The Wall Street Journal is reporting on a new Florida law that allows condominium associations to essentially garnish the rent paid by tenants of a delinquent owner, without going through the process of obtaining a judgment against the owner and a writ of garnishment for the tenant. The Florida law only permits the association to demand money from the tenant – it does not allow the association to evict a delinquent owner and find tenants of its own.
When an owner fails to pay assessments, the burden falls on his neighbors who often have to pay higher assessments to make up the difference. Unlike Florida, Colorado associations are not permitted to demand money from a tenant, absent a court order and a writ of garnishment.
I work for homeowners associations, and live in an association myself, but remain a firm believer in individual property rights. The new Florida law seems to raise due process concerns. It gives associations the right to take away an owner’s property and income stream – and perhaps ability to pay a mortgage – without requiring anything more than a letter. Associations are private entities and thus are not fully subject to many Constitutional provisions, but Colorado has a strong policy of requiring due process before Associations impose monetary penalties.
The Florida law establishes a policy favoring associations and communities over lenders and individuals by allowing associations to divert the income stream that could go to pay a mortgage. While I encourage activities that aid associations in mitigating damages caused by non-paying owners, it’s possible that a law like this could negatively impact the ability of individuals to obtain loans for rental properties.
With the stories we hear of associations gone wild, or Boards imposing fines or foreclosing on properties out of some personal vendetta, it will be interesting to see how well this law stands up in practice and in the courts.