Article Courtesy of The Miami Herald

By Monica Hatcher

Published August 1, 2009 

Condominium associations were handed a significant weapon late last week in the battle to collect rent directly from tenants whose landlords have stopped paying maintenance fees.

In a significant development in condo law and a boon to struggling associations, a Florida appeals court has upheld a ruling allowing a court-appointed representative to collect rents from all tenants living in units subject to foreclosure by associations in so-called blanket or master receiverships.

The ruling, attorneys said, validates more than 20 other such receiverships approved over the past four months by circuit courts in Miami-Dade and Broward counties and clears the way for more condos to use the legal tool to significantly boost collections.

When the condo market crashed, many speculators were caught in units they could not afford and could not sell. Instead, many rented them out. Now, grossly underwater, many have stopped paying their mortgages and their associations fees.

Some continue to collect rent payments from their tenants -- to the immense frustration of condo associations buckling under debt and unpaid bills.

Florida's condo law already provides some relief. It gives associations the right to ask the court to appoint an independent custodian, or receiver, to collect rents from tenants in foreclosed units.

Until recently, though, it was widely assumed that the law required associations to file a separate request for each unit.

For associations struggling to survive, the legal fees and court costs associated with multiple petitions made the process impractical and unaffordable, especially in complexes with hundreds of delinquent owners.

In March, however, Miami-Dade Circuit Court Judge Ellen Leesfield approved one of the first requests for a blanket receivership.

It allowed a single, master receiver to collect rents for all units in foreclosure at The Oaks, a teetering condo community in Miami Gardens. The order also allowed the receiver to collect on units that may enter foreclosure in the future.

The new cost-effective approach is allowing more and more associations to use blanket receiverships.

Ben Solomon, an attorney with Association Law Group, which sought the blanket receivership for the community, said the strategy pulled The Oaks from the brink of financial collapse.

The condo association, he said, was running a $8,000 shortfall each month, collecting only $3,000 of $11,000 needed to run the complex.

"After the receivership was ordered, they doubled their income to over $6,000 within 30 days. By the second month, they were getting back more than $11,000,'' Solomon said.

Some associations have the ability to collect rents if there is a provision in their governing documents that allows it.

For associations without such a provision, normally a majority of residents would have to vote to approve a change in their documents.

That would be a long shot, since most investor-owners would likely vote it down. In many condos, investor-owners outnumber owners who actually live in their units.