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Don’t let banks fatten profits at expense of Florida condo associations

By February 22, 2013 No Comments

By Aaron L. Gordon

With Florida’s real estate recovery just getting started, the battle between property owners and banks continues at a fever pitch.

Still desperate for monthly assessments, condominium and homeowners associations continually look for new revenue sources and strategies for cutting expenses while not compromising services. Frequently, the only alternative is to special-assess the reliable owners. Another strategy has been to challenge the foreclosing banks under Florida’s Safe Harbor law, which can result in associations getting more than the statutory minimum from the banks.

Equally desperate are the financial institutions whose portfolios of foreclosed units continue to swell. With this growing number of foreclosures come large assessment fees due to condominium associations. The big difference, however, is the power of the banking lobby in Florida.

We saw it last year with a bill introduced by Rep. George Moraitis, R-Fort Lauderdale, which would have further limited a bank’s financial liability, resulting in increased financial responsibility on condominium owners. Rep. Moraitis represents District 93, which runs from southeast Boca Raton to Hollywood along the ocean. His constituents are, for the most part, condominium owners. But his law firm represents banks in several capacities. Where were his loyalties and those of other legislators who supported this bill?

Fortunately, House Bill 319 never saw the light of day, but a similar bill could re-surface this year. It is critical for boards to begin questioning their state representatives about their allegiances to banks. Amendments to the current community association bills can be attached. It is a safe bet that any amendment would try to further limit bank liability.

It is important for associations to understand the havoc HB 319 could have caused with passage and to be aware of language that could appear this year. HB 319 would have limited the financial liability of banks by limiting the amount of money associations can recover from delinquent owners, whether the owner is the bank or an individual. It would have made recovery more expensive, because the minimal “recoverable” amount in late fees and interest on past-due assessments represents money the associations couldn’t collect. If associations couldn’t collect more than the minimum, it is likely that special assessments could be levied to good-paying owners as the only way to maintain property, amenities and services.

It’s a mystery as to why legislators, who allegedly represent condo owners, were sponsoring a bill that could have financially hurt their constituents. It raises interesting questions:

Why would politicians make it easier for financial institutions to pay less and mandate that association residents pay more? Why not strengthen – rather than weaken – the provision for community associations by making more assessments recoverable from first mortgagees and subsequent purchasers?

Questions like these are the types that voters should be asking their legislators during 2013’s legislative session. This type of bill almost squeaked through last year, and if community associations aren’t vigilant it is likely to happen during the upcoming session.

Aaron L. Gordon is corporate general counsel for LM Funding, LLC, a Tampa-based financial services company that manages the receivables of more than 400 condominium associations in Florida.