Florida's delinquent condo owners

force neighbors to pay more

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.

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. 

   

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

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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