These are difficult times for many condominuim associations. Investors and owners who were on the bubble may be walking away or defaulting on association fees. Either way the COA boards may be in the difficult position of dealing with foreclosed units. Unfortunately the costs to maintain the common property do not change and in some cases the costs increase. For example in colder climates the association is having to pay the heating bills on empty units to prevent more water damage. For example in smaller complexes maintenance fees, may now be split eight ways instead of 10 becoming an increasing financial burden, especially for the owners on fixed incomes.
An owner's association can force the issue by filing a foreclosure action himself to collect maintenance fees, but that will cost thousands in legal fees, money that they may not have to spend. Washington is among the few states that give homeowners associations a "super lien" that puts them ahead of mortgage holders in a foreclosure, but the most they can recover is six months worth of fees.
Owners fed up with increasing association fees can try to sell their units, but with the likelihood of taking a substantial loss themselves. However once buyers discover that there are foreclosed units they may be reluctant to buy into an association that is carrying an extra financial burden. Many mortgage companies underwriters will want to see the makeup of owners and adequate reserves before they will loan for a condo.
COA's can use reserves to cover some of the fees but under current rules that money will need to go back into reserves within two years. Unfortunately foreclosed condomiums are a problem for everyone.
Pacific Crest Reserves
WWW.PacCrestReserves.com
360-588-6956
Fax 360-588-6965
Toll Free 866-618-7764
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