Lenders foreclosing on domestic, commercial or mixed-use residential or commercial properties that include covenants, deed limitations, statements, owners associations, and developer/declarant rights must be aware of specific issues that might emerge during the course of the foreclosure action that could have a considerable influence on the eventual total cost of the foreclosure, the lending institution's capability to market the residential or commercial property post-foreclosure, and various functional issues that associate with these types of jobs. Similar concerns arise when taking title via a deed-in-lieu of foreclosure. No two distressed projects are exactly alike and there are myriad issues and traps that can be prevented with careful and early preparation. The following is a standard list to alert you to concerns that should be dealt with before and during the pendency of the foreclosure or prior to acquisition via a deed-in-lieu.

Kind of residential or commercial property being foreclosed

- Residential, commercial, or mixed-use

• A group of lots or units
• A single lot or unit
• Developed, partially developed, or undeveloped
  
  Obtain and evaluate the foreclosure title commitment, a U.C.C. search, and a local lien search in particular counties to identify the applicability of the following concerns:
  
  - Homeowner association statement of covenants
• Declaration of condo
• Declarations and deed restrictions referring to the overall community or advancement
• More than one association (master and sub associations).
• Subdivision plat( s).
• Contractors' liens.
• Owners' association liens.
• Municipal liens, consisting of super-priority community liens (may not appear in the realty records).
• Recorded mortgage pre-dates recordation of formation files and specific modifications to the condominium statutes.
• Recorded joinder and authorization of mortgagee to formation documents.
• Ownership of residential or commercial property and personalty
  
  Subdivisions (Homeowner's Association)
  
  - Homeowners associations are typically governed by Chapter 720, Florida Statutes. Certain statutory provisions may take precedence over arrangements in the deed restrictions, however that is not constantly the case (may rely on the substance of the specific problem and the existence of statutes at the time the deed limitations were tape-recorded).
• Does the Declaration reference Ch. 720, Florida Statutes? Yes. Declaration tape-recorded prior to October 1, 2007? Review mortgage foreclosure provision to figure out how the statement addresses assessment liability. No. Review the mortgage foreclosure arrangement in the declaration due to the statutory restriction on liability (12 months of typical expense assessments or one percent of the original mortgage financial obligation) per § 720.3085( 2 )( c), Fla.
  
  Stat. Condominiums
  Statutes. Condominiums are developed pursuant to and are governed by Chapter 718, Florida Statutes. Accordingly, the statute might be provided more deference than the statement of condo. Declaration of Condominium - If taped prior to July 2010, § 718.116, Fla. Stat. offers that evaluation liability was restricted to the lesser of approximately 6 months of overdue typical expense evaluations or one percent of the initial mortgage debt.
• If tape-recorded after July 2010, § 718.116, Fla. Stat. supplies a limitation on evaluation liability to the lower of up to 12 months of unpaid typical expenditure evaluations or one percent of the initial mortgage debt.
• Review declaration of condo for an arrangement that automatically updates the requirements of § 718.116, Fla.
  
  Stat. -Are leases present?- Tenants paying rent or in-kind?
• Are occupants existing on leas and charges?
• Do industrial tenants have appropriate licenses (i.e. liquor licenses).
• Are occupants complying with usage restriction requirements (i.e. signs).
• Are renters complying with regional government regulations (i.e. parking).
• Are there empty systems that require to be remodelled or fixed?
• Are tenants making payments to an owners' association (due to the fact that the proprietor owner has failed to pay outstanding evaluations)?
  
