Defaulted Mortgages on Vacant Properties
Ideally, foreclosing a vacant property should be a simple and painless process. After all, the occupancy status indicates that the borrower has seemingly abandoned the property and would acquiesce to the foreclosure or loss mitigation options. While that may be true of the borrower, the association and the municipality may have a different view. For the associations, a vacant property is a rentable property and for the municipality, a vacant property is a revenue source. As a result, the actions by the association and the municipality may result in added expense and frustration for the mortgagee.
Access Issue. Once a tenant inspection confirms that the property is vacant, the mortgagee generally secures the property by using a lockbox. There are many benefits to securing the property which includes avoiding burglaries and squatters. However, generally, the mortgagee is not entitled to possession of the property until the Certificate of Title or foreclosure deed is issued. There has been several instances where the association foreclosed due to its lien for delinquent dues and obtained a foreclosure deed or where the borrower has executed a deed conveying the property to the association. In such instances, the association becomes the owner of the property and inherits the right to access the property. The association will forcibly remove the mortgagee’s lockbox to gain access to the property. Ultimately, the association will place its own lockbox on the property to secure it from the mortgagee and send a threatening correspondence to the mortgagee warning that there will be consequences if the association’s lockbox is removed. Because, in most instances, the mortgagee will not legally have the right to possession of the property until successful completion of the foreclosure action and issuance of the foreclosure deed, the mortgagee should refrain from removing a lockbox placed on the property by a record owner of the property.
Property Registration. Many municipalities in Florida require that mortgagees register a vacant property when pursuing a foreclosure action against the property. Generally, the property must be registered each year. To enforce the ordinance requiring registration, the municipalities usually perform inspections of the vacant properties with recorded lis pendens and verify registration. If the property was properly registered, then a notice is sent to the mortgagee the following year approximately a month before the registration renewal deadline. The notices must be taken seriously and they should be immediately provided to the foreclosure firm or the mortgagee’s property preservation department. While the property registration cost is nominal, the fines for failure to register the property by the deadline can be very harsh. The fines are generally akin to code violation fines and can be as much as $500 per day for each day that the property remains unregistered. To avoid such fines, all communication from the municipality should be forwarded to foreclosure counsel or the mortgagee’s property preservation team for immediate review.
Foreclosing a defaulted mortgage on a vacant property can be a simple and painless process even when an association forecloses first and the municipality requires registration. However, the simplicity of the process will depend upon the communication between the mortgagee and the foreclosure firm. Mortgagees should strive to communicate issues or notices to the foreclosure firm immediately, clearly, and effectively.