The Lakes at Boca Raton HOA has escalated its crackdown on owners in arrears by taking ownership of two homes in the Lakes. 

A new Florida state law gives homeowner associations the legal right to take title to a property whose owner is in arrears on maintenance fees.  It enables an association to evict the owner if need be and then rent the property.  The proceeds less costs from the rental are applied against the former owner’s debt to the association.   

An association’s title is subject to a superior lien if there is a lender (first mortgagee) with an outstanding first mortgage on the property.  In other words, the lender has the right to foreclose on the property and assume title, whereupon the association no longer owns the property and has to terminate its rental agreement.  

However, it will likely be a year or two -- or even longer in some cases -- before the lender replaces the HOA as the new owner of the property in the Lakes.  In most cases, that’s enough time for the HOA to recoup all its unpaid maintenance fees, interest, legal expenses and violation fines.  If the property is fixed up, maintained and occupied, the lender is more likely to extend the HOA’s time period as the title holder.

During the time that the HOA owns the property, it is not obligated to pay the mortgage or property taxes.  Its only expenses are fixing up the property to make it rentable and hiring a rental property management company to find the tenant and provide financial and maintenance services.  So the net as a percentage of gross rental income is higher than with more conventional rentals.

The financial downside occurs when the lender closes soon after the HOA takes title and before it has a chance to recoup its expenses and recover the maintenance fees never paid by the former owner.  But we expect this will happen infrequently, and be more than offset by other properties that we will own for longer time periods.

It is likely that the HOA will take title to several more homes in early 2012. If owners in arrears are close to losing their homes to the HOA, they can stop that from happening by paying us in full, as two owners recently did the day before their homes were to be auctioned.

 HOA Payment Plan

The Lakes at Boca Raton HOA also offers the following payment plan for owners in arrears who are not yet on the brink of losing title to their home:  

1. If an owner owes less than $5,000 in total past due maintenance assessments, late fees/interest charges, and legal fees/costs incurred by the HOA because of an owner’s arrears, we will accept the following payment schedule:

$1,800 -- minimum initial payment upon written agreement to payment plan.

Balance in five equal payments over next five months.

2. If an owner owes less than $10,000 in total past due maintenance assessments, late fees/interest charges, and legal fees/costs incurred by the HOA because of an owner’s arrears, we will accept the following payment schedule: 

$1,800 -- minimum initial payment upon written agreement to payment plan.

Balance in eight equal payments over next eight months.

3. If an owner owes more than $10,000 in total past due maintenance assessments, late fees/interest charges, and legal fees/costs incurred by the HOA because of an owner’s arrears, we will accept the following payment schedule:

$2,500 -- minimum initial payment upon written agreement to payment plan.

Balance in eleven equal payments over next eleven months.
 

In the event of a missed payment, the above payment plan will be terminated for good,  whereupon the HOA will resume the process of taking title.