Article Courtesy of The Sun Sentinel

By Daniel Vasquez

Published March 4, 2010

Can Florida banks be held financially accountable for purposely delaying condo bank foreclosure sales? A new South Florida circuit court ruling says yes.

Amid a growing clamor for Florida banks to bear more of the financial burden caused by widespread condo foreclosures, the Miami-Dade Circuit Court case settled last week shows an example of associations turning more often to courts for relief from revenue losses tied to the state's condo crisis. And it could pave the way for other South Florida condo associations faced with stalled foreclosures caused by lenders.

The King Cole Condominium Association in Miami Beach filed a motion against Deutch Bank National Trust Company, alleging it purposely stalled the foreclosure sale of a particular unit.

The unit owner has been behind in association payments for about three years, court documents show, and the unit was in foreclosure limbo for two of those years, in large part because of bank problems or inaction.

Why would a financial institution want to slow condo foreclosure sales?

To avoid paying its share of association fees as required by law, say critics such as David Cohen, the president of the King Cole, a community of 285 condos.

"It's not exclusively the bank delays that caused our situation," Cohen said. "Sometimes it is court delays, and sometimes the delays are caused by unit owners. But this ruling could help us with delays caused purposely by banks."

Miami-Dade Circuit Court Judge William Thomas sanctioned Deutch Bank for not sending a representative to a foreclosure sale as required by an earlier court judgment, a move that automatically cancels a sale date, and for not publishing a public notice in a local newspaper in time for another foreclosure sale date, again causing the sale cancellation.

Although Deutch did not offer explanations in court for the delays, its attorney argued that Florida courts are not allowed to force banks to pay condo association fees. Another recent ruling by the 3rd District Court of Appeals in Florida held that a bank could not be ordered to pay monthly maintenance fees before obtaining title to a unit.

Thomas' ruling, however, sanctioned Deutch for improper conduct related to the foreclosure case. The bank was ordered to pay about $7,300 in sanctions to the association and $2,000 to cover its legal fees.

"Thomas' order is not a precedent," meaning that other judges don't have to follow it, said community association attorney Jed Frankel, who represented the King Cole association. "But sanctions like those imposed in this case can be a useful tool to judges facing similar purposeful delays by banks."

Legal experts say such rulings often serve as guidelines for cases that follow.

As a part of the condo crisis, some banks delay foreclosures to avoid having to pay their shares of association assessments as required by law, Frankel said.

Florida limits a bank's responsibility to a mandated cap, the amount that a bank owes an association when it takes title of a condo via foreclosure.

For condo associations, the cap is six months of past-due assessments or 1 percent of the mortgage amount, whichever amount is less.

For a condo unit with regular monthly assessments of $200, a bank could owe as much as $1,200 of past-due assessments to be due within 30 days of the bank taking title of the unit.

For homeowner associations, the cap is 12 months of past-due assessments or 1 percent of the mortgage amount, whichever is less.

Daniel Vasquez can be reached at [email protected] or 954-356-4219 or 561-243-6686. His condo column appears every Wednesday in the Business section and at SunSentinel.com/condos. Check out Daniel's Condos & HOAs blog for news, information and tips related to life in community associations at sunsentinel.com/condoblog

You also can read his consumer column every Monday in Your Money and at SunSentinel.com/vasquez