Q: I recently bought a condo at a clerk’s foreclosure auction. Shortly thereafter I received a letter from the condo association’s attorney stating that if I did not catch up on the last three years' worth of delinquent dues and pay the fees and costs, the association would foreclose. Is that legal? - Nicole

A: Yes. Florida law allows broad powers to both condominium and homeowner’s associations. They can foreclose on the property from the owner to secure payment of the dues and associated costs, such as late fees, legal fees, special assessments, etc. If you buy a property and the account is not paid off when you buy it, you will then be responsible for payment of the assessments and fees. This applies even if you bought it a clerk’s auction. Technically, this is because the lien for the dues relates back to when the association was formed and recorded in the public records, and since you bought after that, your ownership is subject to that association lien. Foreclosing first mortgage lenders do have special rules and limitations to this based both on the law and the actual rules of most associations, but these limitations do not apply to third-party auction purchasers. Buying a property at a foreclosure auction is the ultimate “buyer beware” and all but the most sophisticated investors should either stay away or really do their homework, both on the rules and the specific property they are considering.

Q: My fiancé passed away recently. We owned a home together, meaning we are both on the deed as joint tenants. I am not a borrower on the loan, and I am not paying the mortgage now. I would like to save the home, but it is worth less than what is owed to the lender. What are my rights and responsibilities? - Sheryl

A: In Florida, there are three ways to jointly own real estate with another person: tenants in common, joint tenants with rights of survivorship and tenants by the entirety.

Property owned as tenants in common is owned in equal shares. In joint tenants with rights of survivorship, all of the owners share an undivided 100 percent stake in the property. Finally, there’s tenants by the entireties. This is similar to joint tenants with rights of survivorship, but it’s limited to a husband and wife being the joint owners.

In your situation, it seems that you owned the property as joint tenants with rights of survivorship, which means that when your fiancé passed away, you became the sole owner of the property. I assume that the bank made you sign the mortgage, even though you did not sign the promissory note. This means that while the lender may foreclose the property out from under you, it can’t make you pay the loan or get any sort of deficiency judgment against you. Further, since you are not a borrower, your credit should not be affected by the non-payment. Simply, you do not have to pay the loan, but if you don’t, you may lose the house to foreclosure. You might want to continue to negotiate with your lender to see if it will modify the loan and let you assume it, or you may want to see if you can obtain a new loan based on the current value of the property, and then negotiate with the lender to accept a short payoff -- in effect short selling the property to yourself. Finally, you could also try to short sell the home to a third party, or discuss deeding the property back to the bank, if you don’t want to keep it.

Q: Can you tell me the upsides and downsides of a short sale? - Michael

A: By way of review, a short sale is when you sell your home to a third party at market value and get your mortgage lender to agree to release the property from the mortgage lien even though the lender is accepting less money than it is owed. The upsides to short selling your property include: you may get to avoid the pain of being sued in a foreclosure lawsuit or having a judgment against you; you are reducing or even eliminating the debt you owe your bank; you get out of maintaining and keeping a property you no longer want or need; you help your neighbors by not abandoning it if you can no longer stay there; your credit may take less of a beating than in a foreclosure; and you will feel better proactively solving your problem than just walking away from it. The downsides include: you will take a credit hit; your debt to the bank may be reduced, but not necessarily eliminated; a short sale can be a lot of work and can be confusing; and you will lose your home and have to find another one. There can be many more pluses and minuses based on your individual situation. Because each situation is different, it is important to think this big decision through and surround yourself with competent, experienced professionals to guide you through the decision and the process.

The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed, nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.