Condos, HOAs and Coops Will Have the Ability to Demand Rent

SB 1196 Includes New Remedies for Collecting Money Owed to Associations, but Unanswered Questions May Create Liability Exposure. 

Community leaders and managers have complained for years about investor owner delinquencies.  Why should the owner continue to collect rent from his or her tenant without paying maintenance fees and/or assessments?  Sure, both the Condominium and Homeowners Acts allowed the association to apply to the Court to request the appointment of a rent-receiver, but to take advantage of that provision it had to file the foreclosure lawsuit.  The law requires notices to the delinquent owner, preparation and recording of the claim of lien, filing and serving the foreclosure lawsuit – all before the association could ask the Judge for authorization to collect rent.  It could take several months to obtain the appropriate Court Order – all while the account remains delinquent. In some cases the tenant moves out before the association has the chance to collect any rent.  Of course there are costs and expenses involved with that whole process. 

Recently (as reported on this blog in Condo Receiver Helps Collect Assessments; Q&A: Condo Receivers; Collecting Rent from Tenants; Q&A: Collecting Rent from Tenants (revisited) ) the Courts have extended the law to allow ‘blanket receiverships’ for all units subject to foreclosure – and even more recently some Orders were entered authorizing the receiver to collect rent from tenants occupying units even before the association filed for foreclosure.

Well, in response to those cries for help the legislature included a ‘self-help’ procedure for associations.  The first paragraph of this portion of the new law says:

If the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may make a written demand that the tenant pay the future monetary obligations related to the condominium unit to the association, and the tenant must make such payment. The demand is continuing in nature and, upon demand, the tenant must pay the monetary obligations to the association until the association releases the tenant or the tenant discontinues tenancy in the unit. The association must mail written notice to the unit owner of the association’s demand that the tenant make payments to the association. The association shall, upon request, provide the tenant with written receipts for payments made. A tenant who acts in good faith in response to a written demand from an association is immune from any claim from the unit owner.
 

 Like usual, the law doesn’t answer every question, such as:

  • Can the association demand rent for amounts that became due before the effective date of the law?
  • If the association collects rent on a short term tenancy, does it have to pay sales tax?  What if the owner doesn’t pay the sales tax – is the association liable since it collected the rental payments?
  • What about the expenses incurred by the association to collect rent?  With a receiver the Court allows the receiver’s fees to be paid from the rent (and the Court approves the payments or payment schedule). 
  • Does the association collect the entire rent check or is it only entitled to payment of current maintenance?  Does that mean the tenant pays rent in two checks – one to the association and one to the owner? 
  • Can the association use the ‘application of payments’ procedure to collect the entire balance on the owner’s account?
  • How is the accounting done? Is the rent considered non-assessment income?

These and other factors must be taken into consideration before the association moves forward with any demands against tenants

5 Comments

  1. As a Florida tenant who is receiving demand letters from a Florida homeowner’s association trying to collect all of my rent money based on the recently passed SB 1196, there are a few comments and observations I would like to make. There are several myths floating around the blogosphere which simply aren’t true.

    MYTH #1: TENANTS ARE SOMEHOW AT FAULT

    People in this discussion keep talking about Florida tenants as if we were some kind of sleazy deadbeats. As if we intentionally choose to live in a house rented to us by someone who isn’t paying their association fees, and that this is somehow benefitting us. Something I keep hearing people say, for example, is how unfair it is that we tenants get to benefit from all of these great amenities when the homeowner’s association dues aren’t getting paid.

    Something to think about is the fact that while my landlord may not be meeting his obligations to the homeowner’s association, I for one am dutifully paying my rent every month on time. And I pay the same rent that I paid before he stopped paying his association dues, while actually would imply that I am paying for all of the community amenities now, just like I was before he stopped paying his dues.

    You could certainly argue that my beef about this should be with my landlord, and not with the association. And it is. The part I have an issue with is the general assumption that I’m somehow getting something for free.

    Please be it understood that we tenants are NOT responsible for this mess, nor are we in any way benefiting from our landlords refusing to pay our fees. We are victims of the landlord just as much as the homeowner association is. You can be mean to us, angry with us, or even spiteful to us as much as you want, but your anger is misdirected, and it isn’t particularly fair.

    …and it isn’t giving us tenants much reason to want to go out of our way to go above and beyond the law to help you out. Which goes to my next point.

    MYTH #2: TENANTS ARE IMMUNE FROM LANDLORD RETALIATION

    The lawyer from the homeowner’s association went out of his way to make it clear to me on the phone that if I send them *all* of my rent money I would be completely immune from anything my landlord could ever try to do to me. Plus I’ll even get my community benefits back! And why would I want to pay my landlord anyway, when he is *such* a deadbeat — when I could instead side with my neighbors at the benevolent homeowner’s association, which is so nice and kind?

