Checklist For Foreclosure Or Deed-in-Lieu Of Foreclosure Involving Subdivision And Condominium Properties
Lenders foreclosing on residential, business or mixed-use residential or commercial properties that include covenants, deed constraints, declarations, owners associations, and developer/declarant rights ought to be conscious of specific problems that may arise during the course of the foreclosure action that might have a significant effect on the ultimate total cost of the foreclosure, the lending institution's ability to market the residential or commercial property post-foreclosure, and numerous functional concerns that relate to these kinds of jobs. Similar issues arise when taking title via a deed-in-lieu of foreclosure. No 2 distressed tasks are precisely alike and there are myriad concerns and traps that can be avoided with mindful and early planning. The following is a fundamental list to signal you to problems that ought to be attended to before and during the pendency of the foreclosure or prior to acquisition by means of a deed-in-lieu.
Kind of residential or commercial property being foreclosed
- Residential, business, or mixed-use
- A group of lots or systems
- A single lot or unit
- Developed, partly established, or undeveloped
Obtain and evaluate the foreclosure title commitment, a U.C.C. search, and a local lien search in certain counties to identify the applicability of the following problems:
- Homeowner association declaration of covenants
- Declaration of condo
- Declarations and deed restrictions pertaining to the general community or advancement
- More than one association (master and sub associations).
- Subdivision plat( s).
- Contractors' liens.
- Owners' association liens.
- Municipal liens, including super-priority local liens (might not appear in the real estate records).
- Recorded mortgage pre-dates recordation of formation files and certain modifications to the condo statutes.
- Recorded joinder and approval of mortgagee to development files.
- Ownership of residential or commercial property and personalty
Subdivisions (Homeowner's Association)
- Homeowners associations are typically governed by Chapter 720, Florida Statutes. Certain statutory arrangements might take precedence over provisions in the deed constraints, however that is not constantly the case (may depend upon the compound of the particular issue and the existence of statutes at the time the deed restrictions were tape-recorded).
- Does the Declaration recommendation Ch. 720, Florida Statutes? Yes. Declaration taped prior to October 1, 2007? Review mortgage foreclosure arrangement to determine how the statement addresses evaluation liability.
No. Review the mortgage foreclosure arrangement in the statement in light of the statutory restriction on liability (12 months of common cost evaluations or one percent of the original mortgage debt) per § 720.3085( 2 )( c), Fla.
Stat. Condominiums
Statutes. Condominiums are created pursuant to and are governed by Chapter 718, Florida Statutes. Accordingly, the statute may be provided more deference than the statement of condo.
Declaration of Condominium - If tape-recorded prior to July 2010, § 718.116, Fla. Stat. provides that assessment liability was limited to the lesser of up to six months of unsettled typical cost assessments or one percent of the initial mortgage financial .
- If taped after July 2010, § 718.116, Fla. Stat. supplies a restriction on evaluation liability to the lesser of up to 12 months of unsettled common expenditure evaluations or one percent of the initial mortgage financial obligation.
- Review declaration of condominium for an arrangement that instantly updates the requirements of § 718.116, Fla.
Stat. -Are leases current?- Tenants paying rent or in-kind?
- Are renters existing on rents and fees?
- Do commercial renters have appropriate licenses (i.e. alcohol licenses).
- Are renters abiding by use restriction requirements (i.e. signs).
- Are occupants complying with regional government policies (i.e. parking).
- Exist empty systems that need to be remodelled or fixed?
- Are renters making payments to an owners' association (since the proprietor owner has failed to pay impressive assessments)?
Developer/Declarant Rights
- Even if a project is completed, a bulk purchaser/successor developer will likely require some developer/declarant rights in order to establish the residential or commercial property, run a sales center, build design homes, put up sales indications, etc. It is necessary to assess which rights are needed and then seek advice from relating to the very best way to acquire such rights while restricting liability for predecessor acts.
