Q: I recently reviewed communications from our condominium management regarding penalties for unit owners who fail to pay their maintenance fees. I find the penalties to be insignificant and ineffective. I am frustrated that those who don’t pay their share of our expenses seem unaffected and continue to enjoy amenities, making these penalties a real “nothingburger.” What can be done to address this issue? (K.F., via e-mail)
A: Having gone through several “boom and bust” cycles over my career, I have seen changes to the law which have incrementally provided associations with more remedies regarding dealing with delinquent assessments. Many of these changes were added to the law after the 2008 real estate “meltdown,” while many have been in the statute for decades.
It is important to understand that some of the remedies are self-executing under the law, while many of them require adequate authority under the condominium documents. Therefore, the most important starting point is for your board to confirm with your association’s legal counsel that the community has up-to-date documents that permit all current collection remedies and that the association has a written uniform collection policy to implement those remedies.
Here is a look at the more common remedies available:
- Lien and Foreclosure: The association has the right to record a claim of lien which encumbers the title to a property when there are assessment delinquencies. The statute requires numerous pre and post-lien steps to ultimately foreclose, but an association can ultimately remove a delinquent owner from the title to their property.
- Interest and Late Fees: Interest accrues on delinquent assessments at the rate set forth in the declaration of condominium, and if the declaration is silent, the rate is 18 percent, which is a stiff interest rate in relation to market rates. Additionally, if authorized by the documents, the association can levy late fees on each delinquent assessment or installment. Late fees cannot exceed $25 or 5 percent of the assessment or installment due, whichever is greater. The 5 percent number is most always much greater.
- Suspension of Use Rights: After a certain period of time and after following required statutory procedures, an association can suspend the rights of delinquent owners (and their families, tenants, etc.) to use non-essential common amenities, such as recreational facilities. The association cannot cut off utilities, access, or rights of ingress and egress.
- Suspension of Voting Rights: Again, after following the procedures and timelines set forth in the statutes, and the confirmation of authority in the governing documents, the association can suspend the rights of delinquent units to vote in association affairs, including the election of directors. The statute goes on to say that when voting rights are suspended, those units are not counted for calculating quorum and other numerical voting requirements.
- Prohibiting Board Service: The condominium statute lays out detailed rules that prevent delinquent owners from running for the board of directors and includes a provision that directors who are delinquent in the payment of assessments to a stated degree are deemed to have “abandoned office” and are no longer legally considered board members.
- Disapproval of Leases: The statute permits an association that has the right to approve leases to disapprove lease applications due to assessment delinquency.
While your frustration is not uncommon, it has been my experience that associations which have the full range of legally available remedies open to them, and apply them diligently and fairly, do markedly better than those which don’t. During good economic times, when owners have “equity” in their units (it is worth more than the outstanding mortgage balance), it has been my experience that associations rarely “get beat,” although it may take time to collect. One way to look at that is that you will not find any other investment that pays you 18 percent on your money.
When times are tough and owners are “upside down” on their units (their mortgage balance is more than the unit can sell for), all bets are off. Since the lender has very limited liability for unpaid assessments under the law, and they often are disincentivized to foreclose their own mortgages, things can get very bad very fast. This is what we saw in 2008, which was hopefully a once-in-a-generation phenomenon.
Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Send questions to Joe Adams by e-mail to jadams@beckerlawyers.com. Past editions may be viewed at floridacondohoalawblog.com.