Article
Courtesy of The Sun Sentinel
By Joe
Kollin
Published June 25, 2008
The souring economy has
condo and homeowner associations facing the same problem as many owners:
less money. Throughout South Florida, boards are grappling with how to
keep up property values as fewer owners pay their assessments. Although
foreclosing on a unit is one way to collect the money, the cost is high
and the homes are unlikely to sell. So boards must look for alternatives.
The most common practice is also the most unfair. Boards "overassess"
the remaining owners by 10 percent to 20 percent, said Gary Poliakoff,
whose Fort Lauderdale-based firm represents 4,300 associations in Florida.
Others are eliminating services.
"We're in the red. We cut out security because we couldn't afford it
anymore," said James Guillaume treasurer of the Sunset Lakes condo in
Lauderdale Lakes, where an estimated 30 to 35 percent of the community's
223 units are in foreclosure. "We owe the garbage company and other
vendors and we've got city commissioners trying to help us."
"There should be a government subsidy to help us sustain ourselves
now. We could pay it back when we get the money," he said.
At Canyon Isles, a homeowner association community in Boynton Beach, about
7 percent of the 500 houses are in foreclosure and another 7 or 8 percent
owe the association, said president Eric Koeppel.
"It boggles my mind what's going on with homeowner
associations," he said.
Owners took control of the association from the developer only 18 months
ago, so the board hasn't started new services and is cutting expenses
where it can.
The problem is worse in newer communities, where owners used creative
financing such as subprime mortgages, said Kent Burkman, a Realtor with
Prudential Florida WCI Realty in the Boynton Beach and Boca Raton area.
Older associations also have the advantage of having had more time to
build cushions into their budgets.
Attorney Matt Zifrony said in some associations, up to 50 percent of
owners are in foreclosure. His firm, Tripp Scott in Fort Lauderdale,
represents about 80 associations and he is president of the 2,900-unit
Savanna homeowners association in Weston.
"What you don't want to do is turn to residents who are paying and
say, 'Pay more,' but that's what you have to do," he said. "So
you hold back on the hours that community areas like the pool are open and
defer discretionary spending such as pool heaters and resurfacing tennis
courts."
Poliakoff said "tens of thousands" of liens and foreclosures are
being processed by his firm and many involve "communities of
high-end, multi-million dollar homes."
"I know of very few communities not suffering economic strain,"
he said.
A Hallandale Beach-based company is offering one solution. It advances 27
South Florida associations their money every month in return for a percent
of any money they collect.
"We inject a shot in the arm so associations are able to pay for the
services they must provide," said Alex Moskovitz, chief financial
officer for Association Financial Services.
If associations failed to provide promised services, more owners would
quit paying, he said. "They say, 'If 20 percent won't pay, why should
I?' And that makes matters worse."
Zifrony said the problem of owners not paying assessments may be
stabilizing.
"I'm seeing signs of it bottoming out," he said. "I'm not
getting as many cases coming into legal [for collection] now as six months
ago."
The reason he gives: Owners with problems have "already come out of
the woodwork and there don't seem to be many more people left joining that
segment."
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