The Real Estate and Business Blog

Q:  I purchased a Florida property at a foreclosure auction where the condominium association (not the lender) had foreclosed on its lien for monthly maintenance.  I am aware that that I purchased the property subject to the first mortgage, but am I responsible for paying the mortgage?  What about the condominium maintenance and property taxes?  Finally, am I able to rent the unit out to a tenant?

A: According to the scenario you describe, the mortgage lien is superior to your ownership interest and therefore you are responsible for paying off that lien if you want to keep the property.  Your responsibility, however, is limited to that ownership interest.  In other words, your failure to satisfy the mortgage by not making payments or paying it off entirely will not affect your credit (obviously – you did not sign the note) and the mortgage lender will not be able to pursue any deficiencies against you – but you will eventually lose your ownership interest in the property.

Property taxes, or ad valorem taxes, are very similar to mortgage liens in that your interest is inferior to any tax lien as well.  Your failure to pay property taxes will not render you liable for the tax bill in the future either except to the extent that you may lose your ownership interest.  Tax Certificates are sold and the purchaser can foreclosure on the property through a tax deed sale (similar to a mortgage foreclosure, but a lot easier and faster).

As the new property owner, you are liable for the condominium maintenance.  By failing to pay your maintenance, the condo association has the right to collect maintenance from you.  Although they rarely pursue personal money judgments, they can foreclosure on the property (isn’t this the way you ended up with the property in the first place?).  Also be aware that recent Florida legislation (effective as of July 1, 2010), condominium associations have the right to collect rent from tenants occupying units that are behind on monthly maintenance payments.  This is done through a simple and inexpensive process provided by this new law.  Arguably, they can even find a tenant and rent out your unit if it is empty.

Your right to collect (and keep) rental income, however, will greatly depend on the rights of the lender per the terms of the loan agreement.  Some mortgage agreements assign rental income to the lenders or allow them to place the property in receivership.  In order for the lender to exercise these rights, though, they must do so through the courts.  And they often do not.  Also bear in mind that, just as described above, the condominium association can always step in to collect the rent if the maintenance is not being paid.

As always, every situation is different.  It is highly recommended that anyone in a similar situation consult with an experienced real estate attorney to learn more about your legal rights and duties.

This past week, one of my clients successfully closed on an SBA guaranteed loan for the purchase of real estate intended for his business.  Although a bit more expensive to close and, at times, stressful for the borrower to gain approval, the benefits were  plentiful.

Primarily, real estate SBA loans allow business owners to maintain liquidity and working capital by providing for low down payments and low monthly payments with flexible terms.  The SBA also provides cash loans and equipment loans – seven years and up to fifteen years, respectively

It was announced that as of  February 22, 2010, the SBA had reactivated Recovery Act loan applications through its queue system.   Their queue system provides options to lenders and small business borrowers when the funds under the Act for fee relief and higher guarantees have been exhausted, by allowing funding from cancellations of other loan applications or Congress comes through with more money to fund the program.

The Act eliminates the upfront guarantee fee for loans with maturities greater than one year depending on fund availablity.  Under the Act, however, higher SBA guarantees for lenders under the 7(a) program expired.

The US Small Business Administration, however, has indicated that the end of the acceptance of applications under the queue programs draws near.  Small business owners should take advantage of these programs while they last.  For more information, contact your banker or visit the US Small Business Administration website for more information on this program.