Article
Courtesy of The Sun Sentinel
By Daniel
Vasquez
Published March 5, 2009
Althea Prescott and her husband, Louis, struggle to
pay their family bills, which include increasingly higher maintenance fees
for their Arbor Keys Condominium unit in Tamarac.
When a condo owner stops
paying fees, the law requires the rest of the association
to make up the difference to keep the association solvent.
"However, this may not solve the problem if there are
a lot of nonpaying units," said Alexis Antonacci, a
spokeswoman for the Department of Business and
Professional Regulation.
In that case, an association may file for bankruptcy; or
its creditors may take it to bankruptcy. Once there, an
association could emerge with its debts settled. Or the
association could be terminated and net assets distributed
to the owners. Whether owners get to keep their units
depends on the plan of termination, which they must
approve and which a judge must sign off on. |
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Althea
Prescott and her husband pay their bills on time. But as fewer
owners keep up with maintenance fees, the Prescotts and others must
pick up the slack.
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While
nobody knows exactly how many of the state's 21,833 condo associations are
on the brink of disaster, "we're talking about a crisis, the biggest
in the state after education and health care," said Rep. Julio
Robaina, R-Miami.
A survey released last week by the Community Association Leadership Lobby
showed about 65 percent of the 1,589 property owners who responded
reported that they are affected. Based on numerous public hearings he
participated in last year, Robaina said he thinks at least 40 percent of
associations statewide are struggling.
"My
office sometimes receives as many as 40 calls an hour from owners,
association directors and others reeling from this," Robaina said.
Because he and others expect the problem to worsen, state legislators are
seeking remedies during the session now under way.
Robaina said he has heard of owners who rent their units but don't pay
their association. To fix that, House Bill 1397 would allow rent money to
first be used to pay an owner's outstanding association debts. If a
landlord does not cooperate, Robaina said, the association would have a
right to evict the tenant.
The bill also attempts to ensure banks more fairly compensate
associations. Most times, owners will not pay maintenance once the
foreclosure process begins, and it can take 18 months or longer to
complete.
Lenders now must pay associations only the lesser of six months of fees or
1 percent of the original mortgage amount. Robaina wants lenders to be on
the hook for missed payments for up to two years. To sweeten the deal for
banks, he proposes providing discounts when they agree to pay past
payments early in the process.
Sen. Mike Fasano, R-New Port Richey, and Rep. Jim Frishe, R-St.
Petersburg, co-sponsored a bill that would force lenders to pay the lesser
of 12 months of past due fees or 20 percent of the mortgage amount.
Lenders would owe more if they didn't pay within 30 days of taking
possession of title.
Regardless of the size of a community, even a few delinquent owners can
devastate an association.
Joyce Sasser learned last week that three of the 20 buildings in her West
Palm Beach condo community face special assessments, not including hers.
"In our building, we are concerned that there are units facing
foreclosure," said Sasser, who lives in Whitehall Condominiums of the
Palm Beach Lakes.
Her association has posted warnings that it may cut water and cable
services to those behind in payments.
Vince Rossi, president of Whitehall, said the assessments will help cover
the maintenance fees and legal costs of four foreclosed units.
"We put those up knowing there would be questions about the legality
for us to cut those services," said Whitehall board president Vince
Rossi. "But it is also just one more way we are trying to protect the
good guys who are paying from those who still enjoy our services but are
not paying."
Rossi advocates compassionate aggressiveness. His board allows custom
payment plans, but is tough on those with poor excuses.
"There is one kind of person in arrears who says, 'Screw it, I ain't
going to pay.' And that is not fair to other people who do pay and have to
struggle more. So for the first time, we have people who could lose their
home even though they pay their mortgage but just can't afford to pay
their neighbors' bills."
To limit fee increases, Arbor Keys in Tamarac cut security, landscaping
and valet garbage pickup, and it's working out a plan to pay the city a
$190,000 delinquent water bill.
Like so many caught in this morass, the Prescotts feel trapped.
"Throughout time, we have seen a decline in our complex while at the
same time we have to pay more to live here," said Althea Prescott.
"It's hard to keep up, but we can't sell, we can't stop paying. What
can we do?"
What to do — and
not do
By
Daniel Vasquez
Published
March 5, 2009
Do
not stop paying just because you think everyone else is. You are
responsible for your payments and could face liens and foreclosure if you
stop paying.
Be fair to everyone involved. As much it can, the association
should work with delinquent owners to get them on a payment plan and back
to being up-to-date as soon as possible. On the other hand, being too
lenient can be a burden and source of tension for those who are paying.
Communicate. Associations should strive to keep members informed
on a regular basis. Let them know exactly what measures are being taken to
collect payments from those in arrears, how many neighbors are delinquent
and what services and amenities are being cut back, if any.
Make sure owners know exactly what will happen and when. For
instance, some associations send a letter of warning exactly 15 days after
a missed payment and automatically file a lien exactly 45 days after the
due date — no exceptions.
If
you are in the market to buy a condo, ask the owner to share
information about the association's finances, including records of
accounts receivable and reserves. Also, make sure to ask how many owners
are delinquent or in foreclosure.
Daniel
Vasquez can be reached at:
[email protected]
or at 954-356-4558 (Broward) or 561-243-6686 (Palm
Beach County). His condo column runs every Wednesday in the Local
section and at www.sunsentinel.com/condos.
You also can read his consumer column every Monday in Your Money and at www.sunsentinel.com/vasquez
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