Lenders foreclosing on domestic, business or mixed-use residential or commercial properties that involve covenants, deed limitations, declarations, owners associations, and developer/declarant rights ought to understand particular concerns that might emerge during the course of the foreclosure action that might have a substantial influence on the eventual total expense of the foreclosure, the lender’s ability to market the residential or commercial property post-foreclosure, and various operational issues that connect to these kinds of jobs. Similar issues occur when taking title by means of a deed-in-lieu of foreclosure. No 2 distressed projects are precisely alike and there are myriad issues and traps that can be avoided with mindful and early planning. The following is a fundamental checklist to alert you to issues that should be addressed before and during the pendency of the foreclosure or prior to acquisition by means of a deed-in-lieu.

Kind of residential or commercial property being foreclosed

- Residential, industrial, or mixed-use

• A group of lots or units
• A single lot or system
• Developed, partly established, or undeveloped
  
  Obtain and review the foreclosure title dedication, a U.C.C. search, and a municipal lien search in specific counties to identify the applicability of the following issues:
  
  - Homeowner association statement of covenants
• Declaration of condominium
• Declarations and deed limitations relating to the general 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 local liens (may not appear in the real estate records).
• Recorded mortgage pre-dates recordation of formation files and certain modifications to the condo statutes.
• Recorded joinder and authorization of mortgagee to formation files.
• 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 might take precedence over provisions in the deed constraints, but that is not always the case (might rely on the compound of the specific issue and the existence of statutes at the time the deed restrictions were recorded).
• Does the Declaration reference Ch. 720, Florida Statutes? Yes. Declaration recorded prior to October 1, 2007? Review mortgage foreclosure arrangement to determine how the declaration addresses evaluation liability. No. Review the mortgage foreclosure provision in the declaration because of the statutory restriction on liability (12 months of typical cost assessments or one percent of the initial mortgage financial obligation) per § 720.3085( 2 )( c), Fla.
  
  Stat. Condominiums
  Statutes. Condominiums are produced pursuant to and are governed by Chapter 718, Florida Statutes. Accordingly, the statute might be offered more deference than the declaration of condo. Declaration of Condominium - If taped prior to July 2010, § 718.116, Fla. Stat. provides that assessment liability was restricted to the lower of as much as 6 months of unsettled typical expense assessments or one percent of the original mortgage financial obligation.
• If recorded after July 2010, § 718.116, Fla. Stat. provides a constraint on evaluation liability to the lesser of as much as 12 months of overdue common expenditure assessments or one percent of the original mortgage financial obligation.
• Review declaration of condo for a provision that immediately updates the requirements of § 718.116, Fla.
  
  Stat. -Are leases present?- Tenants paying rent or in-kind?
• Are renters present on leas and charges?
• Do industrial renters have appropriate licenses (i.e. alcohol licenses).
• Are tenants complying with use constraint requirements (i.e. signs).
• Are tenants abiding by city government policies (i.e. parking).
• Exist empty units that need to be remodelled or repaired?
• Are tenants making payments to an owners’ association (since the property manager owner has failed to pay outstanding evaluations)?
  
  Developer/Declarant Rights
  
  - Even if a task is completed, a bulk purchaser/successor developer will likely require some developer/declarant rights in order to develop the residential or commercial property, operate a sales center, develop model homes, set up sales signs, and so on. It is important to examine which rights are required and then consult relating to the finest method to get such rights while restricting liability for predecessor acts.
• Developer/Declarant rights are found in a writing that is recorded and outlines the rights, responsibilities and responsibilities offered to a developer/declarant pursuant to statutes and deed restrictions/declarations. Condominium Developer Rights - Assess whether it makes good sense to get developer rights pursuant to the Distressed Condominium Relief Act to get rights required for sales and marketing while limiting liability for prior developer acts.
• Determine whether acquisition of condominium systems wholesale should be as a bulk assignee or bulk buyer ( § 718.703, Fla. Stat. ).- A celebration taking title to condo units upon foreclosure or through deed-in-lieu that has a proper task of developer/declarant rights and is classified as a bulk assignee might: - Control the advancement until such time as it offers the residential or commercial property to another buyer.
• Amend to correct existing deficiencies in the declaration of condo (depending upon the language of the file).
• Control the books and records of the development and make certain they remain in order.
• Appoint a residential or commercial property management company of its option, relying on any existing management agreement.
• Enhance the sales capacity of the residential or commercial property by changing the governing documents (relying on the language of the file)
  
  - Can market and offer or rent units, preserve design systems, and have indications on the typical elements.
• Triggers turnover of control of the association (if turnover has not formerly happened) but is not accountable for turnover expenses.
• Is not accountable for claims against the designer for breach of service warranty, building and construction flaws, or failure to properly run the condo association
  
  - Successor developer will likely choose a specific project of developer/declarant rights rather than depending on general assignment.
• A lender with advancement rights might be exempt from neighborhood lot evaluations (in lieu of assessments it might need to fund budget plan shortages), however that depends on the timing of recording of the mortgage and the deed restrictions and the particular language contained in the deed constraints.
• Assignment of developer rights need to be in recordable type
  
  - Assignment of developer rights may require resignation of old board of directors and appointment of a brand-new board.
• The new board needs to satisfy to get rid of old officers and choose new ones.
• Budget and evaluation collection concerns.
• Correction of insufficient or malfunctioning documents.
• Develop owners’ association shift plan in advance - statutes govern shift in both condos ( § 718.301, Fla. Stat. )and homeowners associations ( § 720.307, Fla. Stat.
  
  ) Issues During Pendency of Foreclosure Action
  
  - A receivership can restrict exposure for the foreclosing lending institution by dealing with issue issues prior to the transfer of title, such as: - Environmental problems.
• Chinese drywall.
• Completion of preliminary building.
• Making significant repairs.
• Security/vandalism.
• Marketing and sales.
• Managing renters.
• Compliance with governmental regulations.
• Compliance with developmental plan.
• Other various problems
  
  - Continue marketing of units for sale to avoid automatic turnover.
• Funding the association.
• Advance funding certificates (a kind of secured lending to the association so bank financing does not get included in the uncollectible shortage).
• Receivership certificates.
• Continuation of deficit funding (funding only association deficits rather than moneying association based on a budget plan).
• Audit association’s operating, working capital and reserve accounts.
• Maintains main records
  
  Post-Foreclosure
  
  - Monitor timelines for: - Assessments - Payment of assessments due as of date of .
• Payment of continuous assessments
  
  Other Special Development Issues
  
  - Marinas.
• Partial termination of condo.
• Condo hotels.
• Mixed use jobs.
• Community development districts or special taxing districts.
• Mobile home parks.
• Timeshares and fractional interests.
• Infrastructure building and construction.
• Submerged state land leases must be examined for purposes of moving together with the residential or commercial property.
• Livestock.
• Mitigation and preservation locations.
• Water management allows and responsibilities.
• Reserved organization interests in covenants. For example: - Right to offer parking spaces.
• Right to manage cable television expenses
  
  This list is basic in nature and does not cover all possible issues 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 project 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 job with required rights for sales and operation of the task.