A survey by the Community Associations Institute reflects that 72% of post-foreclosure, bank-owned properties are delinquent in the payment of assessments. At a rate of nearly 3 in 4 homes, what can be done?
Interestingly, associations typically have more leverage over a bank than a typical owner. One reason is that the bank owns the property free and clear of any mortgage, and thus has a financial incentive to pay in full if the association were to foreclose its lien. Our standard recommendations are to:
- Treat the bank like any other owner; don’t wait for a closing to get paid;
- Use liens to ensure payment of assessments and enforcement of covenant violations;
- Aggressively pursue foreclosure if the bank refuses to pay after you have followed the procedures in your collection policy.
With more and more properties being bank-owned, associations need to pursue banks aggressively to avoid a receivables nightmare and to ensure adequate cash flow. Pursuing collection and foreclosing association liens on bank-owned properties also insulates the association from a debtor-owner challenge that the association is treating banks different than different owners. Selective enforcement is a valid and common defense in association litigation. While banks should be afforded all of the due process due other owners, they should not be exempt from payment of assessments during their term of ownership.
If you have questions about bank-owned properties within your association please contact us at [email protected] or at 303.432.9999.