New state law might help reclaim fees

The state has enacted a new law that attempts to help community associations collect past due bills, but not everyone is convinced the new measures will work.

Article Courtesy of The Miami Herald

By Donna Gehrke-White

Published August 21, 2010

Many community associations throughout Broward have been struggling during the recession after foreclosed homes were left vacant and some financially strapped property owners quit paying their maintenance fees.

Now the state has stepped in to try to help; a new law allows both homeowner's and condominium associations to deny nonpayers access to clubhouses, pools, fitness rooms and other shared community property. It also stipulates that foreclosing banks now will have to pay a year's worth of unpaid maintenance bills or 1 percent of the original mortgage debt.

Even more controversial, the state allows associations to demand renters pay the community fees that their landlords aren't paying, an attorney told a packed Pembroke Pines town hall meeting on Aug. 11.

Homeowner's and condo associations now can directly bill renters for maintenance fees, with the property owner getting any rent money left over, said Lisa Magill, a partner in the law firm Becker & Poliakoff, which represents many community associations throughout South Florida .

One tenant recently balked "but ended up paying,'' said Florence Small of Century Village.

That's because nonpaying tenants can be forced to move. The associations ``have direct eviction rights,'' Magill said. "You have to think about it but if they [renters] don't comply, you may evict.

"There were a lot of significant changes in the law after the dramatic downturn in the real estate market when people stopped paying their bills,'' Magill said.

"We are pleased with the new laws as it has given greater opportunities to associations to be more in control of their own destinies,'' said Luis Paredes, president of the United Condominium Association of Hallandale Beach.

Those changes -- and even more -- are needed, said those at the Pembroke Pines meeting.

Associations have struggled, they said, to provide services while some owners ignored or even refused to pay delinquent community association bills that have grown to thousands of dollars. Banks are to blame too, many said.

"The banks are not doing what they are supposed to do,'' said Roberta Nazinovitz of Century Village .

"This is a very big issue,'' said Magill, who added she has heard complaints that banks have sat too long on foreclosed property, which has denied communities a chance to collect maintenance fees from new owners.


The new law, which took effect last month, doesn't cover all the problems but it is a step in the right direction, Magill said.

Some grass-roots activists cautioned that the new law will not help associations collect that much money. Banks escaped from paying much of anything, and some parts of the law won't actually bring in cash, said Jan Bergemann, founder and president of the grass-roots nonprofit Cyber Citizens for Justice. Take the new law that bans delinquent owners from using community facilities.

"Sounds great but doesn't put any money in the coffers,'' Bergemann said.

However, the new law in some cases will require foreclosing banks to pay more in unpaid condo fees. The old law had a cap of foreclosing mortgage holders paying either six months of "unpaid common expenses and regular periodic assessments'' or 1 percent of the original mortgage, whichever was the lesser amount.

Now the new law requires banks to pay the lesser of up to a full year's unpaid condominium fees or the 1 percent of the original mortgage. Homeowners associations already had the one-year rule.

For condo associations, that extra six months can mean hundreds or even thousands of dollars more, Magill said.

For example, a foreclosed home with an original $250,000 mortgage has accumulated two years of unpaid fees of $200 a month -- or $4,800. The new law would require the lender to pay the association $2,400 for a year in back fees instead of the old law's $1,200.

Questions remain over how many homes the new law covers. "For example, does the law only affect first mortgages entered into after July 1, 2010, or does it affect existing first mortgages as well?'' a Becker & Poliakoff newsletter questions.

Magill said the new law is also unclear or vague in other areas, such as what unpaid fees are included in the new provision that allows associations to demand tenants pay for their past-due landlords.

The new law only says the tenants will pay for "future monetary obligations.'' If "past-due obligations'' are not included, then it will "blunt the effectiveness of the new law and is not consistent with the intent of the new law,'' according to the Becker & Poliakoff newsletter.

The law firm's Community Association Leadership Lobby tracks new laws and lets more than 4,000 community associations know about the changes.


The new law is clear on some aspects. Associations can't demand more than what the renter is currently paying for rent while property owners must give tenants rent credit for what they pay the association.

The law also clears the way for condo associations to suspend the voting rights of owners who are more than 90 days delinquent in paying. Those who haven't paid bills in the last three months can't serve on their condo or homeowners association boards.

They also be denied access to "common facilities or any other association property.'' When people pay, they can vote again and have access to tennis courts, gyms, pools, clubhouses and other community property.

However, the new law says that associations can't deny the nonpayers parking spaces, utility services or "common elements that must be used to access the unit.''

Nancy Marquez, president of the French Villas Condominium Association in Pembroke Pines , said nonpaying owners have been a problem that has required association leaders to come up with their own creative solutions before the new law took effect.

She said one owner in her complex owed the association more than $10,000; yet, he was collecting rent from a tenant.

So the community's attorney suggested that the association require all owners who rent units out to sign an agreement that allows the association to collect unpaid fees from the renter.

The association did and began collecting fees from the delinquent landlord's renter. The landlord protested, Marquez said, “but the attorney showed he had signed and so we got the money.''

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