Interesting article on how revenues being collected by community associations are being impacted by foreclosures and high unsold inventory -- result being higher fees for fewer owners & special assessments
http://www.sun-sentinel.com/news/lo...3503719.story?page=2&coll=sfla-home-headlines
Foreclosures put added burden on association-run communities
By Joe Kollin
South Florida Sun-Sentinel
Posted January 24 2007
[FONT=Verdana,Arial, Helvetica]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."[/FONT]
[FONT=Verdana,Arial, Helvetica][/FONT]
[FONT=Verdana,Arial, Helvetica]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."
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http://www.sun-sentinel.com/news/lo...3503719.story?page=2&coll=sfla-home-headlines
Foreclosures put added burden on association-run communities
By Joe Kollin
South Florida Sun-Sentinel
Posted January 24 2007
[FONT=Verdana,Arial, Helvetica]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."[/FONT]
[FONT=Verdana,Arial, Helvetica][/FONT]
[FONT=Verdana,Arial, Helvetica]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."
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