Article Courtesy of The Palm Beach Post

By JEFF OSTROWSKI

Published April 17, 2008

At the CitySide townhouses in West Palm Beach, landscapers, bug men and security guards are showing up less often.

At Paradise Cove in West Palm Beach, the water in the hot tub isn't so hot anymore.

And at Carriage Pointe in Boynton Beach, homeowners are paying a combined $60,000 assessment to cover dues their neighbors aren't paying.

The culprit in all three cases is the housing bust. With large numbers of homeowners unable to pay their monthly fees, condominium and homeowners associations are being forced to skimp on maintenance and security - and increase dues.

Fully half of 487 Florida associations surveyed recently by Hollywood law firm Becker & Poliakoff say they're facing financial shortfalls because of the foreclosure crisis. After all, homeowners who aren't making their mortgage payments aren't paying their association dues either.

And about one-fifth say they'll increase fees or impose special assessments to make up for the shortfall, according to Becker & Poliakoff's survey. That means homeowners who are still paying their bills are being hit with higher fees to cover landscaping, repairs and maintenance, said Ken Direktor, an attorney with the firm in West Palm Beach.

"All these losses find their way back to all the rest of the owners in the community," Direktor said.

At Carriage Pointe, one out of every three homeowners aren't paying their bills, which led to that community's hefty $60,000 assessment. Boca Raton property manager Norman Silverstein, head of A&N Management and Consulting, runs Carriage Pointe, and he said foreclosures are hitting hard at many of the 30 communities he operates.

"I'm in a state of panic," Silverstein said. "How can I operate an association with one-third of the funds not coming in? It's a serious problem that's going to explode in the next few months."

CitySide in West Palm Beach has escaped higher association dues, but manager Jeffrey Estis said that's because he saw foreclosures coming and decided to rein in spending.

CitySide reduced the hours that security guards are at the property, shopped around for a cheaper insurance premium and cut pest control service from monthly to quarterly.

At Paradise Cove in West Palm Beach, about 30 percent of the 317 unit owners are late in paying association fees.

"There's more and more people not paying their dues," said Doug Schulte, president of Paradise Cove's condo association. "And of course that creates problems for the association, because we need that money to pay our bills."

To avoid increasing fees, Paradise Cove has cut back on its lawn service. The condo association also turned down the thermometer at the community Jacuzzi - the heating bill was totaling $300 a month, Schulte said.

The financial squeeze is tightest at communities that were completed within the past few years. After all, those are the neighborhoods most likely to be filled with speculators and others who bought at the peak of the market.

The flood of foreclosures is also hurting associations in an unexpected way: Lenders, faced with soaring numbers of defaulted loans, have been slow to seize properties. In the past, banks would foreclose quickly and take over dues payments. Now, Direktor and others say, lenders are taking months to foreclose and start picking up the bill for dues.

Many older communities have escaped the problems caused by deadbeat homeowners, said Steve Inglis, head of Bristol Management Services. Only one of the 160 associations managed by Bristol has been forced to impose a special assessment, he said.

Still, Bristol has gotten more aggressive about collecting dues.

"We're tightening down our collection procedure - about as tight as it can get," Inglis said. "It used to be we'd do a 30-day dunning letter, then a 45-day dunning later, then a 60-day dunning letter. Now we're going 15, 30, attorney. We need to know if they're foreclosing."

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