So You Have a Bank Owned Property, Now What?

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Resource Topic: 
FAQ
Litigation
Collections
By: Brianna L. Schaefer

With the increase in foreclosures it is more likely than not that your association has at least one property that is owned by a bank. It’s also likely that the bank isn't paying assessments.

Question: What can associations do with bank owned properties?

Answer: Bank owned properties are becoming more and more common in community associations because the rate of foreclosures is not declining and the real estate market is not moving homes quickly.  Unfortunately, given the length of time it takes for the bank to sell the property to a new owner, many of these homes are often vacant for long periods, may have yards full of weeds, maintenance issues, and assessments may not have been paid in months.

Fortunately, if your association is having problems with bank owned properties there are several good options for solving these problems. These include:

  1. Treating the bank like any other owner – don’t wait for a sale to get paid or gain compliance.  Treating a bank differently than how the association treats other owners could expose the association to a claim of non-uniform enforcement.
  2. Using liens to ensure payment of assessments and correction of covenant violations.
  3. Aggressively pursuing judicial foreclosure if the bank refuses to pay once you have completed the procedures outlined in your collection policy. Yes, the association can foreclose on a bank!

Since there is no longer a mortgage against a bank-owned property, any association lien will be in first position. And, there is substantial equity in the property. This means it is extremely likely the association will be paid quickly after a foreclosure action begins. If the owner-bank does not pay the association in full and a foreclosure sale is completed, the association would end up owning the property FREE and CLEAR! No mortgage, nothing to pay. 

Foreclosures or bank owned properties are a sharp tool in associations’ collection tool boxes and should not be overlooked. To discuss this option in more detail, contact an attorney at our firm at 303.432.9999.