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Estoppels and Code Enforcement

Two of the foremost identifiable concerns affecting optimum management of an asset management are code enforcement matters and condominium, community or homeowner's association fees. Issues stemming from either of these can create significant financial losses and contribute to endless hours of phone calls, loss of time and delays in settlement. These are not the only areas of concern but often represent the largest degree of loss therefore prompt and accurate dissemination of this vital information are pivotal.

Identifying curative code enforcement matters:

Early identification of code enforcement matters, association estoppel information, utility account information, etc. can help minimize carrying costs and can prevent unnecessary expenses until disposition of the asset. Discovering that a property has a pending demolition order is certainly information an investor would elect to know as soon as possible. This is an extreme example but not unheard of in our experience. This information could lead an investor to investigate the possibility of another more viable means to dispose of the asset in a manner most beneficial to them.

It is common for local real estate agents retained to sell distressed properties and asset management firms to provide an initial assessment of the subject property to the extent that they are able to do so. Therein lies a potential dilemma as not all would-be problems are easily visible or detected. Despite measures taken by these entities, they do not specialize in the detailed field of property research as it pertains to unrecorded fees and assessments which may be due and owing on a property and which are otherwise not detectable through any site inspection they may conduct. These parties already provide a highly specialized service themselves.

An inherent risk associated with distressed properties is that the property may have already fallen or may fall into a state of disrepair and association fees may continue to mount due to the lack of adequate communication between the association and the party responsible for bringing and keeping current payment of same. These risks open the door for a host of issues which range from typical to unexpected. Costly legal action on the part of an association or possible utility meter tampering, the latter of which may not otherwise be uncovered by a real estate agent whose primary function is to sell the property, or by an asset manager busy overseeing the many other intricate aspects of the asset.

Consider the code enforcement hot spots. Our services provide a means by which to ascertain if the property is in compliance with local ordinances at the time of acquisition and/or that the property continues to be in compliance with locale ordinances based on ongoing research. This research is conducted directly with the applicable code enforcement agency.

A code enforcement citation can turn into a expensive fine averaging hundreds of dollars a day if not paid, regardless of any actions taken to correct the violation itself. Simply paying a code enforcement fine is insufficient to clear the case in most instances if correction measures have not already been made beforehand and often you cannot mitigate any fees unless the property has been brought into compliance. Collectively millions of dollars of fines and fees are potentially easily averted in code enforcement related issues alone if this information were available, thoroughly assessed and addressed expeditiously.

Association estoppel information:

Retrieving correct and complete association estoppel information as soon as possible can facilitate expeditious payment for any sums deemed to be due thereby preventing additional costs stemming from late fees or attorney fees and avoiding future liens and legal fees. Obtaining this information may not be quite as simple as one might imagine.

Associations sharing budgets bicker over financial strains and enter into litigation when one association may no longer be able to meet their obligation to pay another association. Fees previously budgeted together can be improperly split without proper notice.

Distress properties, generally vacant, often fall victim to violations of association by- laws. This includes things such as shrubs needing to be trimmed or front doors repainted. Notices of same do not always fall into the right hands and daily fines can accumulate. If the association has turned the property over to an attorney for collection of delinquent fees, obtaining attorney payoff information alone does not ensure that the attorney will disclose any violation information thereby creating exposure to further financial losses.

Regrettably not all associations are well managed and not all of them adhere to the letter of the law. Some are insolvent and tied up in bankruptcy; in extreme cases they cannot provide ledgers or any computerized records. They are sometimes underfunded, overwhelmed, and lacking an adequate understanding of their legal obligations. This is a small but telling glance into the realm of association estoppel research.

Bringing current outstanding association fees as quickly as possible can prevent an eager association attorney from legal action which may result in prohibitive costs or worse, as we have witnessed. In the most extreme cases an association can foreclose on the investor due to lack of aggressive and effective means to identify and bring current association payments for the asset. This promises to continue to be an aggressive and growing trend. Taking back a property through foreclosure only to fail to address the obligation to pay any association fees in the most expeditious manner results in severe financial losses for the investors and servicers and can be avoided.