner refuses, is there any recourse at all to recoup the losses and stop the bleeding? Thanks in advance for your help.
ReplyDeletejmitaly, If the Declaration of Condominium permits an assessment and lien for expenses incurred by the Association for maintenance of the unit, when the unit owner fails to perform his or her obligations, the Association may assess and lien the unit. However, there is no statutory mechanism for an “abatement lien” under these circumstances. This would likely be an empty gesture which would not result in such funds being returned to the Association. The unit owner is not paying anything and has abandoned the property and the bank is only responsible for the lesser of 12 months of assessments immediately preceding acquisition of title or one percent of the mortgage debt. The Board should review its Declaration of Condominium with its community association attorney to determine if this is an appropriate course of action based on the specific facts at your condominium.
ReplyDeleteDgtlXray, Please note that this blog is not meant as a substitute for a discussion with your condominium association’s collections attorney. The Association could (as one strategy) file a lien on the property and foreclose that lien and take title to the property. The Association becomes the owner subject to the superior liens from the Bank and WPRF. Once the Association receives title to the unit, the current unit owner may then be removed from the unit by filing a Writ of Possession with the Court. After the Association receives a Certificate of Title, the unit owner is no longer involved in the decision making process regarding whether to rent the unit. This strategy does not work for all properties. The decision is very fact-specific and the Board should discuss this with its collection’s attorney.
ReplyDeleteI hardly ever advise an association foreclosure. 74% of the homes in Nevada are "underwater" and my boards are not in the real estate business and should not have to manage the liabilities that come with home ownership. Most of out documents are new and have a clause for special assessments when the association makes corrections to trashed properties. I do advise my boards to seek legal opinions when they insist on foreclosure. There is a lot of debate going in Nevada and a bill was recently signed into law that limits caps collection costs at $1950.00. Collection companys were allegedly taking advantage of the HOA collection system.
ReplyDeleteI am only licensed in the State of Florida and cannot, therefore, comment on Nevada law, which appears, from your comments, to be significantly different than the laws in the Sunshine State. As I mentioned in my postings above, foreclosure is but one option and is, by no means, the only option. We advise it when we feel it is an appropriate alternative, such as when the bank is taking no action, the property is in good condition or salvageable condition and the Association would rather have funds coming in from the unit rather than a unit paying absolutely nothing toward the common expenses. There are also many units without mortgages. If the Association takes title they can rent those units or, if there is no mortgage, re-sell the units. Again, each case is fact specific so a broad brush statement such as “all associations should do something” or suggesting that this is generally a bad idea would not be appropriate for this forum. Even if the governing documents had a clause, as some do, which allows them to special assess for turning on the electricity, as a practical matter, who is going to pay that special assessment? The unit, in such cases, is abandoned and already has more liens on it than the previous owner could afford to pay. In addition, banks have a safe harbor provision under Florida law which limits their liability to the lesser of 12 months or 1% of the mortgage value which would generally not include the additional assessment. Finally, the only way to recover money from a lien would be to foreclosure on the lien. Therefore, the Association would still have to foreclose the lien if it wanted to attempt to collect on the special assessment for restoring electricity to the unit. In Florida, the type of “abatement lien” you discuss is not recognized and, even if allowed by the association’s governing documents, would not take priority over the lien of the first mortgagee or other entities with a higher priority. This area of the law has become very specialized in Florida. In fact, our West Palm Beach office of Becker & Poliakoff has three attorneys teamed with paralegals and legal assistants dedicated to only collections work. They counsel each association on the most prudent strategy available for a given situation.
ReplyDeleteMark,
ReplyDeleteThank you for the comments. Passing the Florida cam test is just a small step in all I need to learn before working in your state. I'm going to have to mentally purge years of California and Nevada education. I'm looking forward to the challenge and my move to West Palm Beach.
Keep in touch when you finally get set up in Florida. Our firm offers courses for managers during the year as well.
ReplyDeleteI'm most intrigued by the landlord/Tenant agreement being circumvented in favor of association delinquent assessents.
ReplyDeleteThat must be more than a handful for HOA attorneys :-)
I'll be touch, thanks.
There is no circumvention of landlord / tenant rights. Section 718.116, Florida Statutes, merely permits condominium associations to step into the shoes of the landlord-unit owner to demand that rent be paid directly to the condominium association when the landlord-unit owner has not been paying his or assessments. If the tenant refuses to send the rent payments to the association, the association may evict the tenant under the guidelines of Chapter 83 (Landlord Tenant Statute). This is more complex that can be discussed in this forum and I recommend anyone attempting to demand rent from a tenant consult with their community association attorney before doing so.
ReplyDelete