Florida condo owners footing bill for foreclosures

Posted by: Prashant Gopal on November 29, 2007

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The spate of foreclosures in Florida could make it even more expensive to live the beachfront condo lifestyle that the state is famous for.

Condo associations, which collect fees from residents for maintenance, repairs, management salaries and utilities, have been losing revenue as the numbers of speculator-driven foreclosures rise. It turns out that many condo owners who are struggling to pay their mortgages are also falling behind on association dues.

“Who’s getting hurt are the people who actually bought to live there,” said Eric Glazer, a real estate attorney practicing in Hallandale, Fla. “They have to make up for a shortfall. The building needs a certain amount to run.”

In some South Florida condo buildings, 40% of the units are in foreclosure, Glazer said

Florida had the third highest rate of foreclosures in October behind Nevada and California, according to a report released Nov. 29 by RealtyTrac Inc., a foreclosure listing service. Foreclosure filings nationwide jumped 2% from September and nearly doubled from a year ago. Florida’s rate of one foreclosure filing for every 273 households was twice the national average.

Many of the condo owners now facing foreclosure in Florida never actually moved in. Speculators bought units during the boom, hoping to flip them but instead got caught by the downturn.

Greg Ward, real estate litigation attorney in Fort Lauderdale, said homeowners associations are fighting in court to recover lost fees and special assessment payments. But mortgage lenders must be paid first before condo associations get a dime.

Jane F. Bolin, managing partner of Foundation Property Services, a property management company, said condo associations are digging into savings to make up for the lost condo fees. But condo owners will likely be hit by larger than normal special assessments if a hurricane hits and expensive repairs are needed.

“The main issue right now is that it’s depleting the operating funds for the associations,” Bolin said. “They have to cover the cost of lawn care and maintenance. They have tight budgets and they’re having to foot the bill.”

Reader Comments

Alejandro Diaz

December 19, 2007 1:12 AM

Forget the mortgage lenders, the property taxes need to be paid first thats why its becoming popular and there has been increasing demand for tax liens. The main issue is that the associations already have tight budgets and they are spending time and money going for the fees they are owed and it is resulting in nptably high special assesments to cover the shortages that have to be paid by the condo owners that have been paying their HOA fees on time. If it is bad now what will happen with new condos when only half of the building closes and moves in and there is a substantial amount of apartments that were never sold, like in Villa Regina in the early 80's where people would move in and pay maintenance fees and get no ammenities...

Al Murray

January 5, 2008 9:21 AM

Things will only get worse especially in South Eastern Florida. There is a tremendous glut of new condos that were bought by speculators that thought they could resell before that had to pay taxes and maintenance fees. They cannot afford the monthly payments and cannot flip. No buyers. If we have a recession prices will drop another 20%. They have already gone down 10-15%

Art

April 25, 2008 9:18 PM

But mortgage lenders must be paid first before condo associations get a dime.

This statement is incorrect.Florida statutes give a priority for unpaid maintenance charges before mortgage

linda

October 12, 2008 5:49 PM

I am on a board in a homeowner's association. We were informed by the mortgage company of a unit owner that they were foreclosing on this unit. The unit owner has been there off and on ever since he bought the place. In fact, he's bought 2 other properties in the same county. Now that his unit is in the process of being foreclosed, he's moved in permanently. We all pay the water bill out of the maintenance fees which the unit owner no longer pays us. Does he have the right to remain in the unit free and clear???

peter gentile

April 25, 2009 10:03 AM

I would like an answer to linda's question

Loft resident

October 2, 2009 8:19 PM

No one was able to answer Linda's question? We have that problem in our building. I too would like an answer to Linda's question.

Carolyn Orr

October 6, 2009 5:56 PM

Wow, we are getting a big assessment to cover the shortage in our condo budget. The guys who bought 5 units in our 48 unit condo is belly-up. However even though the 5 properties are in mortgage foreclosure the landlords are pocketing all the rent with no expenses (taxes, condo fees, mortgage) until the banks move. The banks don't want to move on the foreclosures because then they will have to pay our fees. How can we get unstuck from this?

Dave L

October 10, 2009 6:21 PM

For resident owners, there is not much you can do. For rental units, you can force the units owners into receivership. It is may not be worth it for a single unit,might be for for 5. This is becoming more common. See a lawyer!

Ken Klink

November 3, 2009 6:42 PM

LM Funding, LLC provides COA's cash up front in exchange for purchase of lien and foreclosure rights. We additionally assume all legal and collection expenses. Call for details.
Ken Klink
Account Executive
LM Funding
561-309-7499
kenklink@lmfunding.com

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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