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Article
Courtesy of The Sun Sentinel
By Dennis Eisinger
Published
June 23, 2011
The meltdown in residential real estate had disastrous consequences for condominium and homeowners associations. Laid-off owners and over-extended investors who no longer paid their mortgages also stopped paying their maintenance assessments. That income - essential to the upkeep of residential communities and the preservation of home values - is now flowing faster, thanks to legislative action.
As the mortgage foreclosure rate soared towards 50 percent in some communities between 2007 and 2009, the income of the associations plunged. Some homeowner and condominium owners fell one or two years behind in their assessments as lenders were slow to foreclose and associations lacked meaningful power to collect fees.
As a result, many associations had difficulty paying for basic services such as utilities and landscaping, and for essentials such as casualty and windstorm insurance. Associations faced tough questions: Should we dip into reserves, raise association fees, or cut back on spending?
Florida lawmakers have sought to address this fiscal crisis with legislation approved in both the 2010 and 2011 sessions. To better understand the strengths or weaknesses of these measures, and their impact on associations and their members, let's analyze each set, starting with the 2010 laws.
The 2010 measures
The Florida Legislature last year approved laws that assisted community associations in their efforts to collect delinquent maintenance assessments. While not a complete success, many associations have improved their finances and have become better able to care for their communities.
The laws gave associations an important power to collect rents directly from tenants within their communities whose unit owners were delinquent in the payment of their maintenance assessments or any other monetary obligations to the association.
Before the new laws took effect, many owners pocketed rents on their units but did not pay maintenance assessments. Now, an association equipped with a legal order can evict a renter occupying a unit in arrears if that tenant fails to pay rent directly to the association. The association can also seek unpaid rents from the renter in court. The laws prohibit the owner-landlord from terminating the tenant's lease or unleashing other retribution when the tenant directly pays the association.
It is our experience that 70 percent to 75 percent of tenants obey a legal mandate to pay rent to the association. Because of this new legal pressure, community associations have been able to collect a vast amount of delinquent assessments.
The laws have also helped associations collect past-due assessments when the lender that holds the first mortgage on a house or condominium unit completes a mortgage foreclosure. The old law allowed condominium associations to collect the lower of 1 percent of the mortgage amount or six months of past-due assessments. The new law has raised that figure to 12 months. As a result of this change, many associations have undoubtedly collected additional monies (though it must be noted that, even prior to last year, homeowner associations were entitled to collect up to 12 months of prior assessments).
The new laws have not had the desired effect, in many cases, in successfully cutting off use of common areas and community services. Owners who are more than 90 days delinquent in the payment of their assessments (and their guests) can be barred from using amenities such as pools and spas, but in practice, that has not worked particularly well. According to one published report, a community that installed a fingerprint reader at an entrance gate to its pool area received complaints that the procedure invaded people's privacy. In another community, residents physically confronted each other over who could or could not enter a common area pool.
Additionally, the laws were not clear on whether an association could cut off cable TV service paid for through the association. The laws did not state whether this utility was an essential service like water and electricity. A bill passed in the latest legislative session makes it clear, for homeowner communities, that cable TV is not a service that can be shut off. However, no corresponding law was adopted for condominiums.
Some of the efforts by the 2010 Florida Legislature have helped the collection of delinquent assessments for community associations throughout the state. Let's hope that additional legislative and judicial efforts this year will also have a positive effect on collections and, ultimately, improved finances for the nearly 55,000 community associations within our state.
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