When money is tight, consumers typically put away their credit cards and take stock—cutting out non-essentials, such as dining out and luxurious vacations—to make ends meet. Strapped homeowners will limit their funds to emergency repairs only, such as patching up a leaky pipe, and put off anything else that needs to be done until later. Those who live in an HOA might even take such drastic measures as not paying their monthly dues until things improve.
Unfortunately, in this economy, many homeowners are making the decision to do just that and it’s left many associations in a serious financial crunch. They simply don’t have enough money to complete some basic maintenance and improvement projects.
Tough Times, Tough Choices
According to a national survey conducted by Community Associations Institute (CAI), more than half of the nation’s estimated 310,000 community associations continue to struggle with financial issues associated with the mortgage foreclosure crisis and related economic downturn. Almost a half million properties received a foreclosure notice last year, according to real estate data firm RealtyTrac, Inc. and 45 percent of community managers say their client associations face "serious” problems as a result of the housing and economic downturn, while 9 percent describe the impact as "severe." The remainder say these issues are a nuisance or nonexistent.
For example, a recent article in the Daytona Beach News-Journal profiled the luxury Palmas de Mallorca condominium in Daytona Beach Shores, which was nearly shut down in 2008 and evacuated when the homeowner's association did not have $3,000 to fix a water pump that feeds the fire suppression sprinklers. What in the world would bring a high-end condo community to such a predicament? The answer was simple, but dire: half of the building's 12 units were empty and the remaining owners were not paying their assessments. Fortunately the problem was fixed—but it’s just one example of many more associations facing the same battle today.
“In this particular economic time in Florida, community associations are hampered by foreclosures and the board has to make hard choices about what they are going to pay for,” says Dennis J. Eisinger, Esq., an attorney and founding partner with the Hollywood law firm of Eisinger, Brown, Lewis, Frankel & Chaiet, P.A. “The last time this happened it took 14 years to come out of it.”