Foreclosure: Your Final Leverage Tool for HOA & Condo Collections
A lien foreclosure lawsuit represents a form of litigation as serious as any other—demanding both significant cost and time. It stands as an avenue of last resort, yet it remains a critical tool for homeowners’ associations and condos under Florida Statutes §§ 718.116 and 720.3085 to enforce unpaid assessments and charges. Without this option, the statutory collections process loses its effectiveness. At Murrell Law, we undertake a thorough pre-foreclosure review to pinpoint potential obstacles, carefully mitigating risks before embarking on this calculated gamble.
How the Process Unfolds
Filing & Court Approval: We file a complaint, secure a case number, and issue summonses. A process server or sheriff ensures personal service on all defendants.
Answer Period: Defendants are granted 20 days to respond. Should they fail to file with the court within this period, we move for a default, effectively removing them from the proceeding and allowing us to expedite the path to a Final Judgment. If an answer is filed, we pursue Summary Judgment, a swifter alternative to a full trial, requiring a hearing to resolve the matter efficiently. Both Default Judgment and Summary Judgment provide quicker avenues to a Final Judgment compared to the lengthy process of a final trial.
Affidavit Requirements: Regardless of the path—Default or Summary Judgment—we prepare essential affidavits. The Affidavit of Indebtedness, signed by the board or Community Association Manager, verifies the debt owed. The Affidavit of Attorney Fees and Costs, submitted by us, details legal fees, court costs, and collection charges. These affidavits are incorporated into the Final Judgment, establishing the total amount due.
Timeline & Sale Preparation
Once the Final Judgment is secured, a sale date is established, typically ranging from 45 to 90 days out. We publish a Notice of Sale in a newspaper, incurring a notable hard cost. Prior to the auction, we file an Affidavit of Additional Amounts, updating the tally with new publication fees, additional attorney fees, monthly assessments, interest, late fees, and other accrued costs since the Final Judgment. This updated total, combined with the original judgment amount, forms our credit bid—the amount we can bid without cash outlay, covered by the judgment. This step occurs irrespective of the earlier judgment process, ensuring the final figure reflects all obligations up to the sale.
Auction Outcomes & Winning Foreclosure
In over 15 years of handling these cases, less than 10% have concluded with the association holding title—most settle well before a Final Judgment, with over half resolving prior to that stage. Foreclosure serves as our final lever to compel payment after owners disregard statutory letters and pre-suit efforts such as rent demands, tenant leverage, or amenity suspensions. It is a calculated risk. Here’s what winning entails:
Best Case: A third-party bid exceeds our credit bid, resulting in full payment of all owed amounts, including collection costs. The file is then closed with a successful outcome.
Title to Association: Should no bid surpass our credit bid—often starting at $100—we take title 10 days after the sale, subject to a 10-day challenge period. The winning bid incurs a documentary stamp tax at $0.70 per $100. Will the board own the unit? Yes—either we receive full payment from a third-party bidder, or title is issued to us. As a lienholder, we are often subordinate to a first mortgage, which we cannot extinguish. The auction effectively sells the right to rent the unit until the bank forecloses, a period typically lasting 12 to 24 months, though this timeframe has shortened in recent years. The board’s next steps: Renting requires no owner vote to recoup costs, but selling likely necessitates a vote, particularly if a first mortgage complicates the title. Our pre-foreclosure review—such as for the Richards file at Cottages at Stoney Creek, where I am still reviewing the abstract—will identify any mortgage risks. Lien foreclosure remains a gamble, with potential setbacks from bankruptcy or a senior lien.
Eviction: The process is automatic. The new titleholder may obtain a Writ of Possession if the owner remains, effective 10 days after the sale as stipulated in the Final Judgment.
Financials & Deposits
To initiate, we request a $3,000 deposit into trust, covering filing and serving costs (approximately $500 to $1,000), initial preparation, and leaving a retainer for future work. This is not an earned fee; it functions as a lawsuit escrow. The deposit is posted to the resident’s ledger and the Legal Expense GL (per Nora), not the balance sheet. Should the case settle early after service, we refund any remaining balance. However, proceeding to auction may incur total costs of $4,000 to $6,000, billed later as an overage, ensuring we do not begin significantly in the red.
First Mortgage Considerations
Our pre-foreclosure review assesses for delinquent mortgages or signs of bank enforcement. Regarding the Richards file, the board inquired whether the lien and Notice of Intent reached the FHA lender. Under the Federal Debt Collection Practices Act (FDCPA), we cannot disclose the debt to third parties. Lenders may pay off liens when recorded, but that did not occur here. A Lis Pendens—filed with the foreclosure action—might alert them if they monitor public records, though if they missed the lien, they are unlikely to notice it. We do not name them as defendants, as we cannot extinguish a prior first mortgage. If a bank is already moving, we advise against our foreclosure due to the high risk of losing additional funds. We monitor their case, answer as a party, and push it forward. Inaction risks a 5-year statute of limitations wipeout (Fla. Stat. § 95.11(2)(b)).
If Association Takes Title
Should we acquire title—a rare occurrence—renting becomes the strategy to maximize income until the bank forecloses. This is a time-based approach; I have witnessed associations recover 18 months of rent above the debt during slower bank action periods. Contact your insurance carrier to add a small umbrella policy (e.g., for slip-and-fall liability), as we bear no responsibility for taxes or upkeep. Loss is inevitable, so the focus is on recouping as much as possible.
Understanding Debt Transfer
When a new owner assumes title through this process, they inherit the back debt under the principle of joint and several liability, as outlined in Florida Statutes §§ 718.116 and 720.3085. However, certain limitations apply. The collection window is capped at five years from the assessment date under Fla. Stat. § 95.11(2)(b), with assessments recorded in full (no prorating). Your governing documents can alter this dynamic: lien subordination clauses may protect a foreclosing bank, invoking a “safe harbor” that limits their debt to the lesser of 1% of the original mortgage or the last 12 months of assessments, including specials. If your declaration further eliminates all liability, this safe harbor does not apply to banks, though third parties remain fully liable. I recommend amending declarations to align with statutory defaults to safeguard your position.
Murrell Law - Serving Florida Boards with Precision | 35 Durbin Station Court, Unit 106, Saint Johns, FL 32259 | (904) 624-1474
