I have sat through countless Board meetings where Board members and owners alike bemoan the condition of bank-owned properties in the community. Often, weeds have overtaken the yard, the grass is dead, and the home is in need of a new coat of paint. The question that always comes up is “What can be done about this eyesore?” An association’s remedies are limited to the authority granted to the association in its governing documents. While many associations use those remedies to the best of their abilities, Boards should not overlook local municipal codes, such as codes regarding weed control and maintenance.
If the home at issue is also a foreclosure of an FHA-approved mortgage, HUD has given the FHA-approved mortgagee an additional nudge to clean the property up. Pursuant to Mortgagee Letters 2010-18 and 2012-12, issued by HUD, the lender must not neglect the property, and before the property is conveyed to HUD, the lender must ensure that the property has been maintained and cleaned to a certain extent, which includes maintaining the lawn and complying with any state or local laws, such as zoning or code ordinances, during the time that it holds title to the property. If the lender receives a code violation from the applicable municipality for weed control, for example, the lender should cure the violation. Upon doing so, the lender may be reimbursed by HUD for the expenses incurred by the lender to do so, as long as the lender follows certain requirements and guidelines as established by HUD in Mortgagee Letter 2010-18.
Given that above, if faced with a run-down, bank-owned property, especially one that was financed with an FHA-insured loan, the association should not hesitate to call the local municipality and report any code violations in relation to the maintenance of the property. It won’t cost the association anything, and could very well spark some action from the bank.