Article Courtesy of The Orlando Sentinel

An Opinion By Aaron Gordon

Published March 10, 2016

It was John Kenneth Galbraith who once said, "Nothing is so admirable in politics as a short memory." It appears as though our Legislature is suffering from a mild case of amnesia when it comes to the recovery of the real estate industry.

House Bill 1357, sponsored by Rep. Mike LaRosa, R-Polk County, is making its rounds in Tallahassee, both as a stand-alone bill and in the form of various floor amendments. In fact, there was an effort to amend a portion of House Bill 1357 on to another bill awaiting a final vote on the House calendar as recently as last Friday morning. However, that amendment was withdrawn on procedural grounds.

While LaRosa appears well intentioned in his aim to protect his constituency from a perceived wrong, the application of his bill will severely limit a community association's ability to govern and collect past due assessments and ultimately harm those whom he is intending to help.

House Bill 1357 would result in placing new restrictions on an association's ability to collect past-due assessments, a situation from which many community associations are just starting to recover after the great real estate downturn of the last decade. Many advances have been made during recent years, resulting in the ability of an association to responsibly and efficiently pursue delinquent unit owners. If this bill were to pass, it would make the collection process more cumbersome and time-consuming and risk budgets not being met, large special assessments and ultimately, a decline in property values.

It's hard enough for volunteer boards to collect monthly assessments. Why make it harder?

Let's take a look at some of the bill's proposed regulations that could hamper an association's ability to govern and collect efficiently:

The bill proposes a formal collection policy be adopted and circulated to owners. This is a redundant requirement. For associations to collect their assessments the authority to do so must be contained in the association's governing documents, which all unit owners are subject to.

The bill will require the association to offer delinquent owners a six-month payment plan. Associations operate on an annual budget. If an association chooses to assess monthly, it has already given a unit owner a 12-month payment plan. If the owner didn't pay, why should the association be required to offer another payment plan?

In a truly confusing part of the bill text, it would require an association to give a 30-day notice to a delinquent homeowner if the association intends to use a third-party collection vendor. Why would we put limits on an association for retaining a vendor as important as a collection agency or law firm?

The bill would require at least six months of assessments be delinquent before foreclosure or transfer-of-lien proceedings can commence. Then a vote by the board of directors is required to start the process. This would let a delinquent owner thumb his nose at the board for six months at a time before the board could realistically do anything of consequence to the owner.

The bill would also require the largest associations to maintain websites with a wide range of digital records that are accessible to all owners. This would require additional expenses to make sure that associations are in compliance.

With real estate prices increasing and vibrant sales in some markets the norm, it seems that for many the crisis in the not-too-distant past is a vague memory. One of the major causes of the crash was the inability of associations to collect monthly assessment, which are the lifeblood of communities throughout Florida.

Without these needed funds, associations could not implement budgeted maintenance and repairs such as landscaping, painting, roofing, paving and more. When that was the case, many boards went to their owners, requesting special assessments to cover the shortfalls in the interests of maintaining property values.

House Bill 1357 will further hamper these efforts to collect funds from owners who legally agreed to pay when they purchased a home in that community. As an industry, we have made great strides, and to limit or hamper these efforts could be damaging to what remains, a delicate recovery.

Aaron Gordon is general counsel for LM Funding America Inc., a Tampa-based specialty finance company.