    But “immune from any claim from the unit owner” doesn’t really paint a complete picture of the situation tenants are in. While my landlord may not be able to kick me out for sending my rent to the homeowner’s association, there are other things he CAN do to me that would make my life less than pleasant.

    For example, if my air conditioner breaks he has always in the past gone out of his way to have someone come over to fix it within just a couple of hours. The lease doesn’t specifically require that, but he does it anyway. If there is an issue with the sink, or with another unit owner, or something else, he takes care of those things right away too.

    Do you think I’m going to receive such great service from him if I side with the homeowner’s association and stop sending him rent? And do you think the homeowner’s association is going to step up and fix my sink, or my air conditioner, or whatever — now that we’re such great neighbors and friends?

    Maybe they’ll be OK if my family and I sleep in the community exercise room until the landlord gets around to fixing the air handler? I doubt it.

    Or what about that beautiful mirror I have hanging in the hallway? My lease is pretty explicit about the fact that I’m not allowed to use wall anchors. Call me a criminal, but I did (otherwise it would have fallen down!) My landlord has not noticed and probably doesn’t care, because he knows that I will properly patch the wall and put things back the way they were before I leave.

    But…do you think it is possible that if I stop paying my rent he might for the first time see himself in my beautiful mirror and wonder how such a heavy object d’art could be supported with just thin nails? What do you think the chances are he won’t try to use it as an excuse to try to evict me ? And maybe he might even notice a few other things I was doing wrong that neither I nor he ever gave a thought to before?

    While he might not kick me out for not paying my rent, I have to imagine that having him for an enemy means that he will think of anything he possibly can to try to get me out of here as quickly as he can. How are my new friends at the homeowners association going to help me with that?

    Which lead me to the last, most important reason that the “immunity” offered by the new law is fairly worthless. My lease expires in three months. What happens then? I can tell you right off the bat that my landlord will have no interest in keeping me in the unit if I’m not paying rent and *especially* if I’ve decided to throw my lot in with my new friends (and his new enemies) at the homeowner’s association.

    The only power the homeowner association has is to evict me. They can’t do anything to make it possible for me to stay in my unit when my lease runs out, and I’m guessing — based on their past treatment of me — that they aren’t going to help me find another unit. I’m especially confident that they aren’t going to help cover any of my moving expenses when I undoubtedly have to leave in three months.

    Which brings me to my final point.

    MYTH #3: TENANTS ARE NOMADS

    Homeowner associations and lawyers keep asking: “Why do you stay? Why do you want to live in a unit owned by a deadbeat?” And everyone else talks in such a way that you would think that tenants were all nomads who live out of suitcases that can easily be packed and unpacked at a change in the wind.

    I’ve lived in my current unit for over five years. At the time I moved in (after being shown the place by a reputable real estate broker) my landlord wasn’t a deadbeat. He was glad to have my family and I stay “as long as we liked” – a great situation for a family with two kids just starting middle school. We spent several thousand dollars to move all of our belongings to this unit, we registered the kids for school, and we’ve made friends in the neighborhood and community.

    Moving isn’t easy. For me to move — to get everything ready to go, to find a new place, to hire movers, to pack everything up, move it, find a new place, unpack everything again — is a major *ordeal*. I will have to take time off of work to do it. I will have to spend a lot of money to do it. It will be very unpleasant and expensive for me and my family.

    …but not half as unpleasant as it will be for my kids, who will have to make new friends, maybe even have to go to a different school, and have their lives all turned around.

    Most tenants are NOT nomads. Just like homeowners, they *live* where they live, and they have just as many materials goods (sometimes more!) as homeowners do. Moving is a terrible burden.

    CONSEQUENCES FOR EVERYONE

    My point is this: Associations are right now trying to push the new law as far as it will go. Despite the fact that the law pretty clearly says “future monetary obligations” and despite the distinct possibility that the legislature may have *intended* this law to apply only to new leases entered into *after* July 1st, associations are trying to use it as a panacea to collect all of their overdue assessments and dues without going through the regular debt collection procedures usually required by the law.

    And while I feel very bad for the homeowner’s associations, the way in which they are trying to manipulate and scare tenants is just plain wrong. They are making demands that many *unbiased* observers believe are NOT covered by the law (although we’ll have to wait for a judge to rule on it to know for sure) under the assumption that they will get to keep any money they can collect now, so they should get as much as they can before it is too late. And they’ve deluded themselves into believing that the tenants – their neighbors – won’t be harmed.

