HOA Nut House

Many residents aren’t able to submit dues

BY DICK HOGAN, dhogan@news-press.com

Foreclosures are rocking not just the thousands of homeowners in Lee County, but the homeowners associations that represent them.

The reason: Financially strapped residents or, in many cases, the lack of residents because of the growing foreclosures, simply aren’t paying their bills.

• At Renaissance, a Fort Myers condominium that recently sent out bills for a $1,000 special assessment, just 20 percent of the owners ponied up.

• The homeowners association at Stoneybrook at Gateway — which paid for mulch to spruce up some of the abandoned homes — now faces cuts of about $130,000 from its $1.3 million budget.

• Condo fees at Tuscany Gardens condominium in south Fort Myers have increased 20 percent in the last year just to cover costs.

A lot is at stake: More than 60 million Americans live in an estimated 300,000 homeowner associations, condominium communities, cooperatives and other planned developments, up from 45 million residents in 223,000 communities in 2000, according to the Alexandria, Va.-based Community Associations Institute, which represents and provides information to homeowners and professionals who run community and condominium associations.

And these are hard times for homeowners and associations alike, an institute spokesman said.

“It’s an issue everywhere,” said Frank Rathbun, vice president for communications. “I think it’s throughout the country but we haven’t done any statistical analysis on it.”

It’s Simple economics.

“Someone who has either been foreclosed on or lost his or her job is probably a lot less likely to be paying assessments,” Rathbun said. “That puts the burden on the association to provide the services and amenities residents expect.”

It also means those remaining residents are forced to pay a greater share of the expense.

Locally, the associations’ shaky finances are a result of the collapse of the Lee County real estate market and the economy in general.

Foreclosures hit a record 2,160 in April as home prices collapsed: down 37 percent in April to $200,300 from an all-time high of $322,300 in December 2005. Meanwhile, unemployment was 6.4 percent, up from 3.7 percent a year earlier.

In Southwest Florida, non-payment of fees is a problem mainly for newer projects that were built or converted from rentals in the real estate boom that reached its height in December 2005, said Joe Adams, who’s in charge of the Becker & Poliakoff office in Fort Myers and also writes a column on condo law for The News-Press.

“It’s a huge problem,” he said. “It’s not really just in conversions, but that was the craze in ’03 and ’04 and ’05, and they were in the wrong place at the wrong time.”

One of the hardest hit is Renaissance, near the Edison Mall, converted from apartments three years ago at the height of the real estate boom.

Foreclosure actions have been filed against 17 of the 112 units and five of those have already been taken back by the lender.

Bill Davis, 64, a retired banker who lives in Marietta, Ga., bought a condo at Renaissance in February 2006 for $210,900 as a place where he could visit his son and two grandchildren in Fort Myers.

Now the condo is assessed by the Lee County property appraiser at $133,000, eight other units are listed for sale at $100,000 or less, and Davis said he’s not sure what the future will bring.

The 20 percent response to the special assessment was an eye-opener, he said. So far, foreclosure actions have been filed against the owners of an additional 28 units but many others are headed that way.

“There’s no way they can stay in their homes or will stay in their homes, Davis said.

“They’re just waiting to get kicked out, waiting for a year before the sheriff kicks them out” after the foreclosure goes thorough.

Short of dissolution, homeowners associations face a series of hard choices, said Ellen de Haan, regional managing partner for Tampa Bay for the real estate law firm Becker & Poliakoff and a past president of the Community Associations Institute.

“Levying an assessment which punishes the good guys isn’t always the way to go,” de Haan said.

But burning up reserves can be a bad strategy as well because it leaves the association vulnerable to emergencies.

They can try to borrow the money, but delinquent assessments are a red flag for lenders, she said. Even if a loan is obtained “they can get into a spiral of debt where they’re further and further behind.”

She recommends that associations facing financial problems be aggressive about going after delinquent assessments and cut expenses as much as possible.

Not every community built in the past few years faces problems as severe as Renaissance but most are seeing at least some effects.

Steve Bostwick, a Century 21 Sunbelt Realty agent who bought three Tuscany Gardens units three years ago, said increasing delinquency rates has caused his monthly fees to increase from $233.23 a month for a one-bedroom, one-bath unit up to $411.75 for the largest three-bedroom, two-bath unit. Thirty-four of the 248 units are in foreclosure.

Tuscany Gardens is still doing OK, he said, but that’s meant board members getting hands on in the management of the condo.

“I think really it’s because we took the bull by the horns,” Bostwick said.

For example, he said, to save money the board got rid of its maintenance contractor and hired an experienced handyman to live at the condo and do as many repairs as possible.

It’s also dispensed with a billing company and renegotiated its insurance bill: At more than $100,000, that was the biggest savings so far, he said.

Stoneybrook residents haven’t just sat and waited for their property values to go down as weeds grow on the community’s 23 abandoned properties. There have been at least 62 foreclosure actions filed against Stoneybrook residents, 30 of them this year, according to Lee County Clerk of Courts records.

“The Estates Home Owners Association bought the mulch and the volunteers spread the mulch, trimmed the bushes and made the houses look good,” said Sherry Bucar, who’s on the board of the Stoneybrook at Gateway Master Association and also the board of for Stoneybrook at Gateway Estates, a community within Stoneybrook. But that only goes so far, she added, noting that Gateway Estates only assesses its 694 homeowners an $87-a-year fee. “We don’t have the money to buy more bark mulch.”

Warren Davies, president of the master association, said his board is considering what needs to be cut from the budget. The master association levied a $720 fee in January and hasn’t decided what the July assessment will be.

There is some resentment from the solid citizens who are still paying their assessments, Davies said.

“People who do pay their assessments don’t understand why we’re cutting,” he said.

“But you have to work into your budget that money that’s not being paid.”

Right now, he said, “We’re running between 14 and 17 percent not paying their assessments: compared to 3 to 5 percent in normal economic times.

The lost money creates some hard choices for the board.

“If the pool isn’t heated as long as some people like,” Davies said, “they won’t be happy.”

But that may be necessary, he said: The propane used for heat is $2.52 a gallon, up from $1.90 a year ago.

Already, Davies said, the association has cut hours at its clubhouse and basketball courts and more may required.

Increasing fees substantially isn’t likely, he said, because the young families and fixed-income retirees who make up a large part of the community would be hard-pressed to pay more.

However the budget is balanced, there won’t be the luxury of a surplus, Davies said.
“If you have any money left over you’re lucky,” he said.

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