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Dealing with high assessment delinquencies

March 4, 2011

Q: I recently attended a meeting of condominium board members from several associations. The conversation focused on the number of owners who are seriously delinquent in paying their assessments. Someone asked about the "worst case scenario" when there aren't enough assessment dollars to pay the bills No one knew what would happen. Receivership was mentioned. What would happen?

A: It is the responsibility of the unit owners through their board to operate the association. When it becomes clear that some or many owners are not able to carry their share of the responsibilities, it is up to the remaining owners to do so. Aggressive collection policies would be the first step including filing liens on delinquent units.

Some associations have declared the need for a special assessment to weather the current economic storm. Others have sought bank loans to help the association carry on.

The problem that a high delinquency rate causes are self perpetuating. Unit owners will not be able to sell their units, or if they can find a buyer, the selling price will be greatly reduced. Lenders will not consider mortgages for properties in associations that are in financial disarray. Finding willing buyers with cash to close will become the only option for those who want to sell . Owners will abandon their properties. Board members resign.

The worst case scenario occurs when no one is willing to serve on the board or to address this problem. When that happens, someone in the association usually recognizes the urgency of the situation and seeks someone to take charge in the role of a receiver.

A receivership is only sought when no one is willing to become a director and there is no board of directors to operate the association. It is not sought if there is simply disagreement among board members about how to handle the financial crisis.

A unit owner would have to petition the courts to appoint a receiver. The courts would appoint someone to act as the association's board of directors. This person would most likely be a paid professional. All the costs associated with this, including court costs and legal fees, would be paid by the association.

The receiver would probably begin by preparing a budget of all the costs of operation including the receiver's fees and proper reserves. It would be up to the members to pay the fees to cover these costs and, most likely, those who have been paying will need to pay more. This will not make members happy but the problem of lack of association oversight would at least be solved temporarily.

Attorney Sylvia Heldreth is a Certified Specialist in Real Estate Law. Her office is located at 1215 Miramar St. in Cape Coral.

This article is not intended as specific legal advice to anyone and is based upon facts that change from time to time. Individuals should seek legal counsel before acting upon any matter involving the law.



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