One of the biggest problems that can cause the downfall of any condo or co-op is a lack of funds, or more specifically, not enough money to keep operations running smoothly and to make the necessary repairs to keep everything up to par.
These financial firestorms may happen when a co-op or condo development has a long-running squabble with the building sponsor/developer, is faced with a disproportionate number of sublets and rental tenants, falls victim to a major unexpected, ill-prepared-for repair project, or are the unhappy victims of fraud.
If there’s no money in the reserve fund, a lack of equity to borrow from to make repairs or not enough people able to pay high special assessments, the building will be in serious trouble—falling into bankruptcy or worse.
According to Brad Schneider, CPA, a certified fraud examiner and president of CondoCPA in Elmhurst, there are ways to edge back from the brink of financial wrack and ruin.
Schneider was involved with an association that had no reserves and high delinquencies and the issue was exacerbated because the association had a loose collection policy.