Condo special assessment

General Real Estate Investing
1

Ok,

Here is the situation:

I have a friend who owns a condo, that is collateralized by two other investment properties.

The condo’s management is about assess a special assessment because they are unable to collect fees from a large amount of the owners in the building, and don’t have enough money to make the payment on the building.

My friend has paid all his bills on time, but is really balking at paying this “special assessment” because he thinks they will ask for it later.

Oh, his rental condo is currently vacant, so he has been keeping this condo up out of his own funds.

So what would you do in that situation?

Jay

2

SELL THE CONDO!!!

Mike

3

Your post isn’t clear on exactly what the special assessment is to be used for and what payments other condo owners have not been making. I presume they are delinquent on their monthly assessments which go to cover insurance, common maintenance and reserves. While your friend has been making his monthly assessment payments. Condo associations have recourse to charge late fees and place liens on units not making their assessment payments. Your friend should closely review the condo association bylaws and documents to determine if the association can make special assessments to cover cash shortfalls caused by non paying unit owners. This is one of the reasons condos make tough rental units. Not only do you have a mortgage to cover plus expenses but you also have condo association fees eating into your cash flow and special assessments which could completely negate any earnings you thought you were generating.

4

He is getting the special assessment because of others not paying their assessments.

This is great information… I had NO idea condo associations could levy special assessments legally. But it turns out it is a part of his contract.

He can’t sell because no one is buying.

5

Jay,
His unit is collateralized by two other units? Does that mean that he paid for that unit with notes on two other units? So they are all tied together? I am just trying to understand the financing and risk.

In any case, your friend MUST start going to the Homeowners’ Meetings, asking lots of questions, reading all the paperwork. Not a good time to bury his head in the sand. Maybe he can help get the other owners to pony up their dues. Time to get very active and militant and protect his investment. Also time to rent out that unit if it is vacant!

Owning real estate is not for wimps. You gotta DO something.

Furnishedowner

6

Your friend must realize that special assessments are a fact of life for a condo association. When the association does not have enough income or cash on hand to meet its expenses, it has no choice.

For a delinquent owner, the association can put a lien on the owner’s unit then foreclose on their lien. Maybe a foreclosure sale will generate enough revenue to pay the arrearages along with a new owner will pay the monthly dues.

7
  1. Get it rented ASAP… Lower the rate.
  2. Condo and HOA boards can pretty much set special asessments at will. You may want to check your HOA documents.
  3. If others are not paying the logical choice is for the HOA to place a lein on the properties and foreclose as a last choice.
8

What state is the condo in? Many states that have many condos and HOAs have changed the laws to protect them better against people not paying their dues.

Florida has changed the law to give the associations for condos and HOA a 1st lien position so now the banks have to take a 2nd and 3rd. HOA or Association can foreclose ASAP with 1 payment and once the unit is sold, the HOA/Association and attorney will get paid, then the banks will get there share. This was ton because of all the empty units and people not having money…

If your friend is paying and many units vacant…look into foreclosing…Typically the attorney will do the work and wait to be paid after foreclosure and it is sold…