The Nuclear Option Economic Woes Increase Condo Foreclosures

 In the tough environment that has characterized both the national and world  economy over the past few years, many condo owners have faced job loss, reduced  salaries, or just financial uncertainty. While the situation has made things  extraordinarily uncomfortable for individuals and their families, it has also  had a ripple effect on the buildings and HOAs these individuals call home—particularly when owners don't pay their assessments or common charges.  

 Tough Times

 “Unfortunately, in our current economic climate the volume of delinquencies,  foreclosures and bankruptcies causes cash flow to be a burden at times. Bills  still have to be paid and the main source of income to any association is the  assessment dollars,” says Andrea Sorgani, former president of the Illinois chapter of the Community  Associations Institute (CAI-IL) and owner of Alma Property Management in  Schaumburg. “I strongly recommend that when preparing an annual budget a line item for bad  debt be recognized and assessment increases adjusted to accommodate the loss of  revenue.”  

 When unpaid, overdue debt is not collected, it can wreak havoc on a condominium  association. In small communities, it can quickly cause the association to have  trouble meeting operating expenses. Even larger associations will eventually  feel the effects of the shortfall if multiple units fall into arrears.  

 First Steps

 Once an owner has become delinquent, the association should take action. The  first step in the process, depending on the nature and type of association,  could be a friendly reminder notice as soon as the due date has passed.  

 “If an assessment is due on the 1st, but is not considered late until the 10th,  then a simple notice to the owner on the 15th, letting them know that their  payment was not received and is now subject to the late penalty, is  recommended,” says James Erwin, a partner with the Chicago-based law firm, Erwin & Associates LLC. “However, once the account is 30 days late, it is recommended that the  association’s legal counsel send out a 30 day notice together with an account ledger.”  


Related Articles

Q&A: When an Owner Who Owes HOA Fees Is Now Bankrupt

Q&A: When an Owner Who Owes HOA Fees Is Now Bankrupt

Show Me the Money

Collections, Foreclosure & Evictions

When Residents Are Disruptive

Tips for Keeping the Peace