A South Florida condo association serving a 55-and-older community has filed for bankruptcy.

Palm Greens at Villa Del Ray Recreation Condominium Association, a Delray Beach-based association managing the recreational facilities and amenities for the community, filed for Chapter 11 reorganization on Jan. 28 in the U.S. Bankruptcy Court for the Southern District of Florida.

It reported $43.7 million in liabilities.

Lennar Homes is the largest creditor with a $25 million claim.

This bankruptcy follows a series of legal disputes between Lennar and the Palm Greens at Villa Del Ray Recreation Condominium Association over alleged breaches of agreements tied to managing and forming the community’s shared amenities, with each side filing lawsuits in April 2025 in separate Florida counties.

Lennar said in a statement to Realtor.com®, "Lennar has fulfilled its obligations under the development agreement and will continue to work with all parties to do so. Last week, we opened a brand-new resort-style clubhouse and pool, which Lennar constructed and is available to all residents. We remain committed to completing all amenities for the enjoyment of the entire community."

Lennar's statement went on to say, "The recreation association’s bankruptcy relates to its management of its affairs and is in part due to its filing of multiple lawsuits against multiple parties. In its litigation against Lennar, the vast majority of claims were dismissed by the Court with prejudice in Lennar’s favor.”

The second largest creditor named in the bankruptcy filing is the Number 2 Condo Association, which is owed $18.5 million.

It's labeled "Number 2" because Palm Greens at Villa Del Ray has two distinct condominium associations within the same larger community, and each one is responsible for its own group of residential units and governing documents.

The official reasons behind the bankruptcy have not yet been released.

Realtor.com reached out to Tate M. Russack, the attorney representing the condo association, but did not hear back.

These types of bankruptcy filings are not unusual.

"We are seeing a definite uptick in condos filing for bankruptcy in Florida," Chad D. Cummings of Cummings & Cummings Law in Florida tells Realtor.com. "There can be many factors in play, some of which relate to mismanagement."

What is Chapter 11?

A Chapter 11 filing enables an HOA to keep running while it restructures its financial obligations under federal court supervision. Day-to-day operations continue, including collecting assessments, enforcing covenants, and contracting for services.

The intent is to stabilize finances, not shut down the community. A Chapter 11 plan can include negotiating claims, restructuring existing loans, extending payment timelines, or using special assessments to support repayment.

What happens when a condo association files bankruptcy?

According to Cummings, a Florida condo association bankruptcy filing triggers an "automatic stay," so most lawsuits and collection actions against the association pause.

"But it does not pause the need to pay for insurance, utilities, and basic operations," he says, "The association’s bankruptcy does not wipe out your monthly dues or a properly adopted special assessment. Residents still owe those."

If a resident does not pay up, Cummings says the association can still record and enforce its statutory lien, subject to the bankruptcy court’s process.

A condo association bankruptcy can also lead to uncomfortable consequences for residents.

"Services get cut, vendors stop showing up, repairs stall, insurance gets harder and more expensive—or, in many cases, impossible to get at all—and boards get aggressive on collections," says Cummings. "Emotions are usually running high, as the bankruptcy is often a symptom of earlier financial problems where board members did not take action or made mistakes."

After a condo association files for Chapter 11, HOA dues and assessments may increase as part of the association’s court-approved repayment plan.

"In many cases, the association is allowed by the bankruptcy court to pay debts over a longer period of time, essentially changing the terms of the original loan or other obligation, which can result in higher dues," explains Cummings.

In addition, a condo association bankruptcy can have a negative effect on current and future real estate transactions, since this must be disclosed to prospective buyers.

"Lenders and buyers get skittish, so sales and refinances can fail because the condo no longer meets underwriting rules," warns Cummings. "That tanks property values for units, needless to say."

According to projections from the Realtor.com 2026 National Housing Forecast, median sales prices for existing condos across Florida's eight largest metros are projected to fall an average of 1.9% in 2026.

Realtor.com economists say Florida’s condo market appears to be softening due to several factors, including rising home insurance costs, increasing climate-related risks, and elevated HOA fees.