HELP!!! I just found out that my 12 unit condo building has lien

Pompano Beach, FL · Member since 2017 · 13 posts · 2 votes

A 12 unit condo buidling i own has City of CS liens over $6,000,000, the liens are on the Hoa, not on the individual units. This is about 2x as much as the entire buidling is worth.

I did try to negotiate with the city but since those liens have been there for so long, they would not budge. This is in the city of Coral springs.

it is now going to be close to impossible to sell these units. Any ideas? Would love to exit this investment while market is hot.

Gio

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Matt Devincenzo

Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes

Quote from @Giovanni Cortes:

I bought these 10 years ago and did sign a hold harmless agreement. So I was privy to this but didn't take care of these issues at that time and never imagined they would blow up as they did.

Haha next time I'd suggest you lead with this info. Your original post seemed as though you stumbled on the information when you went to sell, not like you knowingly took on a problem but never worked to address it. My advice still stands, but man you really have to just start working on fixing the problem not pretending it will somehow go away.

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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
4y
Obvious answer - get competent legal help.
If you own all 12 units, why does the HOA still exist? Theoretically, I would think you could dissolve the HOA and sell the property as an apartment complex. That said, a lawyer would have to tell you if that would fully resolve the issue.
6 Reply
Giovanni Cortes
OP
Pompano Beach, FL · Member since 2017 · 13 posts · 2 votes
4y
Thank you Greg, I did get a lawyer to negotiate those liens but didn't discuss with him converting to a multifamily buidling.
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Austin Johnson
Investor · Jefferson City, MO · Member since 2020 · 190 posts · 178 votes
4y
so you have a $3m, 12 unit condo building with $6m in liens from the city? is this correct?
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Giovanni Cortes
OP
Pompano Beach, FL · Member since 2017 · 13 posts · 2 votes
4y
Yes Austin that us 100% correct but since it's accruing interest daily , that number could be more.
0 Reply
Austin Johnson
Investor · Jefferson City, MO · Member since 2020 · 190 posts · 178 votes
4y
Did someone drop the ball during due diligence? seems like this should have come up during the property screening phase or at least mentioned by the title company. weird.
my biggest hiccup is if you try to sell it as is, you have to disclose the $6m in liens. That's going to be a rough sell I would imagine.
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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
4y
Quote from @Austin Johnson:

Did someone drop the ball during due diligence? seems like this should have come up during the property screening phase or at least mentioned by the title company. weird.
my biggest hiccup is if you try to sell it as is, you have to disclose the $6m in liens. That's going to be a rough sell I would imagine.
Agreed. There is the possibility that your Title Insurance could cover any losses you incur.
4 Reply
Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
4y
The first question is what are the liens for, and the second is can/is that issue corrected? Usually after you correct the violation then you have a much stronger position to go ask for a lien reduction. Especially if the majority is not actual costs the City incurred but simply stated fees and interest. If the City itself doesn't seem inclined to provide a reduction, then you can pursue Councilman etc who can work on the issue from their end. They have the ability to pass an ordinance if necessary to reduce the obligation...so it becomes one of showing how exorbitant the issue has become and appealing to common sense.
My experience with FL Cities is in the three I worked in they all adjusted the liens after the fact. Two had published guidance for fee reductions etc, the third did not but once the issue was corrected and a reasonable appeal was made they provided a reduced fee. The ones I was involved in were no more than 10% of the balance or the actual City costs incurred whichever was greater. So if this became $600K then you're at least in a saleable position.
Another option would be to take the HOA into BK. That will create a judicial proceeding where the judge can restructure and reorganize the debt effectively accomplishing the same thing as above. It may be worth talking to a BK atty and seeing what their thoughts on the issue are.
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Giovanni Cortes
OP
Pompano Beach, FL · Member since 2017 · 13 posts · 2 votes
4y
I bought these 10 years ago and did sign a hold harmless agreement. So I was privy to this but didn't take care of these issues at that time and never imagined they would blow up as they did.
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John Clark
Member since 2018 · 1k+ posts · 1k+ votes
4y
Quote from @Giovanni Cortes:

I bought these 10 years ago and did sign a hold harmless agreement. So I was privy to this but didn't take care of these issues at that time and never imagined they would blow up as they did.

When has a government ever ignored a source of funds? You knew there was a lien and you bought anyway?

