Checklist For Foreclosure Or Deed-in-Lieu Of Foreclosure Involving Subdivision And Condominium Properties

Lenders foreclosing on domestic, industrial or mixed-use residential or commercial properties that include covenants, deed constraints, statements, owners associations, and developer/declarant rights need to know specific issues that might emerge throughout the course of the foreclosure action that could have a considerable influence on the ultimate general expense of the foreclosure, the lending institution's capability to market the residential or commercial property post-foreclosure, and numerous functional problems that associate with these types of jobs. Similar problems occur when taking title via a deed-in-lieu of foreclosure. No 2 distressed tasks are exactly alike and there are myriad problems and traps that can be avoided with cautious and early planning. The following is a standard checklist to inform you to concerns that must be dealt with before and during the pendency of the foreclosure or prior to acquisition via a deed-in-lieu.


Kind of residential or commercial property being foreclosed


- Residential, industrial, or mixed-use
- A group of lots or systems
- A single lot or system
- Developed, partially developed, or undeveloped


Obtain and evaluate the foreclosure title dedication, a U.C.C. search, and a municipal lien search in particular counties to determine the applicability of the following problems:


- Homeowner association declaration of covenants
- Declaration of condo
- Declarations and deed restrictions relating to the general neighborhood or advancement
- More than one association (master and sub associations).
- Subdivision plat( s).
- Contractors' liens.
- Owners' association liens.
- Municipal liens, consisting of super-priority community liens (might not appear in the property records).
- Recorded mortgage pre-dates recordation of formation files and particular changes to the condominium statutes.
- Recorded joinder and authorization 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 limitations, however that is not constantly the case (may rely on the compound of the specific problem and the presence of statutes at the time the deed restrictions were tape-recorded).
- Does the Declaration referral Ch. 720, Florida Statutes? Yes. Declaration recorded prior to October 1, 2007? Review mortgage foreclosure provision to figure out how the declaration addresses evaluation liability.
No. Review the mortgage foreclosure provision in the declaration because of the statutory limitation on liability (12 months of common expenditure evaluations or one percent of the initial mortgage financial obligation) per § 720.3085( 2 )( c), Fla.


Stat. Condominiums
Statutes. Condominiums are produced pursuant to and are governed by Chapter 718, Florida Statutes. Accordingly, the statute may be given more deference than the declaration of condo.
Declaration of Condominium - If tape-recorded prior to July 2010, § 718.116, Fla. Stat. supplies that evaluation liability was restricted to the lesser of approximately 6 months of overdue typical expenditure assessments or one percent of the initial mortgage financial obligation.
- If tape-recorded after July 2010, § 718.116, Fla. Stat. supplies a limitation on assessment liability to the lower of up to 12 months of unpaid typical cost evaluations or one percent of the original mortgage debt.
- Review statement of condo for an arrangement that instantly updates the requirements of § 718.116, Fla.


Stat. -Are leases present?- Tenants paying rent or in-kind?
- Are renters current on rents and fees?
- Do industrial tenants have suitable licenses (i.e. alcohol licenses).
- Are renters complying with usage constraint requirements (i.e. signs).
- Are tenants complying with city government policies (i.e. parking).
- Are there empty units that require to be renovated or repaired?
- Are tenants paying to an owners' association (due to the fact that the landlord owner has failed to pay impressive assessments)?


Developer/Declarant Rights


- Even if a job is completed, a bulk purchaser/successor designer will likely require some developer/declarant rights in order to develop the residential or commercial property, run a sales center, construct design homes, set up sales indications, and so on. It is essential to evaluate which rights are needed and after that consult concerning the very best way to get such rights while restricting liability for acts.
- Developer/Declarant rights are found in a writing that is recorded and details the rights, tasks and responsibilities provided to a developer/declarant pursuant to statutes and deed restrictions/declarations.
Condominium Developer Rights - Assess whether it makes sense to acquire developer rights pursuant to the Distressed Condominium Relief Act to obtain rights required for sales and marketing while limiting liability for previous designer acts.
- Determine whether acquisition of condo systems in bulk ought to be as a bulk assignee or bulk buyer ( § 718.703, Fla. Stat. ).- A celebration taking title to condominium systems upon foreclosure or via deed-in-lieu that has an appropriate project of developer/declarant rights and is categorized as a bulk assignee might: - Control the development up until such time as it sells the residential or commercial property to another buyer.
- Amend to correct existing deficiencies in the statement of condominium (depending upon the language of the file).
- Control the books and records of the advancement and ensure they remain in order.
- Appoint a residential or commercial property management business of its option, relying on any existing management contract.
- Enhance the sales potential of the residential or commercial property by modifying the governing documents (relying on the language of the document)


- Can market and offer or lease systems, maintain design units, and have signs on the typical elements.
- Triggers turnover of control of the association (if turnover has not previously took place) however is not accountable for turnover costs.
- Is not accountable for claims versus the designer for breach of guarantee, building problems, or failure to correctly operate the condominium association


- Successor designer will likely prefer a specific task of developer/declarant rights instead of counting on general task.
- A lender with advancement rights may be exempt from subdivision lot evaluations (in lieu of assessments it might have to fund budget shortages), but that depends on the timing of recording of the mortgage and the deed restrictions and the specific language consisted of in the deed restrictions.
- Assignment of developer rights need to be in recordable type


- Assignment of developer rights may need resignation of old board of directors and appointment of a new board.
- The brand-new board requires to meet to get rid of old officers and elect new ones.
- Budget and assessment collection problems.
- Correction of inadequate or defective paperwork.
- Develop owners' association transition strategy in advance - statutes govern transition in both condos ( § 718.301, Fla. Stat. )and house owners associations ( § 720.307, Fla. Stat.


) Issues During Pendency of Foreclosure Action


- A receivership can limit direct exposure for the foreclosing lending institution by dealing with problem concerns prior to the transfer of title, such as: - Environmental issues.
- Chinese drywall.
- Completion of initial construction.
- Making significant repair work.
- Security/vandalism.
- Marketing and sales.
- Managing tenants.
- Compliance with governmental policies.
- Compliance with developmental strategy.
- Other various concerns


- Continue marketing of units for sale to avoid automated turnover.
- Funding the association.
- Advance funding certificates (a type of secured financing to the association so bank funding does not get consisted of in the uncollectible deficiency).
- Receivership certificates.
- Continuation of deficit funding (financing just association deficits instead of moneying association based upon a budget plan).
- Audit association's operating, working capital and reserve accounts.
- Maintains main records


Post-Foreclosure


- Monitor timelines for: - Assessments - Payment of assessments due as of date of conveyance.
- Payment of ongoing assessments


Other Special Development Issues


- Marinas.
- Partial termination of condo.
- Condo hotels.
- Mixed usage tasks.
- Community development districts or unique taxing districts.
- Mobile home parks.
- Timeshares and fractional interests.
- Infrastructure building.
- Submerged state land leases should be assessed for functions of moving together with the residential or commercial property.
- Livestock.
- Mitigation and sanctuary.
- Water management allows and obligations.
- Reserved organization interests in covenants. For instance: - Right to offer parking areas.
- Right to manage cable tv costs


This list is general in nature and does not cover all possible concerns with regard to the conveyance via foreclosure or deed-in-lieu of residential or commercial property in a distressed condominium or property owners' association job. Careful analysis of your task 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 shift of the job with required rights for sales and operation of the project.