Condo associations gain victory over banking lobby

Article Courtesy of The Sun Sentinel

By Aaron Gordon

Published May 25, 2013

For the second year in a row, Florida's condominium associations dodged a financial bullet when legislators opted to favor voters rather than the powerful banking lobby. It was an important victory for the state's struggling community associations, which continue to face financial woes due in large part to budget shortfalls and delinquent assessments.

The defeat of House Bill 1339 was a resounding statement to the banking lobby and the legislators who are controlled by them. The statement was clear: voters will not stand for legislation that limits an out-of-state bank's liability at the expense of Florida's community associations and residents.

The banking lobby's concern is understandable as a growing number of associations are challenging foreclosing banks under Florida's Safe-Harbor law. The result is that aggressive associations are getting more than the statutory limit (12 months or 1 percent of assessments, whichever is less).

The amount allowed by the statutory Safe-Harbor is a paltry sum, making Representative George Moraitis' proposed House Bill 1339 even more egregious, as it would have further limited the foreclosing banks liability with the following language: "The first mortgagee or its successors or assignees who acquire title to a unit by foreclosure or by deed in lieu of  foreclosure are not liable for any interest, administrative late  fee, reasonable cost or attorney fee, or any other fee, cost, or  expense that came due prior to its acquisition of title. This  subparagraph is intended to clarify existing law."

House bill 1339 was inaccurately positioned as a way to expedite the foreclosure process, something that was not needed since legislators passed House Bill 87 which is likely to accomplish that very goal. Keep in mind, an association bill passed with every opportunity to be amended, to include the language above and the legislature chose not to attach it.

House Bill 1339 failed to make it out of the House Judiciary Committee. The clock finally ran out when the bill sponsor failed to get support from colleagues who didn't want to be associated with a controversial bill that would directly impact the wallets of their constituents. They realized that if the foreclosing banks aren't responsible for these fees, then it comes directly from the pockets of residents.

The practical effect of this bill would have been the transfer of wealth from community association's members (residents) to banks. In short, it would have been be another "bailout" for the banks.

Moving forward, voters should ask the following questions since it's likely a similar bill backed by the banking lobby will be introduced next year:

Why would politicians make it easier for financial institutions to pay less and mandate that association residents pay more?

Why not strengthen – rather than weaken – the provision for community associations by making more assessments recoverable from first mortgagees and subsequent purchasers?

Our state's current scenario is a battle of attrition, with banks stalling foreclosures and associations picking up the tab and leaving too many dollars on the table. Associations must take the lead in these efforts and suggest, perhaps, a more narrow definition of a first mortgagee.

It is clear that the intention of House Bill 1339 was to protect entities that purchased mortgages for pennies on the dollar. These entities are not facilitating home ownership. To protect them as a "clarification of existing law" is a distortion of the well-meaning intent of the current law which operates to encourage and protect mortgage originators whose mission is to put people in homes, not kick them out for profit.

Going forward, Florida voters must diligently monitor the efforts of the banking lobby and unfriendly legislators. The effort toward curbing or narrowing the safe-harbor provisions should start now with lobbying efforts and a grass-roots campaign by residents in community associations. Call or email your legislators now. Don't let the banking lobby and a few rogue representatives try to increase your association's liability again next session.

This year, Florida's constituents won the battle, but next year it could be different.