Don’t let the banks get off the hook!

Last week, we delved into the intricate workings of foreclosures and how banks manage to slip through the accountability net when they reclaim properties. We discovered that banks have a legal "safe harbor," allowing them to owe only a fraction of what owners owe to the association upon acquiring a property. This safeguard aims to keep banks investing in HOAs without fearing unpaid assessments.

But here's a silver lining: imagine the bank doesn't repossess the property during foreclosure, and instead, a third party wins the bid and becomes the new owner. What financial responsibilities does this new owner bear, especially if the property is plagued by significant unpaid assessments? The answer lies in Florida Statute 718.116, which mandates that a new owner is fully liable for all prior unpaid assessments.

So, in cases of foreclosure by either the bank or the association, the association hopes for a third-party buyer to emerge victorious in the foreclosure sale – as they'd be responsible for all dues. Except... remember what we discussed last week? Some governing documents protect the bank from obligations even if they'd owe money post-foreclosure. Well, brace yourself for another revelation: certain governing documents also shield third-party purchasers who buy properties during foreclosure sales. Even if the association strikes gold and a third party buys, these documents can let the buyer off the hook, leaving the association in dire straits.

So, the key takeaway from the last couple of episodes is clear: it's imperative for the board to meticulously examine their governing documents. The mission is simple but critical – ensure that both banks and third-party purchasers cannot evade financial responsibilities when acquiring properties in your community. Make sure your documents don't backfire on you. If they do, swift amendments are your best course of action!

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