Article Courtesy of The Real Deal
By Katherine Kallergis
May 14, 2020
With the first days of May ticking by, homeowners and
condo associations are keeping a close eye on monthly collections.
They’re preparing for nonpayment, as owners and renters struggle to pay
More than 1 million people in Florida have filed for unemployment,
according to figures released by the state. The tourism, hospitality and
retail sectors have been devastated. And for those newly unemployed,
monthly or quarterly condo or homeowners maintenance fees may not make
it to the top of their list of priorities. Depending on how long the
economic impacts of the pandemic linger, some buildings and housing
communities will suffer as a result.
South Florida real estate attorney Dennis Eisinger is already hearing
from associations that are trying to figure out how to move forward. He
describes it as a tricky balancing act between funding operational costs
and having compassion for unit owners who may be struggling financially.
Eisinger, whose firm Eisinger, Brown, Lewis, Frankel & Chaiet, P.A.
represents about 700 associations in Florida, estimates that between 60
percent to 65 percent of homeowners statewide live in communities run by
associations. If homeowners fall behind on their mortgages or
association fees, they can be foreclosed on by their lender or
association. In most cases, homeowners and condo associations are second
in line to lenders, so overdue fees would likely remain unpaid if a
lender forecloses on a property.
“We anticipate we’re going to start seeing the impact come June, July
and beyond,” Eisinger said. “We may be in for some very difficult times
over the next couple of months, potentially [the next] couple of years.”
It doesn’t help that most associations aren’t eligible for the Small
Business Administration’s Paycheck Protection Program (PPP) loan,
Eisinger said, calling that a “big mistake” on the part of the SBA.
During the last recession, many associations got into “deep financial
trouble,” forcing them to cut back on amenities or pass special
assessments to continue operating, said Sebastian Jaramillo, a partner
with Miami-based law firm Wolfe Pincavage.
But Jaramillo doesn’t believe that it will be as bad this time around,
because associations haven’t been letting unit owners fall behind on
payments, and owners have more equity in their homes.
“A lot of people had financed 100, 110 percent of their home, so when
the market dipped they were under water,” Jaramillo said, referring to
the previous recession.
Attempting foreclosure is also an expensive process that some
associations will want to avoid, and the temporary freeze on
foreclosures and evictions until mid-May is expected to create a backlog
Plus, “the end game – foreclosure – may not necessarily be in the best
interest of the condo [association],” said Siegfried Rivera attorney
A number of associations he represents have been proactive about
reducing operating expenses wherever possible. Blanch said associations
are “anticipating they are going to have difficulty collecting payments
from owners who have lost their jobs, who have been furloughed, or been
Some are offering payment plans or waiving late fees to owners who have
requested that, similar to what happened in 2008 and 2009. But the true
impact has yet to be seen, he said. Payment plans could consist of
lowering the portion of fees an owner has to pay for the first three
months, and then spreading the rest out over the remaining set period of
Down the line, to continue operating, associations may have to vote to
use their reserves or may have to impose special assessments. And they
operate on tight budgets already, Blanch said. Using reserves to cover
basic operations should be viewed as a last resort, he said.
“April may not be the first month we start feeling the strain. It may
happen in May, June, July,” he added. “It’s almost like you can see the
tide, right? The effects are going to be somewhat delayed.”
The more expensive, Class A communities will likely feel the impact
later on, experts say. Paul Kaplan, managing partner and co-founder of
KW Property Management & Consulting, said that for the 90,000 units that
his company manages in Florida, collections have fallen just 3 percent
so far in May, compared to the same period last year.
Blanch and others predict the damage won’t be as severe as in the last
“You’re going to have a lot more people that they may fight a little
harder to keep their homes,” Blanch said. “Before, people were more
willing to walk away from an investment.”