Zombies are fictional undead beings created from the reanimation of a human corpse popular in movies and on television. Unfortunately, many community associations are now finding themselves dealing with “zombie” homes. A zombie home is created by a lender which begins but does not complete a foreclosure combined with an owner walking away from the property. Lenders often delay their own foreclosure proceedings to avoid taking title to the property for as long as possible and the obligation to pay assessments that comes along with it. They look to profit at the association’s expense.
Zombie homes reduce the values of neighboring properties and keep community associations from collecting badly needed assessments which will likely never be recouped. Zombie properties can remain in limbo for months or even years. In some instances zombie properties have been taken over by squatters, causing security and other problems for associations and their residents.
To combat these problems, community associations can file their own foreclosure on zombie properties. Such a lawsuit requires the association to invest both time and money which, again, may never be recovered. Association foreclosures often result in the association itself obtaining title to the unit since purchasers generally are unwilling to buy units with little if any equity subject to a first mortgage, although third parties sometimes bid at public sales thereby allowing the association to recoup some money. Associations that take title to a zombie property can cover assessments owed and sometimes make a small profit by renting a property if it is in good shape and located in a positive rental market. If not, merely owning a unit does not generally benefit the association as the association becomes responsible for maintaining the zombie home, while losing out on assessments.
In addition to a foreclosure action, community associations now have the means to file a complaint regarding zombie homes. The Consumer Financial Protection Bureau (CFPB) was created in 2010 to, among other things, protect homeowners from dealing with unscrupulous mortgage servicers. The Dodd-Frank Act directed the CFPB to facilitate the coordinated collection, monitoring and response to consumer complaints regarding certain financial products and services. Consumers may file a complaint—including complaints about zombie homes in their community—through CFBP’s online portal http://www.consumerfinance.gov/complaint/. This gives community association members an opportunity to complain about unreasonable delays brought about by financial institutions.
Further instructions on how to file a complaint with the CFPD are available on the Community Associations Institute’s website,https://www.caionline.org/Advocacy/MortgageMatters/CFPBcomplaint/Pages/Howtofile.aspx.
The Community Associations Institute is tracking the complaint data to assist it in advocacy efforts before Congress.
Jed Frankel is a partner with Eisinger, Brown, Lewis, Frankel & Chaiet in Hollywood. He focuses his practice on community association and dispute resolution. Contact him at email@example.com.