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Buying a Florida Condo? Are Your Neighbors Paying Their Fees?

James W. Martin

An article in the Tampa Bay Times points out a potential problem when buying a condominium in Florida. The headline says it all: “Condo owners must cover fees for deadbeats.” The gist of the article is that when a Florida condo owner stops paying the mortgage, the condo association fees usually go unpaid, too. That means that the other condo owners have to make up the difference so that the condo association has enough money to keep the pool, recreation area, parking lot, and other common elements maintained and in repair.

How can this happen? It’s because legally the the mortgage holder has a lien (pronounced “lean”, as in “Please don’t lean on me.” ) on the condo unit. The lender’s lien is usually in first place. This makes it hard for the condo association to assert its right to collect the monthly association fee by putting its own lien on the condo.

The continuing problems in the economy further exacerbate the problem. Many lenders are filing foreclosure lawsuits and getting foreclosure judgments but not actually holding foreclosure sales. This means that titles to the condo units remain in the condo owners who are not paying the condo associations’ fees. Sometimes the condo owners remain living in the condos during the foreclosure process. This can go on for years.

And sometimes condo owners file bankruptcy, which further delays the day when a bona fide owner takes over the condo and begins paying association fees.

All in all, the warning is clear: Before buying a condo in Florida, you need to know your neighbors. Are they paying their condo association fees? Ask the condo association for financial statements and reports. Check with the County Property Appraiser and the County Clerk of Court to find out if any of the units in the condo are in foreclosure. Hire a lawyer to guide the due diligence investigation.

If a buyer fails to include these steps in the due diligence investigation before signing a contract to purchase a condo, the buyer could end up being one of the good guys who makes up the condo fees not paid by the financially-unfortunate guys.

For additional information, see the free ebook written by Florida Bar Board Certified Real Estate Lawyer James W. Martin on Florida Real Estate Sales Contracts.

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