Article Courtesy of The Palm Beach
Post
By Kimberley Miller
Published
March 22, 2011
With 50 percent of its owners owing a total of more
than a half-million dollars in overdue maintenance fees, a suburban West
Palm Beach condo association wants to seize control of delinquent units,
bypass owners when it comes to rent collection and possibly even rent
units through a third party.
The move by the Palm Beach Grande Condominium
Association is a desperation measure as coffers dwindle to amounts unable
to support the association through the end of the year, according to a
petition filed in Palm Beach County Circuit Court.
In some cases, the owner of a condo in foreclosure
is renting it out and receiving a monthly payment, but refusing to pay
association fees for water, landscaping, security, insurance and upkeep of
the fitness facilities.
Since 2007, nearly 160 of Palm Beach Grande's 304
units have faced a foreclosure filing, according to Condo Vultures, a
Miami-based consulting company.
About $675,000 is owed Palm Beach Grande's
association.
The request for a receiver says it is "unfair
that unit owners should be allowed the benefit of rental income in their
pockets when they are not meeting their monthly obligations to the
condominium association."
Past practice has been for an association to ask for
a receiver for each individual unit in default. But that was when defaults
were relatively few.
Now, faced with hundreds of delinquent units,
"blanket receiverships" are becoming more common.
Recent court decisions in Miami-Dade and Broward
counties have granted blanket receiverships, allowing a court-appointed
representative to directly collect rents to pay off maintenance fees.
While laws differ when it comes to owner-occupied,
vacant and rented condo units, some boards are even getting the power to
rent out delinquent units, effectively bypassing the owner to become
landlord.
The new legal tool appears to be moving north, with
one Palm Beach County property management company saying it expects about
five condo boards it represents to file receivership requests within the
next 30 days.
"If 50 percent of the people don't pay, the
other 50 percent pay more and it just becomes a burden," said Mark
Quinn, president of Banyan Property Management, which represents Palm
Beach Grande Condominium Association. "You end up with dues going up,
people can't pay, they go up again. Everything spirals down."
Palm Beach Grande, near Okeechobee Boulevard and
Benoist Farms Road, was an apartment complex until 2006, when it converted
to a condo.
Units were going for $165,000 to $180,000. Their
current market value, as listed by the Palm Beach County Property
Appraiser's Office, is about $50,000.
Monthly condo association fees are around $235. The
lawsuit claims about 100 of the delinquent units are not owner-occupied.
"We're collecting for the association to keep
the community in working order," said Steve Terrinoni, a broker with
Rent Florida Realty Inc., which is requesting to be the receiver for Palm
Beach Grande. "This is what it's going to take to get the
associations out of debt."
But Peter Zalewski, a principal with Condo Vultures,
said that although a receivership looks good on paper, it doesn't mean it
will work in practice.
It can be difficult, he said, to persuade a renter
to pay the receiver instead of the owner. The landlord may offer a
discount to keep the rent coming in, or play on the tenant's sympathies
with a tale of economic woe.
"The tenant gets confused as to who to
pay," Zalewski said. "They don't want that grief or headache and
at the end of the day, they don't know who to believe."
Still, John Lapolla, who recently bought five Palm
Beach Grande units at deflated prices and is renting them out, said he's
in favor of a legal order to force assessment payments when a person is
earning money from a unit.
"Every person who buys a unit should live up to
the commitments they made when they bought it," he said.
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