“People are very frustrated that they didn’t get any help,” said Bill Raphan, a spokesman for the state Condominium Ombudsman’s office. “It’s in a crisis stage right now because so many condos can’t pay their bills. Associations are left with 30%-60% delinquencies in maintenance fees, and they can’t make up the money.” With no relief in sight, said Cynthia Spall, a shareholder in Gunster Yoakley’s Real Estate Practice who represents condo associations, “we’re back to square one."

“What that generally breaks down to is if someone is not paying their association fees, they’re probably looking at foreclosure or default under some loan instrument as well.

So the issue becomes what is happening in foreclosure on that loan, and where the association is in priority of those owed.  Associations had hoped to push through the 2009 Legislature measures that would have forced lenders to move ahead with foreclosures.

“It’s not news that lenders are delaying filing their actions and foreclosing,” Ms. Spall said, “because they don’t want to be responsible for the carrying costs on the units.” Associations could file a motion to try to get the bank either to proceed or to pay assessments, she said, but the chances of success are iffy, and the cost of filing the motion could be well over $1,000.

Associations can file their own foreclosure action, Ms. Spall said, but the cost for that runs $3,000-$5,000 and it could take a least a year.

Filing a money judgment against the delinquent owner in also very costly, she said, and if that owner files bankruptcy, the association can’t collect.

“So there are no good legal options,” she said.

But even in today’s environment, there are things an association can do, said Ken Arnold, CEO of Miami-based Association Financial Services, which manages accounts receivables for condo associations and homeowners associations. They involve ramping up financial management controls and taking a more professional approach, particularly in the area of accounts receivables – Association Financial’s niche.

“We increased monthly cash receipts for one association by $178,000 within 2 months,” Mr.

Arnold said. “Their total monthly fees came to $73,000.

And that’s far from our only success story.” One of his company’s strategies is to set up a master rental receivership program. Traditionally, he said, a receiver can be appointed to accept rent on a unit instead of a delinquent owner so that association fees and other debts can be extracted.

“The problem is, to bring in a receiver for one unit is expensive,” he said. “We bring in a master receiver for the entire association so that every unit falling under the foreclosure clause can automatically be included.” Other services include offering interest-free accounts-receivable lines of credit to advance money to associations to cover their delinquencies. “We are the only ones in the entire state offering that,” Mr. Arnold said.

Also important, he said, is education.

“A lot of board members don’t understand their role is setting policy, not management,” he said, “and property management is often abused because they are too close to the members. Many associations don’t even charge interest and penalties on delinquent payments. There is no disciplined approach. So they can benefit by outsourcing financial management.” But inevitably, the burden for shortfalls settles on the developer or unit owners, “depending on how many units are sold,” Ms. Spall said, “it could be both."

“A bulk sale of empty units could be a good thing for them, because the buyer would then have to start paying association fees right away.” 

If that doesn’t happen, Mr. Raphan said, “in some condos everybody may have to pack up and leave.”