  Developer/Declarant Rights
  
  - Even if a is finished, a bulk purchaser/successor designer will likely require some developer/declarant rights in order to establish the residential or commercial property, run a sales center, construct model homes, set up sales signs, etc. It is important to evaluate which rights are needed and after that speak with relating to the very best method to obtain such rights while restricting liability for predecessor acts.
• Developer/Declarant rights are found in a writing that is recorded and details the rights, tasks and duties provided to a developer/declarant pursuant to statutes and deed restrictions/declarations. Condominium Developer Rights - Assess whether it makes sense to obtain developer rights pursuant to the Distressed Condominium Relief Act to get rights required for sales and marketing while restricting liability for prior designer acts.
• Determine whether acquisition of condominium units wholesale ought to be as a bulk assignee or bulk buyer ( § 718.703, Fla. Stat. ).- A celebration taking title to condominium units upon foreclosure or by means of deed-in-lieu that has a proper assignment of developer/declarant rights and is categorized as a bulk assignee could: - Control the advancement till such time as it offers the residential or commercial property to another purchaser. - Amend to correct existing deficiencies in the declaration of condo (depending upon the language of the file).
• Control the books and records of the advancement and make certain they are in order.
• Appoint a residential or commercial property management business of its choice, relying on any existing management agreement.
• Enhance the sales capacity of the residential or commercial property by changing the governing files (relying on the language of the file)
  
  - Can market and sell or rent units, maintain model units, and have indications on the typical components.
• Triggers turnover of control of the association (if turnover has not formerly happened) but is not responsible for turnover expenditures.
• Is not accountable for claims versus the designer for breach of guarantee, building problems, or failure to correctly operate the condominium association
  
  - Successor designer will likely choose a particular project of developer/declarant rights rather than relying on general project.
• A lender with advancement rights may be exempt from subdivision lot evaluations (in lieu of assessments it may need to fund budget shortfalls), but that is reliant upon the timing of recording of the mortgage and the deed limitations and the specific language contained in the deed restrictions.
• Assignment of developer rights must be in recordable type
  
  - Assignment of designer rights might require resignation of old board of directors and visit of a new board.
• The new board needs to satisfy to eliminate old officers and elect brand-new ones.
• Budget and assessment collection concerns.
• Correction of insufficient or defective paperwork.
• Develop owners' association shift strategy beforehand - statutes govern shift in both condominiums ( § 718.301, Fla. Stat. )and property owners associations ( § 720.307, Fla. Stat.
  
  ) Issues During Pendency of Foreclosure Action
  
  - A receivership can limit exposure for the foreclosing lending institution by dealing with problem issues prior to the transfer of title, such as: - Environmental concerns.
• Chinese drywall.
• Completion of initial building.
• Making major repairs.
• Security/vandalism.
• Marketing and sales.
• Managing occupants.
• Compliance with governmental guidelines.
• Compliance with developmental plan.
• Other various concerns
  
  - Continue marketing of systems for sale to avoid automatic turnover.
• Funding the association.
• Advance funding certificates (a kind of guaranteed financing to the association so bank funding does not get included in the uncollectible deficiency).
• Receivership certificates.
• Continuation of deficit financing (funding only association deficits instead of funding association based on a budget).
• Audit association's operating, working capital and reserve accounts.
• Maintains official records
  
  Post-Foreclosure
  
  - Monitor timelines for: - Assessments - Payment of evaluations due since date of conveyance.
• Payment of continuous assessments
  
  Other Special Development Issues
  
  - Marinas.
• Partial termination of condo.
• Condo hotels.
• Mixed use projects.
• Community development districts or unique taxing districts.
• Mobile home parks.
• Timeshares and fractional interests.
• Infrastructure building and construction.
• Submerged state land leases need to be assessed for functions of moving together with the residential or commercial property.
• Livestock.
• Mitigation and conservation areas.
• Water management permits and obligations.
• Reserved service interests in covenants. For example: - Right to offer parking areas.
• Right to control cable television service costs
  
  This checklist is basic in nature and does not cover all possible problems with regard to the conveyance through foreclosure or deed-in-lieu of residential or commercial property in a distressed condo or property owners' association task. Careful analysis of your task with members of the Real Residential Or Commercial Property Litigation and the Community, Condominium, and Resort Development Group of the Real Estate and Finance Practice Group will result in a smooth shift of the task with required rights for sales and operation of the project.