A startling trend has developed taking advantage of a loophole in the Florida foreclosure laws that investors are salivating over. Florida law allows neighborhood Homeowner's Associations (HOA) to foreclose on properties when their monthly fees are past due. The kicker? The HOA doesn't even have to notify the mortgagee of the foreclosure if it's based on past due HOA fees.
The ability for an HOA to foreclose is understandable; residents in those neighborhoods expect certain services that are difficult to provide without proper funding. If the association doesn't foreclose, they're likely to forfeit their ability to collect on the debt once the bank steps in. Considering the fact that most homeowners owe less than $15,000 in HOA fees, these cases are ripe for trial in county court rather than in the circuit courts where damages have to exceed that amount. With circuit courts backed up due to bank foreclosures (those exceeding $15,000), bringing HOA foreclosures to county court speeds up the process drastically. Since the HOA doesn't have to notify the bank of the foreclosure, the bank doesn't even have the opportunity to protect their stake in the home by paying the arrearages.
Enter the investors who "buy" the property at auction, which effectively pays the HOA past due fees. One associate in the Tampa Bay area was able to secure $8.2 million worth of properties for a little over $200,000 in foreclosure auction bids. What do they do with the homes? Live in them, vacation in them or even rent the property during what is, at the current time, an extremely lengthy bank foreclosure process. Sadly the banks will eventually evict those renters after they are able to foreclose, with no legal basis to go after the HOA hawks.
The question is, how can one prevent an HOA foreclosure? In Florida, where the practice is most prominent, the best thing to do is to stay in touch with the homeowners association in your neighborhood. If you are behind on your HOA dues or even facing a foreclosure lawsuit from your HOA, contact a Jacksonville Foreclosure Lawyer or a Florida Foreclosure Defense Lawyer today to determine what actions can be taken to prevent the HOA foreclosure .
