and individual owners; preferably local banks that don’t
have high exposure to subprime loans.
“That way, if an owner comes to you with a problem,
you can offer options, rather than just throw him over-
board,” he said. “Work with vendors, too, to secure pricing
and to put together financing packages for larger projects,
so that expenses don’t outweigh income. Get legal repre-
sentation. Identify those owners who are on the verge of
permanent delinquency, and work something out because
foreclosure is expensive and the lawyers get paid regard-
less of whether you do.”
Another Chicago-based manager, Tom Taylor, CPM,
head of the condo division at Draper & Kramer, AMO®,
said he hasn’t seen any association bankruptcies yet, but
he has seen many with significant foreclosure issues.
Invariably, an owner will stop paying condo dues before
he stops mortgage payments, so it’s critical to stay on top
of delinquencies.
“Our delinquencies, after the second month, are turned
over to an attorney and pursued diligently,” he reported.
“We urge clients to act promptly and don’t let an owner
say ‘Please don’t turn me over; I’m gonna pay.’ Work something out, and keep everyone informed.”
Damage control
Banks hate to foreclose, because they hate to own real
estate, but when they do foreclose they’re often reluctant to sell the property because today’s prices are so
depressed. Some condo boards are taking legal action
however, forcing lenders to auction off foreclosed properties in order to put a solvent, fee-paying owner in place.
Washington, D.C.-based attorney Benny L. Kass, of the
firm Kass, Mitek & Kass, said this tactic can be effective.
“In some states,” he said, “If a lender forecloses on a
condo unit, that lender has to pay up to six months’ worth
of delinquent condo fees to the association. Lenders don’t
like to do this, but at least foreclosure stops the hemor-
rhaging.”
A condo association could, itself, foreclose on an owner
who doesn’t pay the fees, Kass said, but that’s seldom
recommended. The mortgage will still have to be paid off
and then the association will have to deal with the current
owners of the unit—either evicting them or arranging a
temporary lease. And once the association owns the unit,
it will have to pay the real estate tax, just like any other
owner.
Joseph Dobrian is a contributing writer for JPM. If you have questions regarding this article or you are an IREM
Member interested in writing for JPM, please e-mail Markisan Naso at mnaso@irem.org.
