The ongoing recession has changed the financial picture drastically for many residents, and their buildings are feeling the effects of late and missing assessment payments, owners unable to pay special assessments, and even owners who withhold maintenance payments for the same reasons rental tenants withhold rent: They may feel that nonpayment punishes the board or management for some shortcoming—real or perceived. A building’s assessments are used to pay for routine cleaning of common areas, door personnel, amenities and unexpected issues such as roof damage, balcony repairs and other problems, but if someone doesn’t pay their share, it can quickly lead to some very serious problems.
There are many reasons residents cite for nonpayment of their monthly dues and assessments: unemployment, other unexpected expenses or sheer forgetfulness. But the most common reason cited is that someone in the family isn’t working because they’re sick, says Marshall Dickler, an attorney with the law firm of Dickler, Kahn, Slowikowski & Zavell, Ltd. in Arlington Heights. Another common reason for arrears is a divorce or separation that leaves a resident short of cash. In the case of elderly residents, isolation and forgetfulness may play a role. In the worst case scenario, a resident may have died without a person appointed (or willing) to handle their estate.
“After that, it usually is something like money management, where the owner has built up debt and can’t juggle or make all of their payments,” Dickler says. “Believe it or not, we see a tremendous amount of this in January and February, after Christmas purchases that can’t be paid for with savings or cash flow.”
In Illinois, there are no figures that have been publicly compiled for the number of co-op and condo buildings that are dealing with delinquent owners. But Angela Falzone, a consultant with Association Advocates, Inc. in Chicago, says that out of the 42-unit townhome complex that she manages, there are three foreclosures and three serious delinquencies—and the number of problem residents is growing. According to national real estate research firm RealtyTrac, Illinois had 33,092 total foreclosure filings in the first quarter of 2011 to rank it among the top ten active states.
Duty vs. Do-Gooding
For condo boards and management agencies, the key is to figure out how long they should wait before initiating collection procedures—and determining if a grace period should be made for special circumstances such as illness or unemployment. The general consensus is to refer the delinquent unit owner to the association attorney when the delinquency hits 60 days.