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Q&A: Collecting Rent from Tenants (revisited)

Many readers have posted questions regarding the ability to collect rent from tenants.

It is important to remember that in all of the cases reported previously on this blog, the Court only appointed a blanket receiver to collect rent after the Association filed an action to foreclose its Claim of Lien.  Thus, the Association must pursue the collection procedures set forth in the Condominium Act (Chapter 718, Florida Statutes) or Homeowners’ Association Act (Chapter 720, Florida Statutes).  It must send written notice of the delinquency to the Owner, file its Claim of Lien, notify the owner in writing of the intent to foreclose and then file its lawsuit, all before it can ask the Court to allow it to collect rental income.

Here is an issue that comes up frequently:

  Assume the following:
– A bank has commenced foreclosure proceedings against a unit Owner but not taken possession of the unit
– The Condo association has liened the Owner for past due assessments
-The condo Owner has declared bankruptcy
-The Condo Owner has a renter in the unit & is collecting rent

Can the Condo association obtain a receiver to collect the rent to pay the association assessment?

A bankruptcy filing results in what is known as an “automatic stay”.  This essentially stops all collection activity against the debtor. In Senate Report No. 95-989, the Judiciary noted:

The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his creditors, stopping all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.

Generally when there is a foreclosure pending against a debtor in bankruptcy, the Court will require payment of post-petition obligations (assessment fees or mortgage payments).  If the debtor files under Chapter 11 of the Bankruptcy Code (reorganization), creditors (including the Association and/or the Lender) are prohibited from taking any action to collect past-due amounts.  However, these creditors may file a Motion for Relief from Stay in the event the debtor fails to keep ongoing obligations current.  While the automatic stay is in effect, the Association cannot take further action to collect any past due assessments or charges.  It cannot collect rent directly from the tenant (even if the governing documents provide that type of relief) and any rent collected may be deemed to be property of the bankruptcy estate.  Violations of the automatic stay are not taken lightly by bankruptcy judges.

Some communities have amended their governing documents to include an automatic “assignment of rent” when an owner falls into delinquency status.  The communities that are most successful not only amend the governing documents, but likewise require (through amendment or as part of the approval procedures) a tri-party lease addendum that includes this assignment.  The tri-party lease addendum creates a contractual relationship between the owner, the tenant and the association which is helpful in the event assessment payments from the owner fall behind schedule.  This document generally gives additional rights to the Association in the event the owner fails to control the conduct of the tenant (or the tenant’s guests) as well.

All of these actions must be considered in light of the existing governing documents and in conjunction with analysis of the laws governing debt collection (especially when bankruptcy is involved).

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  • Jack McManus
    August 24, 2009

    Hi.. How about assuming the following:
    In a Homeowners Association,
    – A bank has commenced foreclosure proceedings against a unit Owner but not taken possession of the unit
    – The HOA has liened the Owner for past due assessments
    -The Owner has NOT declared bankruptcy
    -The Owner has a renter in the unit & is collecting rent
    Can the association file its own foreclosure and apply for a rent receivership? Who handles the receivership and how and when are the rental receipts dispursed and to who?

  • Lisa Magill
    August 25, 2009

    As previously reported, Section 720.3085, Florida Statutes contains language that is similar to the condominium act. It says that homeowners’ associations are entitled to the appointment of a receiver to collect rent if the parcel is rented or leased while the Association pursues foreclosure. The expenses of the receiver are borne by the party that loses the foreclosure action.
    The receiver is appointed by the Court. Any association contemplating this type of action should ask the Court to appoint someone that is familiar with this process.

  • Tenant
    November 2, 2009

    In the instance mentioned (foreclosure proceedings, condo lien, owner bankruptcy, rent collection), can the Condo Assocation evict the tenants because of the owners past due fees that are now part of the bankruptcy?

  • Cathy Graves
    November 9, 2009

    May a Condominium Association utilize the referenced tri-party lease addendum without amending their governing documents- whereby the existing documents do not have any provisions for “rent assignments” and prohibit transferring the responsiblity for association assetsments to the Tenant?

  • Tenant
    November 18, 2009

    Does a tenant have a right to sue a Condo Assn for violating its Condominium Declaration if the violation directly and monetarily affects that tenant? Under 718.303(1), it appears only the unit owner can do so. Is there any case law that extends standing to the tenant, or is there any other applicable statute?

  • Jennifer Smith
    January 27, 2010

    I just want to ask: can an association ask a tenant, who is leasing from a condo owner whose said tenant was leasing the condo from, directly for a copy of the tenant driver license and to sign documents with the condo? So, in other words, can the condo association by pass the landlord who is the owner of the condo and ask the tenant for the tenant’s driver license and the copy of the lease, rather than asking the landlord who actually own the condo.
    Response: The answer to this question depends on the language of the governing documents of the community. All parties must sign in order to have an enforceable lease addendum – if that is the reason for the question.

  • Denise
    February 12, 2010

    The bankruptcy did not include this condo and has been discharged. The owner originally was going to keep the unit but it has since into foreclosure, what rights does the Association have as far as the tennant is concerned. She has been living in the unit for 2 years paing nothing. We have filed the necessary liens but we are in “limbo”.

  • Terri
    January 22, 2011

    Assessments not paid from dollar one 2yrs delinquent
    Maintainance Fees not paid for 2+yrs.
    Said owners are renting
    What is the recourse please?
    RESPONSE: The 2010 changes to the homeowners and condominium association acts allow the association to demand rent from the tenant when an owner is delinquent. The association can foreclose against the unit and evict a tenant that refuses to pay the rent.

  • Junior G
    August 24, 2011

    Can a Condo Association with a majority of its owners living outside of the state use Proxies to vote at the Annual Board of Directors Election? If not, how can absentee owners vote for Directors they want?
    RESPONSE: The condominium act generally prohibits the use of proxies in the election of directors. The division publishes an election procedure guide that includes the balloting requirements. Here is a link to the election brochure: http://www.myfloridalicense.com/dbpr/lsc/documents/ElectionBrochureEnglish2011.pdf