South Florida HOAs battling tenants for dollars owed

Recovering lost dollars can be costly

WEST PALM BEACH, Fla. - Much of our state's real estate market is dominated by homeowners' associations.  But as Florida struggles to move beyond its housing crisis and related economic troubles, some HOAs are facing some unique - and mounting - challenges.

Adam Sinclair has a long list of things that need fixing at Summit Run, a private 254-home development in suburban West Palm Beach.  As a homeowners' association board member, Sinclair's job includes collecting HOA fees from his residents.  Currently, however, Sinclair says 25% of homeowners are behind those HOA assessments. Sinclair believes it is costing everyone who lives the area.  

"Some are foreclosed. Some are vacant," said Sinclair.  "Some of them are talking to the attorney trying to work something out.  Some of them are in limbo and we have no idea what is going on."

Across Palm Beach County and across South Florida, some people are going for years without paying their bills and, too often, it is their neighbors who are forced to pick up the tab.  Homeowners' associations lose money that, legally, is owed to them.

Paul Massey is HOA president at Convention Center Townhomes in downtown West Palm Beach.  Eight homeowners in the development, Massey said, are in the midst of the foreclosure or short sale process.  Massey said all eight have thousands of dollars in HOA fees that are long overdue.  

"They're using all the facilities, the pool, we're cutting their lawn and they're not contributing their fair share," he said.  "It makes for some friction in the neighborhood."  

In the 41 unit development, this association said it has lost out on more than $50,000, between legal fees and those not paying their HOA fees.  

"These folks know all the tricks in the book," said Massey.  "There are plenty of stall tactics they put in place."

Real estate attorney Scott Wortman represents nearly two dozen HOA and condo associations in Palm Beach County.  

"The associations themselves are very much a victim of the mortgage foreclosure crisis," said Wortman.  

His firm is called in when a homeowners' association first contacts a resident about delinquent payments.  45 days later with no payment received, and the HOA can then choose to foreclose on that property in its own development.  Wortman said the goal of the process is to receive some of the money that is owed or force the tenant-in-question out.  

"The number one rule is sharing in the financial burden in the maintaining of that community," he said.

For smaller HOAs, legal action can be costly in time and money, often with the financial burden falling on residents who do pay their HOA fees.  

"So many of our developments in South Florida are HOA driven," said West Palm Beach housing expert, Paul Baltrun.  

With fewer dollars in HOA reserves, Baltrun said services - like landscaping, security, and extermination - can be cut back.  He said that can lead to additional vacancies, even fewer payments to the HOA and, perhaps, dropping property values.  

"People still just don't have the desire to live in that property or there are other communities where the HOA is well maintained and they would rather live in those communities," said Baltrun.

For Massey and Sinclair, who live in the communities they oversee, time is not an amenity they enjoy.  

"If the banks would just push through these properties and put them on the market and get folks to purchase them," said Massey.  "That's all we're asking."  

Every passing day, though, and the struggles of a homeowners' association can persist.

The foreclosures, the short sales, and those people who aren't paying the HOA fees that they signed up for; Sinclair wants all of it out of his neighborhood soon.  

"It can only get better," said Sinclair. "And if it doesn't get better, than it's not going to be good for anybody."

Selling off the backlog of foreclosures and short sale properties is the answer, experts say.  The federal government, meanwhile, is altering its foreclosure prevention program to allow more people to be eligible for federal aid.  Now, mortgages on rental properties - not only owner-occupied properties - can be modified.  Experts say that may impact HOAs more now than in the past.  Click here for more information.

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