Blanket Receivership was first introduced to Florida in May 2009 as a legal method for Associations (Condominiums, Cooperatives and Homeowner’s Associations) to pursue rental income from both leased and vacant units that are delinquent in paying monthly Association dues. The tenants of such units are required by Court Order to pay their rent directly to a Court Appointed Blanket Receiver. The Blanket Receiver accounts for each unit’s delinquent balance, including late fees, interest, legal fees, and receivership costs, and makes monthly disbursements of the net collected rents to the Association.
Recent Blanket Receivership Court Orders have expanded the role of the Blanket Receiver by permitting him to take possession of delinquent units, complete renovations and lease them out. As the Blanket Receiver, JKM will fund these renovations on the front end at no out of pocket cost to the Association. JKM believes that the key to a successful Blanket Receivership program and therefore a financially healthy Association is the generation of income through the expedient lease up of all abandoned units.
JKM has worked with several attorneys to develop detailed Blanket Receivership Court Orders that specify the duties of the Blanket Receiver and clarify his authority. Unit occupants who ignore and/or refuse to cooperate with the Blanket Receiver can be served to appear in Court. In addition, the Blanket Receiver can obtain Writs of Possession from the Court for non-compliant occupants and/or complete evictions.
The Blanket Receiver is responsible for meticulous record keeping and is typically required to submit quarterly reports to the Court for review. In addition, JKM believes in full transparency and takes these reporting requirements a step further by hiring a third-party accounting firm to complete a yearly audit for each Blanket Receivership property.
As a Blanket Receiver, JKM provides assistance to those parties who are directly responsible for the financial health of an Association, including the Board of Directors, Management Company and Association Counsel. It is important to note that a Blanket Receiver does not function as a Receiver over the operations of the Association. In addition, a Blanket Receiver is typically not an attorney. To the contrary, JKM works in conjunction with the Board of Directors, Management Company and Association Counsel in order to generate income to compensate all parties with outstanding balances.
In order to initiate the appointment of a Blanket Receiver, the Association must first file a petition with the Circuit Court that requests such an appointment. The Court then schedules a hearing date for the petition approximately 3 to 6 weeks after the date of the initial filing. At the hearing, the presiding Judge will review the Blanket Receivership Court Order that is drafted by Association Counsel and hear evidence that substantiates the financial difficulties facing the Association. The Judge may ask questions about the Order, suggest modifications to the language of the Order or simply approve it. Once the Order is approved by the Judge and is certified by the Court, it becomes effective immediately.
Once an Order is in effect, JKM will proceed with administration of the Order in accordance with our proprietary Blanket Receivership Policies and Procedures Manual. JKM has developed this procedures manual in order to assure consistency and fairness of administration to all receivership units. This manual includes step-by-step procedures and standard forms for the notification of unit occupants and owners; record keeping; unit-specific accounting policies and procedures; Court reports; renovation and lease-up of units; and evictions.
Blanket Receivership offers those responsible for the financial health of an Association a means for significantly increasing monthly cash flow in the short term and reducing unresolved debt over the long term. The most significant benefits of this program include the following:
- Limited Up-Front Cost To The Association. Typically the only out of pocket expense to the Association in order to pursue Blanket Receivership is a $500.00 filing fee for Receivership Counsel. All future costs of the Blanket Receivership, including legal fees, are paid out of collected rents. All delinquent Association fees, late fees and interest are paid in full through Blanket Receivership.
- Reduction in Legal Expenses. The Blanket Receivership process serves as an efficient and effective alternative to pursuing individual unit foreclosure actions. The typical legal cost of each foreclosure is approxiamtely $3,000.00 and the timeframe for completion can surpass a year. Blanket Receivership avoids these legal costs and begins to generate income immediately.
- No Special Treatment for Lender Owned Delinquent Units. If a lender owned unit is delinquent, then it is subject to the Blanket Receivership Court Order. If the unit is vacant, the Blanket Receiver will take possession and lease the unit. All outstanding Association balances will be paid off by the collected rent. If a Lender wishes to sell the property, he must work with the Blanket Receiver in order to pay off all costs in full and obtain clear title.
- No Special Deals To Clear Delinquent Balances. Some collections companies and/or collections attorneys will accept less than what is owed on a delinquent account in order to settle. With Blanket Receivership, settlements are not accepted because the Blanket Receiver retains leagl control of the unit.
- Blanket Receivership Court Orders Are Ongoing. A Blanket Receivership Court Order applies to all units within an Association as long as the Order remains in effect. The Court Order will specify conditions that must be met in order for a unit to become a Receivership Unit. Some units may enter Receivership on day one and eventually be released once all financial obligations are met. Other units may enter Receivership 6 months after approval of the Court Order. A number of units will never enter Receivership.
- Unit By Unit Accounting. JKM performs unit specific accounting. This means that each unit is responsible for its own delinquencies and specific costs.
- Court Supervision. A Blanket Receiver typically submits quarterly reports to the Court regarding the status of the Blanket Receivership. JKM takes this requirement a step further and contracts for independent third-party audits of each property per calendar year. JKM also retains liability insurance and provides a bond for each receivership property.
- Collection of Information on Unit Occupants. As a Blanket Receiver, JKM collects personal information on the occupants of each Receivership unit. Many unit owners bypass Association approvals or registration of unit tenants. As a result, the Association may have no record of current unit occupants, pets and vehicles.
- Eviction. Although JKM attempts to work with all existing tenants of leased Receivership units, at times problematic or non-compliant tenants must be removed. JKM will obtain Writs of Possession and/or process evictions in order to ensure the collection of rents and support a safe, non-confrontational living environment.
Promenade Shores at Doral is a 240-unit condominium community located in Doral, Florida which entered Blanket Receivership with JKM in February 2010. Of the 240 units, approximately 1/3 were 60 or more days past due in paying their monthly assessments. The total estimated delinquency for the community as a whole stood at approximately $250,000.00.
Since February 2010, JKM pursued the collection of rents from leased units and initiated a renovation and lease-up program for abandoned units. As of July 2013, approximately 30 units have been renovated and leased out by JKM. JKM has remitted in excess of $555,000.00 to the Association for delinquent accounts. JKM’s monthly distributions to the Association now account for between 25%-35% of total monthly collections.
With JKM’s distributions, the Association has had the funding available to re-build reserves and complete numerous capital improvement projects including repaving, landscaping, and signage repair.
Cedar Woods Homes is a 165-unit condominium community located in Homestead, Florida which entered Blanket Receivership with JKM in November 2010. Of the 165 units, approximately 70% were 60 or more days past due in making monthly Association payments. The total estimated delinquency for the community as a whole stood at approximately $500,000.00.
Since November 2010, JKM has pursued the collection of rents from leased units and initiated a renovation and lease-up program for abandoned units. As of July 2013, approximately 40 units have been renovated and leased out. JKM has remitted in excess of $400,000.00 to the Association for delinquent accounts. JKM’s monthly distributions currently account for 40% of total monthly collections with some months remitting up to 99% of monthly collections.
With JKM’s distributions, the Association has caught up on past-due bills, re-instated flood insurance coverages and completed deferred maintenance on landscaping, a fountain, security gates, and the clubhouse/pool area.