Senator Chris Smith for Fort Lauderdale has proposed a Florida senate bill that would make it illegal for condominium associations to cover delinquent owner payment by raising assessments on owners who pay their fees regularly.
To start with, it’s very important that a condominium raises the funds required to maintain the property, utilities, and safety of the building. That’s the primary purpose of the board, and performing proper maintenance and paying bills ensures that owners retain property that has (within the market) maximum resale value and opportunity.
When a large amount of delinquent owners exist in a condominium, the board fails to collect the revenue required to meet their duties to maintain the building and pay the bills. As corporations have limited powers to generate funds, they raise the contributions until the responsible, paying, owners meet the financial needs of the condominium corporation.
This can mean, where we see some condominium with 2/3 delinquency – that the responsible owners are paying 3x the condo contributions they should be. This is a great hardship.
Historically, this issue of non-payment hasn’t been an issue. But the combination of the housing crash, high unemployment levels, and most importantly – a foreclosure process in Florida that is now taking 12-24 months (gaaahhh!), is leaving a significant number of condominium raising fees on owners to cover costs.
Traditionally, non-payers would be foreclosed on, and the corporation would get the outstanding sums in 30 to 90 days from filing. That, with only a few delinquent at any one time was fiscally manageable. Now, with the lack of ability to collect in a timely manner, corporations are facing massive debts, shut off of services, and dangerous buildings.
At some point, even if it is two years, the corporation will get paid. The question is what to do in the meantime. If the Florida legislation moves forward – preventing responsible owners from paying for non-payers – the question still arises: where does the corporation get the money it needs now.
Corporations taking out loans works well in great economies because the corporation can back the loan with their ability to levy condo contributions. But when the debt issue arises from the very issue of being unable to collect contributions, there is no ability for a corporation to find money.
The legislation sounds all good and dandy to protect the responsible owners from directly paying more while the state courts take so long with the foreclosure, but that just puts the costs onto the building and services. Non-existent or reduced maintenance can have as great or greater cost on residents trying to resell as an increase in their condo contributions.
It’s a tough position, but the answer is not to limit the hands of the condominium corporation is sourcing the funds needed to maintain and operate the condominium corporation.
The real answer is for the Florida legislature to properly fund a court process that addresses the insane time it takes to foreclosure. Instead of responding to the substantial increase in foreclosures they have let the current system drown. It’s bad form to write more laws when the problem lies with the underfunded court system.
CondoFeed 