Homeowner Associations vs Delinquent Owners

Seinfeld fans know the lure of Del Boca Vista…the excitement of locking horns in a Canasta game, throwing down the Mahjong gauntlet or hanging around by the luxurious pool and sauna area. Fans also remember the politics involved in Morty Seinfeld and his grasp of the presidency…a marble rye eroded more than his seat at the head of the table.

Life imitates art on a regular basis. What happens when owners fail to pay their association fees? Tension among neighbors, especially in condos and planned communities continues to rise as the economy stumbles and owners continue to be squeezed. When mortgage payments stop, so do home owner association fees and that means fewer folks paying to maintain the level of service expected. This is a significant issue in condominiums as lenders are very strict on lending policies; many require budget reviews of the complex, review of the number of delinquencies, number of bank owned units and number of rental units. FHA has strict requirements for condominium loans; if the ratios are above their guidelines, buyers could be refused a loan. This of course does nothing but turn a potential buyer away, prolonging the mess.

Back to life imitating art – and Mr. Sid Schulman, President of a complex in Florida called International Village. He has taken what some consider extreme measures to get delinquent owners to pay their fees. Near the mailbox of each condo building he posted a list of residents delinquent on their maintenance fees, with the message “Pay up or move out” and the same in Spanish, Pague O Mudese. He also tried, unsuccessfully, to get the cable company to cut off service to nonpayers. The article is an excellent look into a problem that is affecting thousands of attached and detached communities across the nation that have home owner associations. The article is HERE.

The article also illuminates the continuing debate surrounding home owners delinquent on their mortgages and essentially living rent free. As one real estate agent mentioned, this is Florida, a state that requires court ordered foreclosure and one center mass of the robo signing issue. Owners spending two years in a home without paying a mortgage is not unusual. In fact, the average delinquent Florida owner spent 573 days in there home without paying – AVERAGE so you know that means a healthy number are well past that. You can see an interactive chart of national days HERE and see the dramatic increases from 2007 to 2010.

Significant loss of value, lender black lists, eroding amenities and red ink….It’s easy to see why the tensions rise when everyone is so intertwined.