- Developer/Declarant rights are found in a composing that is taped and outlines the rights, duties and obligations provided to a developer/declarant pursuant to statutes and deed restrictions/declarations.
Condominium Developer Rights - Assess whether it makes good sense to get designer rights pursuant to the Distressed Condominium Relief Act to get rights needed for sales and marketing while limiting liability for previous designer acts.
- Determine whether acquisition of condominium units in bulk need to be as a bulk assignee or bulk buyer ( § 718.703, Fla. Stat. ).- A celebration taking title to condominium systems upon foreclosure or through deed-in-lieu that has a correct assignment of developer/declarant rights and is categorized as a bulk assignee might: - Control the advancement until such time as it offers the residential or commercial property to another buyer.
- Amend to fix existing deficiencies in the statement of condominium (depending upon the language of the file).
- Control the books and records of the advancement and make certain they remain in order.
- Appoint a residential or commercial property management business of its option, relying on any existing management agreement.
- Enhance the sales potential of the residential or commercial property by modifying the governing documents (depending upon the language of the document)
- Can market and sell or lease units, keep model systems, and have indications on the typical aspects.
- Triggers turnover of control of the association (if turnover has not formerly took place) but is not accountable for turnover expenditures.
- Is not responsible for claims versus the designer for breach of warranty, construction problems, or failure to effectively operate the condo association
- Successor developer will likely prefer a specific task of developer/declarant rights rather than counting on basic assignment.
- A lender with advancement rights might be exempt from subdivision lot evaluations (in lieu of evaluations it might need to fund budget plan shortfalls), however that is dependent upon the timing of recording of the mortgage and the deed restrictions and the particular language contained in the deed restrictions.
- Assignment of developer rights should remain in recordable kind
- Assignment of designer rights might require resignation of old board of directors and appointment of a brand-new board.
- The brand-new board needs to satisfy to get rid of old officers and choose new ones.
- Budget and evaluation collection issues.
- Correction of inadequate or defective paperwork.
- Develop owners' association shift plan beforehand - statutes govern shift in both condos ( § 718.301, Fla. Stat. )and property owners associations ( § 720.307, Fla. Stat.
) Issues During Pendency of Foreclosure Action
- A receivership can limit direct exposure for the foreclosing lending institution by handling issue issues prior to the transfer of title, such as: - Environmental issues.
- Chinese drywall.
- Completion of preliminary building.
- Making significant repair work.
- Security/vandalism.
- Marketing and sales.
- Managing tenants.
- Compliance with governmental regulations.
- Compliance with developmental plan.
- Other miscellaneous concerns
- Continue marketing of units for sale to prevent automatic turnover.
- Funding the association.
- Advance financing certificates (a type of secured lending to the association so bank funding does not get consisted of in the uncollectible deficiency).
- Receivership certificates.
- Continuation of deficit financing (financing just association deficits rather than funding association based upon a spending plan).
- Audit association's operating, working capital and reserve accounts.
- Maintains main records
Post-Foreclosure
- Monitor timelines for: - Assessments - Payment of assessments due since date of conveyance.
- Payment of ongoing assessments
Other Special Development Issues
- Marinas.
- Partial termination of condominium.
- Condo hotels.
- Mixed use jobs.
- Community development districts or special taxing districts.
- Mobile home parks.
- Timeshares and fractional interests.
- Infrastructure building.
- Submerged state land leases must be examined for purposes of transferring in addition to the residential or commercial property.
- Livestock.
- Mitigation and sanctuary.
- Water management allows and commitments.
- Reserved business interests in covenants. For instance: - Right to offer parking spaces.
- Right to manage cable television service costs
This checklist is basic in nature and does not cover all possible concerns with regard to the conveyance through foreclosure or deed-in-lieu of residential or commercial property in a distressed condo or property owners' association job. Careful analysis of your project with members of the Real Residential Or Commercial Property Litigation and the Community, Condominium, and Resort Development Group of the Real Estate and Finance Practice Group will result in a smooth transition of the project with necessary rights for sales and operation of the project.