On the other hand, we may be only 1/3 through....

“Credit losses could peak at a level of $3.6 trillion for U.S. institutions,” famous forecaster of doom and gloom Nouriel Roubini said this week, “half of them by banks and broker dealers. If that’s true, it means the U.S. banking system is effectively insolvent, because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”

Total financial write-downs and losses have now surpassed $1 trillion since the start of this crisis in mid-2007. That’s puts us barely a third of the way though this mess, if you follow Roubini’s logic.

Renting/foreclosed properties

It goes without saying that we are in a depression in the multifamily commonly owned property industry in Florida. The price and value of Condo, HOA and other types of property is in the process of reverting to the mean.

Now I am not a fortune teller, as that is contrary to my religion; additionally I have been right for the wrong reasons before and vice versa. All I know is that I saw a half -billion dollars worth of condo projects in Sunny Isles when I was in South Florida for the BCS that has not even been finished yet; they will be finished and sit empty until foreclosed on, and the lender, and then we the people will take the haircut now that all financial losses have been socialized and all profits were, of course, privatized. Prices will continue to tumble for a looooong time, IMHO. Assessments need to be collected more urgently than ever in the midst of this disaster.

What are ongoing associations to do?

Well for one thing, when you amended your documents 3, 4 and 5 years ago to prohibit rentals in the first "x" years of ownership or capped rentals at "x" percent of units, I hope you included a sentence that says "This shall not apply to the association."

I just took over representation of a community in Gibsonton where their lawyer helped them amend LAST JULY and did not place that language in the amendment. Now, I understand as well as anybody why my communities wanted that language; there were so many speculators buying property hat they were in danger of becoming filled with tenants who have little interest in the long term success of the community. However by doing so, the flip side is that in this extremely dangerous market, if the association forecloses and takes title to the property, it will face a political and perhaps a legal problem if it takes title due to a foreclosure and tries to rent pending foreclosure of the first mortgage.

What's the bottom line? No matter what your documents say, the association should aggressively foreclose and take title to units that do not pay. People need to know that they will not hold on to their property for long, and that the association will do everything it can to divest them from title, and rent the unit to recoup some of the lost payments.

That's all I have to say about that....

Community Association Collections for Dummies

Here is a shortened version of what I prepared for a client, FYI---

When we are asked to file a lien we send it to the debtor Certified mail and regular mail. We send the original to be filed with the clerk of the court the same day. Law requires that we provide 30 days notice to debtor before filing suit.

Usually we get the return receipt back; sometimes there are issues with the debtors address; there is no one answer fits all. We move as fast as we can. We NEVER give less than the 30 day notice.

After we clear up the issue of notice we ask for approval to foreclose. I recommend that he board authorize management to do so as these are critical times in the industry and delay is bad.
After we get authority to foreclose, we filed the complaint with the court, lis pendens and serve the suit on the debtor. We wait until 30 days after service of the suit on the debtor (time for service varies, maybe out of state, avoiding the process server, whatever) before seeking a default from the clerk of the court if they do not answer.

Usually 3/4 of people who have not paid arrange to make payment at this point including all fees and costs, interest, etc.

If they continue to ignore us, we seek summary judgment; that usually takes 10 more days to get filed and a hearing date is set about 30 days later.

Usually 3/4 of the remaining people pay by this time or make arrangements to do so.
At the summary judgment hearing, we ask for sale of the unit on the courthouse steps to satisfy the amounts due. Usually the court sets it 30 days later.

If we go to sale, we bid up to the amount of the judgment; if someone goes higher, the association is paid in full as well as all interest, costs, etc...if not (about 1 in 200) the association takes title to the unit.

If there is a first mortgage it is subject to that mortgage, what most people do not understand is that no payments are required...no taxes, no insurance, only make sure liability insurance in place.

Usually at this point we try to rent it month to month just to recover lost assessments. I hardly ever ask for fees, and rarely ask for costs to be repaid, as by the time of sale I have about $800 in hard money paid out for the benefit of the association. Given the current environment, I am considering to ask to be reimbursed for my out of pocket costs if nothing is realized at the sale...that is done on a case by case basis.