Condos on the road back

Article Courtesy of The Herald-Tribune

By Michael Pollick  

Published April 8, 2015


Being an owner at Bradenton's Garden Walk has been anything but a walk in the park since a developer converted the 174-unit apartment complex to condo ownership back in the blue-sky days of 2006.

After each unit was legally split up so it could be separately sold, buyers lined up at $145,000 to $150,000 each, often leveraged to the hilt with easy-to-get mortgage money.


But as the lenders retreated the supply of buyers dried up, too. Prices plummeted, and units had an assessed value of $22,000 each in 2008-09.

The condo association board, charged with keeping the place up, found that as prices declined, so did its ability to collect the original $200-per-month condo fee.

“We were caught in a cycle, a vicious cycle,” said Keith Montgomery, who bought a unit at the original price level of $145,000.

Montgomery watched his investment evaporate at the same time that his second-story unit began getting wet inside because of a leaky roof. He became a part of the three-member condo board out of self-defense.


As it turned out, all 29 roofs needed to be replaced, including the wooden rafters that held them up.

Keith Montgomery, treasurer for the Garden Walk Condominium Association in Bradenton, stands outside of the condo complex that was almost taken over by the state. 

Through the Great Recession, being a director of a condo or homeowners association became an unmitigated pain. You suffering the same loss of value as other owners, while soaking up complaints about your perceived inability to keep the place looking good.

“It's a pretty much thankless job,” said Don DeBat, a veteran Chicago real estate writer and co-author of the book “Escaping Condo Jail.”

“And the vast majority of board members are not trained to solve these problems.”

In Florida, burgeoning foreclosures meant unkempt houses with jungle-like lawns that threatened property values.

With condos, the situation was often more grave, because the association was trying to cover monthly expenses that typically included many more services. 

At a condo, the board is responsible for paying all the bills except those incurred within a unit's four walls.

In addition to capital expenses such as replacing roofs, that can mean paying for garbage pickup, cutting the grass, keeping the sprinklers working, chlorinating the pool and filling potholes in the parking lot. 

What is the scene like now, nearly six years after the official end to the economic downturn in June 2009?

“It remains a challenge to bring and keep owners current in the payment of their assessments to the association, and we remain busy doing that,” said attorney Dan Lobeck, whose Sarasota law firm represents many of the region's homeowner associations, including Garden Walk's. “But clearly, the crisis is past. We are not being overwhelmed with requests for collections, as we were years ago.”

New foreclosures have dropped radically, but courts are still burdened with bringing thousands of existing cases to an end.

Every time a lender filed a foreclosure, the condo or homeowners association was named as a defendant, right next to the owner who did not pay his or her bill. That in itself generated a large amount of legal expense.

“The HOA collects assessments on that property, so it has an interest in that property,” said Scott Petersen, a Sarasota attorney and HOA specialist. “Now we've got to spend legal fees.”

“I would say 2009 was absolutely, in terms of the foreclosures, the craziest,” Petersen said. “The process servers would come in with boxes.”

At the bottom in 2009, nearly half of the units at Garden Walk — 80 of 174 — were in arrears on assessments, said Montgomery, the condo association's treasurer. “It costs money to collect, and we didn't have the money,” Montgomery said.

The condo board was forced to take drastic action, raising the monthly assessment to $300 from $200, just to collect enough money to pay Lobeck so he could go after the big non-payers.

Florida, along with Nevada and California, became known during the downturn that began in 2007 as one of the states where property owners were the most underwater. That means these were the states where low-down or no-money-down mortgage loans were made at the peak of an inflated market.

For several years after that, as property values dropped, the primary way those homes could change hands was through a short sale, meaning that the lender agreed to take less than was owed at the closing.

“A majority of the sales for six, seven years were short sales,” Montgomery said.

Even now, Florida is posting the nation's third highest foreclosure rate, according to RealtyTrac, a national housing data firm.

The foreclosure rate in the Sunshine State is compounded by its proliferation of homeowner and condo associations.

“When there was nobody making offers on property, I was making five offers a day,” Willig said. “We bought in Colonial Oaks, Center Gate, the Landings and Glen Oaks.”

Now Willig says he is in the midst of a marketing makeover, which is in itself indicative of the improved tone of the resale market.

Instead of Florida Home Rescue as his primary theme, he will emphasize a new-normal name: “”

One of the houses that put him in the black was a foreclosure on Meandering Way in the Lakewood Ranch subdivision of Summerfield.

“It was at the bottom of the market in 2009,” Willig said. “I think I paid $118,000 and it sold for $185,000. I loved that place.”

The house was a typical abandoned property, with the power turned off and the grass up to your waist. Then one day, the neighbors became encouraged by signs of progress. 

They saw a flurry of workers going in and out of the house.

They were cheering as they went by, and honking their horns, thinking the workers were fixing the house, Willig said.

But as Willig learned when he got the keys to take a look inside, “Those people were not working. Those people were stripping the house in broad daylight.”

Because the house needed electrical work, new airconditioning units and appliances, Willig was able to get it for a bargain, even by 2009 standards.

The homeowners association fees alone had stacked up to $60,000, based on unpaid monthly fees plus daily penalties. Because the bank owned the property, it was in charge of renegotiating a lower fee and then handing Willig a clear title.

He borrowed $100,000 and was able to get in and out of the property in less than two months.

“My money people were ecstatic,” he said. “It was 50 days from the day I bought it to the day I sold it.”

Meanwhile, back at Garden Walk, Montgomery and his fellow directors have managed to lower the accounts receivable from a high of $200,000 to a more manageable $100,000 or so.

The condo disaster that had 80 units in arrears now leaves just eight to worry about, Montgomery said.

“We are trying hard to foreclose on them.”