A lender's foreclosure action can create challenges for community associations seeking to collect past-due charges. Because a first mortgage lender can generally eliminate the association's lien and/or ownership, as well as certain pre-title charges, some associations cease collection when a lender files a foreclosure action. Such measures impress upon owners that there are no consequences to overdue charges, and increase the financial burden on paying owners. It also eliminates the opportunity to be paid.
We recommend that counsel answer and monitor any lender's foreclosure action in the community. Answering provides weight to the association's arguments (effectively, but not legally) when it seeks to advance the lender's case. In receiving case filings, the association can also avoid waiting to collect, unaware that the lender has foreclosed. The risks of such a lack of knowledge also include accounting issues and ineffectiveness of legal notices (sent to the wrong owner now that the lender has foreclosed). Monitoring a case also means the association knows when the case stalls, and can take action to advance it, presuming the association was named as a party (if the lender did not name the association, the purchaser at the lender's foreclosure sale owes all past-due charges, but the association may not participate in the case unless it first "intervenes").
As a party to the lender's case, an association's counsel may attend every hearing and present the association's position. Likewise, at any stage in the lender's case, the association can schedule a "case management conference," requesting that the judge force the lender forward. Florida law also provides for a streamlined process for seeking an "order to show cause" why a foreclosure judgment should not be entered and a sale set, in specific circumstances, which expedites the completion of the case. If all parties have answered or been defaulted, the association can notify the court that the case is ready for trial (resulting in a trial order shortly after), or file a motion stating that based on all pleadings filed in the case, the lender is entitled to its judgment. Finally, if the lender obtained a judgment but the foreclosure sale was canceled, the Association can simply reset it.
If the association desires that rather than foreclosing, the lender's case should be dismissed (i.e., where the association has taken title and is renting the property, or where the owner is paying over an extended payment plan), the association can take actions requiring the lender to "prove up" its ability to foreclose through discovery requests directed at the lender's entitlement to foreclose, filing opposition to the lender's legally or factually insufficient/improper pleadings, and attending hearings to contest the lender's arguments. If the lender's delay has lasted at least 10 months, the association can also move to dismiss the case for lack of prosecution.