    What they need to understand is the untenable position they are putting tenants such as myself in. Because this isn’t about whether or not I should follow the law (because I will) – associations are asking tenants to accept their *interpretation* of the law – one that will likely cause tenant to face severe indirect consequences. And I don’t have a lot of reason to think – or want to believe – that the homeowner’s association interpretation is the correct one – or more important, the one that a judge side with.

    The homeowner’s association can try to evict me. But as I understand it in order to be evicted, the they are going to have to convince the judge that I have somehow violated the law by sending *only* the $300 association fee to them because (a) “future monetary obligations somehow include past due amounts; (b) the law applies to contracts entered into before the law went into effect; (c) the law isn’t somehow unconstitutional and a violation of the property owner’s due process rights. I don’t know much about the law, but it seems to *me* that proving all of that isn’t going to be easy.

    Someone asked whether a tenant such as myself would go to all of the trouble and expense? Wouldn’t it just be easier to move? Curiously enough, even if I wanted to move I can’t – I have a lease, and unless I’m willing to pay several months rent worth of penalties, I can’t leave.

    But also consider this: if the homeowner’s association isn’t successful at proving the points above – if they fail with their bid to evict me – they have to pay all of my legal expenses. And I don’t plan to use a cheap lawyer.

    Sure, it’s a gamble. But I, like so many other tenants, are being backed into a corner. If the homeowner’s association tries to evict me they better feel really good about their hand — because the stakes are high, I don’t have to option to fold and I (quite literally) have a full house.

    If it comes to this I imagine we probably won’t be the most loved family at the community pool this summer…but frankly, we haven’t been *allowed* to use the community pool for quite a while now, so I think we’ll find a way to live with ourselves.

  2. Thanks so much for taking the time to explain things from the alternate view point. I certainly feel for you. I wish you and your family all the best. I wish there was something more I could say, but it’s a mess, isn’t it?

  3. Thank you for your comments. Tenants did get “stuck in the middle” of this mess. In some cases the tenant doesn’t know the owner of the property hasn’t paid until he/she is served with a summons and complaint!

  4. George, this topic is so interesting and current that the local news media may be interested in doing a short piece on it. If you (or anyone else reading this) would be prepared to make yourself available for public comment on this subject, please contact me asap by emailing: Marcus@CondoMetropolis.com

  5. Yeah, I’m in a different situation – Feb of 2009 I found my place on Craigslist – for rent by owner the place was being represented by a local realty office with a reputable rental agent – very popular – everything seemed kosher – I move in and pay rent – renew my lease in Feb 2010 – I have issues getting it signed – turns out the owner is “sight unseen” – everything is handled via email and deposits – I check the original lease – it was never signed by the owner either – a week or so later – I get served for his foreclosure – realty office is unaware – rental agent is confused – they ask that I don’t pay rent until all is resolved – he never communicates, her fees aren’t being paid so – now I’m a squatter with an unsigned lease – rent paid for nearly 14 months – come to find out the place was in foreclosure in Oct 2009 – so my rent went nowhere – I communicate with the bank – they say stay – the realty office has cut ties with me – they are not being paid to represent the property and the owner is nowhere to be found – so I’m staying – rent free – in fear of some sudden bank possession or sale – the community manager is aware of the situation – she even asked that I stay – possibly look for another unit in the same community – I’m a good tenant – I was – I paid rent on time – I paid every fee – my security and pet deposits are gone – and now this – they want me to pay $200 each month for his irresponsibility – he owes $865 total in HOA fees – that is great – surely nothing in comparison to the rent I had been paying – but what is in for me – I pay for his faults – I have no rights – I’m going to get evicted anyways – so why not just wait this out – is there really anything permanent and or legally bad that can happen to me? – I’m basically stuck between a rock and a hard place I am constantly looking for a place but why walk away from such an ideal situation – and now why pay another entity more money to go down the drain? – seriously why pay fees for someone next door who doesn’t pay theirs and they actually own and have rights in the HOA? – and why pay for someone not only delinquent in dues but the mortgage too? At the end of the day I’ve done everything but send out a search party for an owner I’ve never seen – I contacted the bank – the lawyer – I showed everything to the community manager, I went to the comptroller office, the county clerk of courts – all parties involved say just stay in the property until the bank or an owner takes possession – I’ll have 60 days to leave – but now what to do when it comes to this unduly law? Do I pay this HOA for nothing? Do I not pay the HOA and risk a swift & dirty eviction? Do I just leave on my own accord? Can I just stay here and both the HOA thing and the foreclosure drag on forever considering the sign o times?

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