And I notice you've ignored telling us what the liens are for.

I certainly hope the building is in the name of a corporation and not you personally, because what the city will do is go after you personally for what it can get, then maybe go after the building.

Am I right in assuming that there's no mortgage? I can't imagine a bank would have lent money on a liened property.
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Austin Johnson
Investor · Jefferson City, MO · Member since 2020 · 190 posts · 178 votes
4y
Quote from @Giovanni Cortes:

I bought these 10 years ago and did sign a hold harmless agreement. So I was privy to this but didn't take care of these issues at that time and never imagined they would blow up as they did.

So. You bought it, knowing full well there were liens. let 10 years go by and now you're stressed because those liens have had 10 years to grow? that's a pickle....
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Giovanni Cortes
OP
Pompano Beach, FL · Member since 2017 · 13 posts · 2 votes
4y
The reason for lien was
1) dead grass
2) rear canal area needed to be trimmed of all trees
3) parking lot unpaved
4) garbage enclosure unpermitted
yes, I know they were there and did ignore them till now and there is no mortgage on them. They are not owned in a corporation.
1 Reply
Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
4y
Quote from @Giovanni Cortes:

I bought these 10 years ago and did sign a hold harmless agreement. So I was privy to this but didn't take care of these issues at that time and never imagined they would blow up as they did.

Haha next time I'd suggest you lead with this info. Your original post seemed as though you stumbled on the information when you went to sell, not like you knowingly took on a problem but never worked to address it. My advice still stands, but man you really have to just start working on fixing the problem not pretending it will somehow go away.
8 Reply
Austin Johnson
Investor · Jefferson City, MO · Member since 2020 · 190 posts · 178 votes
4y
Quote from @Giovanni Cortes:

The reason for lien was
1) dead grass
2) rear canal area needed to be trimmed of all trees
3) parking lot unpaved
4) garbage enclosure unpermitted
yes, I know they were there and did ignore them till now and there is no mortgage on them. They are not owned in a corporation.
ok, so it's not as bad as I had imagined. Have you taken care of all the above issues?
0 Reply
Giovanni Cortes
OP
Pompano Beach, FL · Member since 2017 · 13 posts · 2 votes
4y
Hello, Yes all issues have been resolved but the liens and fines remain. The buidling just passed the 40 year inspection so right now buidling is 100% fine. Just these old fines amd liens.
thanks again
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Giovanni Cortes
OP
Pompano Beach, FL · Member since 2017 · 13 posts · 2 votes
4y
Thank you Matt, I appreciate your indepth response
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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
4y
So dead grass, trees needing trimming, an unpaved driveway and an unpermitted “garbage enclosure” results in $50,000 PER month in fines? That seems like something you could try to fight as unreasonable. Though they would have a good argument that you could have spent $200 10 years ago on landscaping and tearing down the garbage enclosure.

Obviously at $50k per month you should be willing to pay at least $100k to a lawyer or a local “fixer” to try to get out from under this as it’s only 2 months of fines at the current rate. Try the Hoa bankruptcy (how much are the dues? Try an assessment?) Honestly they probably should have taken the building 5 years ago when the amount due exceeded the building’s value. They aren’t being very good stewards of public money.
3 Reply
Giovanni Cortes
OP
Pompano Beach, FL · Member since 2017 · 13 posts · 2 votes
4y
The reason the buidling hasn't foreclosed the buidling is that there are residents with homestead exemption that live there.
0 Reply
Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
4y
That’s probably good. That means you don’t own the condos as renters couldn’t get a homestead exemption. They own the condos so they owe the $6mil. Just have the Hoa apply an assessment. But, that also means I’m not sure what you own, the hallways? The land? Might be time to just walk away.
According to the state of Florida: Who qualifies for homestead in Florida?"); Homestead Exemption: Every person who has legal or equitable title to real property in the State of Florida and who resides thereon and in good faith makes it his or her permanent home is eligible to receive a homestead exemption of up to $50,000. The first $25,000 applies to all property taxes.
2 Reply
Peter Walther
Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
4y
Quote from @Bill B.:

So dead grass, trees needing trimming, an unpaved driveway and an unpermitted “garbage enclosure” results in $50,000 PER month in fines? That seems like something you could try to fight as unreasonable. Though they would have a good argument that you could have spent $200 10 years ago on landscaping and tearing down the garbage enclosure.

