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Article
Courtesy of The Sun Sentinel
By Joe
Kollin
Published
January, 2007
If
you think you're paying more to live in your condo, townhouse or gated
community, consider this: It may get worse before it gets better.
Experts fear that with homes selling slowly, owners who can no longer afford
payments may soon abandon them. If that happens, those left behind in
communities run by associations must make up the missing share of money to
maintain roofs, roads, landscaping and pools.
"We're
seeing a 100 percent increase in the number of files turned over to us [by
associations] for lien and foreclosure," said Gary Poliakoff, whose Fort
Lauderdale-based law firm, Becker & Poliakoff, represents 4,200
associations in Florida.
In Broward County, his firm has more than 900 active collection files. The
Palm Beach County office has 200 active cases, but those "communities are
more upscale so the stresses aren't as great as quickly as they are compared
to Broward, with its higher number of retirement communities," Poliakoff
said.
Robert Kaye, whose Fort Lauderdale firm represents almost 500 South Florida
associations, said the volume of foreclosures his firm is handling is up 20
percent from last year, although he declined to give specific numbers.
An association's expenses are constant, so budgets are based on the
community's number of homes and apartments.
"Other owners have to make up the shortfall because service providers
aren't going to say, `We feel sorry for you and will reduce the cost,'"
said Poliakoff.
He said a similar situation existed in the late 1970s and early 1980s and
"it took two or three years for the market to absorb all units."
Another attorney who specializes in community association law, F. Blane
Carneal, agrees.
"The instability will last two years and then straighten out," he
said. "The strong will survive, the weak will get out and more will come
in and settle down.''
Danille R. Carroll, the state's condo ombudsman, said she is concerned the
"weak" who might not survive will be older people.
"A $200 special assessment or $2,000 payment for insurance is hard to
come by when you're on a fixed income," she said.
Poliakoff estimated 40 to 50 percent of association budgets now go for
insurance premiums and most boards are not allowed to skimp on insurance.
"Look at the documents: 99 percent say full-cost replacement is
required," he said. "This creates a burden.''
It is too soon to know what impact the newly passed insurance reform will
have.
Another contributing factor to the foreclosure problem is creative financing.
"A significant number of first-time condo buyers acquired them during the
boom of the last decade by financing 90 percent or 100 percent and [using]
adjustable-rate mortgages," Poliakoff said.
Carneal explained that as interest rates rise, those buyers are "having
to refinance or get rid of their property."
But the downturn in the market has reduced the value of units, so equity isn't
what it was one or two years ago. The result is that people are falling
behind.
Kaye encourages associations to file foreclosure lawsuits as a way to deter
delinquencies.
"If they don't actively pursue through collection procedures and unit
owners see no incentive to pay, everything comes tumbling down like a house of
cards," he said. "People find a way to come up with the money to
save their homes."
Becker
& Poliakoff encourages associations to foreclose as a way to beat out
lenders. If a bank assumes title to a condo in a foreclosure, the association
likely will lose six months of maintenance, money that everyone else will have
to make up.
By beating the bank to the punch, associations can at least get some income by
renting the unit, collection foreclosure specialist Adrian Marchisio said.
Then, when the market corrects itself, the unit can be sold.
Millie Rivera, whose two-bedroom Hawaiian Gardens condo in Lauderdale Lakes
was devastated by Hurricane Wilma in 2005, still can't live in it. Yet the
56-year-old loan officer must pay the $303 a month maintenance, insurance and
all special assessments. She is living nearby with her daughter.
Although some neighbors sold their units at what she considers wholesale
prices just to be rid of them, Rivera doesn't know what she will do.
"That's the question I keep asking myself. That's why I'm so stressed
out," she said. "What about all the money I put into the place? No
way I'll walk away. I'll fight hand and tooth because all my life savings are
in there."
ISSUE OF THE DAY
Q: Please, we need help! We are practically at the wire now with condo
elections coming up in four weeks. We cannot have a new board, which may be
divisive. There are candidates running who are presently in litigation with
this board. Some current board members are seeking reelection. -- Jack
Schwartz, North Lauderdale.
A: If requested by a specific number of unit owners, state condo ombudsman
Danille R. Carroll will monitor elections. She is a state employee whose
salary is paid by condo owners. Her Broward County number is 954-202-3234,
e-mail address is [email protected] and her Web site is
www.myflorida.com/condos. Sorry, the state provides no one similar for those
of you in mandatory homeowners associations.
Every other Wednesday, Staff Writer Joe Kollin discusses issues relating to
living in communities governed by condo and homeowner associations. Please let
us know about the issues that concern you. Contact him at [email protected]
or 954-385-7913.
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