collect more, and collect it more easily: best practices for condo/hoa debt collection
TRANSCRIPT
ASSOCIATION
COLLECTIONS
STRATEGIES 2015
Jed Frankel, Esq.
Eisinger|Brown|Lewis|Frankel|Chaiet
954/894 8000 x301
• This presentation is designed to provide general
information on the topic presented and is not rendering
any legal or professional services. Although these
materials are prepared by professionals, the content and
information provided should not be used as a substitute
for professional services, and such content and
information does not constitute legal or other professional
advice. If legal or professional advice is required, the
services of a professional should be sought.
SHOW ME THE MONEY!
FLORIDAThe Foreclosure State
Judicial Foreclosure Process
The Florida Bar News/February 15, 2013
• Foreclosures to remain high until 2016 or 2017
• Highest foreclosure rate in nation
• 3.11% of all housing units having some type of
foreclosure filing
• Still has more homes going in foreclosure than
coming out
• Foreclosures used take 169 days now take 853
days (third longest in nation)
• Backlog of 272,000 cases (down from 278,000)
“Florida now The Foreclosure State”
• The Miami Herald, Feb. 14, 2013, 10B
• First place in nation in foreclosure activity 1/2013
• Miami-Ft. Lauderdale-Pompano Beach – No. 2 in nation in foreclosure activity – 1 in 228 homes foreclosure filing
• Highest foreclosure rate in nation for 5th consecutive month
• 1/2013 – foreclosure filings up 12% from Dec. and up 20% from prior year
• 5 areas in top 10 nationwide
• Remains through 2015
QUESTIONS For Every Association
What do you
know about
unit/owner?
Bankruptcy?
Is Unit Vacant?
Is Unit Rented?
Is there a Bank
Foreclosure?
Why is Owner in
arrears?
Is there a rental market?
What is the condition of
the unit?
Long time owner or
speculator?
How long?
Time is not
on your side!
Each month lose assessments that will never be collected.
Bad debt expense that paying unit owners will ultimately make up.
Delinquent unit owners live for free.
Lengthening time until get a good, paying unit owner.
Delinquencies hurt resales.
What are the
goals?
Get rid of “deadbeat”
unit owner?
Recover as much
money as possible?
Take title to unit?
Rent out unit?
Get new, paying unit
owner?
Set example to other
unit owners?
HOW WE GET THERE
Teamwork
• Board of Directors
• Manager
• Accountant
• Attorney
• Unit Owners
Gameplan
• Agreed upon objective
• Focused to meet that objective
• Understand the conditions are
changing
• “Halftime” adjustments
Passive Approach = wait on the bank
• Let the bank foreclose – and take its time
• Bank, not association, pays for foreclosure lawsuit
• Have someone in unit
• No assessments paid
• Bank’s liability limited (Fla. Stat. 718.116)
Active Approach
• Association forecloses – need to move quickly
• Try to get title to unit - rent out, short sale
• Potential 3rd party purchaser
• Stabilize cash flow
• Encourage payment by unit owners
• Paying unit owners’ satisfaction –
• Stop the Bleeding
• Business Judgment Rule – protecting assets
• Does taking title impact Association’s ability to recover?
Passive vs. Active – Which is Better?
Short sales
• More Now
• Really at mercy of banks – few years ago were not
interested
• New owner for unit – paying market value NOT what
owed
• Bank writing off some of what it’s owed (but not releasing
personal liability)
• Association asked to take less than it MIGHT eventually
recover (personal liability possibility?) – Fla. Statutory cap
limits if first mortgage holder (bank) takes title
“Active” Passive Approach
• Requires bank foreclosure case
• Association does not file its own case
• “Encourage” bank to proceed quickly – $ to do so
• Case Management Conferences
• Default defendants for the bank
• Notice case for trial
WHAT ELSE WE CAN DO
Relief from bankruptcy
• Seek relief from stay
• Allow foreclosure to proceed
• Real Property to be sold
• No deficiency judgment
Deutsche Bank Sanctioned
Association got:
• Expedited Sale Date
• Bank ordered to pay
assessments
• Reimbursement of attorneys fees
and costs
Harris v. Liberty Community Management
• 702 F. 3d 1298 (11th Cir. Dec. 19, 2012)
• Management companies now exempt from FDCPA liability
• “so long as the collection of such assessments from
homeowners is not central to the management company’s
fiduciary obligations”
• Association itself can initiate collections efforts
Post-judgment remedies
• Personal liability for former unit owner(s)
• Florida Statutes §718.116(1)(a) & §720.3085(2)(a)
• Collections efforts
• Personal property
• Garnish accounts/wages