In this economy the idea makes sense but to make it legal you would need owners in default to agree and this would have to be done with lawyers involved. It certainly is a much better idea than sticking to this and this by-law which was voted on in different economic times but be sure to cover all the legal aspects so as not to invite more trouble.
You may not rent a unit unless the Association forcloses on it. In order to speed up the foreclosure process, you should have your collection attorney force foreclosure by noticing each case for trial. Courts are taking longer to foreclose on units due to poor documentation. In the state of Florida, you are able to collect rents from delinquent units owners that are collecting rent from renters and not paying assessments. The beforementioned information provided is, at best, of a general nature and cannot substitute for the advice of a licensed professional, i.e., by a competent authority with specialised knowledge who can apply it to the particular circumstances of your case. Please contact a local bar association, law society or similar association of jurists in your legal jurisdiction to obtain a referral to a competent legal professional if you do not have other means of contacting an attorney-at-law, lawyer, civil law notary, barrister or solicitor.
Rent them! Use a rental agent if you can. It will save you much more than the 10% they charge. You must have the owners permission.
If I were you I'd follow Liliane's advise.
Points to consider, does the unit need to be renovated, can you recoup renovation cost and lost income before the Bank forecloses, you become liable for fees, is rent in the general area high enough to cover costs? Lots to consider. Could be costly if the bank forecloses three days after you've got the place cleaned up.
Do your Association a favor and talk with your legal council.
Liliane A is correct about foreclosing on an owner. It is very true you need to make sure you follow the FL statutes as far as timeline on notifying the owner of lien, then lien, then notice of foreclosure, then foreclosure. You can't just rent out a unit if the owner still has title. And it would be a rare owner who would allow you to. You have to take title in a foreclosure auction at the courthouse, again, you have to follow the timeline for getting this done.
The gamble is, especially if there is a mortgage on the property, can you take title, fix it up and rent it out long enough to recoup your legal and prep costs and past assessments, before the bank takes title when they get around to foreclosing the unit themselves. Less of a problem if there is no mortgage, if you have title you can try to sell unit at a profit to cover all your costs and assessments. It's rare though that there is no mortgage. That is the problem (among many) of taking over abandoned properties. You may take them over, spending more association funds besides what you've lost already in assessments, and then the bank takes it back before you make any money at all.
If your association is well funded and the board doesn't mind being landlords, it is worth exploring with your legal counsel. Don't do it by yourself. You have to understand the risks and if challenged in court, if you haven't followed legal procedure you will have spent your assoc funds for naught.
Amen cebo...you said it succinctly, and the part about high enough rents is definitely a factor.
Sorry..one more comment...there may be units that are still well kept and rentable if and when you foreclose...but (this happened to us) between the foreclosure proceedings and the time it takes to transfer title to you, the owner still has rights to access the unit and they can trash it totally, tear out and remove the fixtures, etc. If you are a small association like we are, it is a very ugly business. Large organizations may be more suited to going through this.
Hello - we have a small 4 unit condo building in Chicago. The owners below me came to the last meeting in July and said they are walking away from their mortgage and unit (they want to buy a house in the suburbs and they don't think they will get as much as they owe on the unit if they try to sell so are just walking away). They did give us the keys and said go ahead and rent it out and put the money in the condo association account for repairs that are needed. We have a special assessment going on right now - about $2k per owner. So what I want to know is, is it legal for us, the Condo Association, to rent out their unit and have the money go to the association while we wait for the bank to take possession of their unit? Any help would be much appreciated!!
@MLB. Your post with the paragraph that begins with "The gamble is,..."
I am considering bidding on a foreclosure where the Plaintiff is the Condo Association. The amount owed the assoc is $11k. However, there is a mortgage for $50k. The defendants in the foreclosure are the Owner and the Bank.
Your statement frightened me. Could the bank foreclose again? I assumed that the new purchaser is the new owner, without liens.
I also assumed that the highest bidder will likely be the Bank. Then, the bank will sell the unit.
This is new territory for me.
Andy...thanks for your comment. "The gamble" was speaking about the situation where the bank held the mortgage and the owner abandoned the property with back HOA assessments due. In this situation, in Florida at least, since the owner owes money on this asset to the Association, the Association has the right to go through foreclosure to take title of the property. The Gamble is that the association is betting it can fix up, rent the unit and recoup all its costs and assessments BEFORE the bank decides to foreclose on it and take title themselves. In Florida, mortgages and tax liens always wipe out liens placed by associations.
If an association forecloses that does not mean they take over the mortgage! IF they want to BUY the property, then they need to make a deal directly with the bank, but the bank would have to go through the foreclosure process first to get title, and then deal with the association. The association has no right to sell the property if the bank is holding a mortgage, I think you can understand why.
You need to make sure you know who holds the title to the unit and if there is a mortgage outstanding on it. You as the buyer may also be liable for back assessments, you must check out your state's laws on this. Be careful! Make sure your title company reveals all problems with this unit, and enforce your title insurance if something shows up after the sale.