Obviously at $50k per month you should be willing to pay at least $100k to a lawyer or a local “fixer” to try to get out from under this as it’s only 2 months of fines at the current rate. Try the Hoa bankruptcy (how much are the dues? Try an assessment?) Honestly they probably should have taken the building 5 years ago when the amount due exceeded the building’s value. They aren’t being very good stewards of public money.

I think you'll find the original liens may have provided that if the repairs were not completed (and the city notified of their completion) by a date certain, fines at the rate of say $100 per day would begin to accrue so if ten years go by I can see how the total could seem to be exorbitant ($100 X 365 days X 10 years X 10 liens = 3.65MM + interest). Also, the city may be figuring since the owner waited until the property was being sold to fix the problem why should they reduce the amount due. As far as being poor stewards of public money, the city spent no money and is "earning" $100 per day (in my example) as a return. That seems to be a pretty good investment.
2 Reply
Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
4y
@Peter Walther

They WERE earning a great return, UNTIL 5 years ago when the fines exceeded the value of the building. From that day on they started earning zero. If the building is worth $3 million and they are owed $6million, they ain’t getting $6million. They coulda foreclosed 5 years ago when they were owed $3million, sold for $3million and got $3million.

If they can’t force the foreclosure they will never get any money, because who’s going to sell an income producing property for zero dollars? If they can force it, they should have 5 years ago. Do you think $1 is being spent on maintenance?

Either way, it turns out OP either doesn’t own the building (since the people who live in the condos have homesteaded the property so they are owners and not renters), they can be held responsible for the money owed. Or maybe, and this is a big maybe, the story was made up as it went away as soon as the homesteaded issue was mentioned. And he went on to start a new thread 2 hours later not mentioning the homesteading.
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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
4y
In all honesty here, you really need to pony up for an attorney. You are going to need some competent legal help to get this resolved and it's going to cost you some money. You can get a few ideas here but you need someone with good knowledge of Florida's real estate law to get involved on your behalf.
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John Clark
Member since 2018 · 1k+ posts · 1k+ votes
4y
Quote from @Bill B.:

@Peter Walther

They WERE earning a great return, UNTIL 5 years ago when the fines exceeded the value of the building. From that day on they started earning zero. If the building is worth $3 million and they are owed $6million, they ain’t getting $6million. They coulda foreclosed 5 years ago when they were owed $3million, sold for $3million and got $3million.
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Wrong. You said "[a] 12 unit condo buidling i own has City of CS liens over $6,000,000." So you own the building (your homesteading statement later on confuses me, but that doesn't detract from YOUR claim of total ownership. That means the city could foreclose, get $3 million from the sale of the property, and then go after YOU PERSONALLY for the deficiency of $3 million. That's why I asked if you had the building in your own name or if it was in the name of a corporation. So the city is still getting a great return due to its ability to go after you personally for the deficiency.

Oh, and probably tag you for its attorney's fees and costs.

So based on what you yourself posted, you are toast.

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William Costello
Indianapolis, IN · Member since 2021 · 193 posts · 150 votes
4y
@Giovanni Cortes I would suggest getting legal help reaching out to an attorney and have them review the contracts and documents. Good luck!
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Peter Walther
Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
4y
Quote from @Bill B.:

@Peter Walther

They WERE earning a great return, UNTIL 5 years ago when the fines exceeded the value of the building. From that day on they started earning zero. If the building is worth $3 million and they are owed $6million, they ain’t getting $6million. They coulda foreclosed 5 years ago when they were owed $3million, sold for $3million and got $3million.

If they can’t force the foreclosure they will never get any money, because who’s going to sell an income producing property for zero dollars? If they can force it, they should have 5 years ago. Do you think $1 is being spent on maintenance?

Either way, it turns out OP either doesn’t own the building (since the people who live in the condos have homesteaded the property so they are owners and not renters), they can be held responsible for the money owed. Or maybe, and this is a big maybe, the story was made up as it went away as soon as the homesteaded issue was mentioned. And he went on to start a new thread 2 hours later not mentioning the homesteading.

Since the city is not out of pocket any money the ROI when receiving $1 is the same as receiving $6mm, infinite, no difference.
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