In addition to the thousands of condominium and homeowner associations throughout the nation that are experiencing assessment shortfalls, delinquencies and high foreclosure rates, there also are many new developments coming on line where the developer has run out of funds and simply walked away from the project midstream after some homeowners have already purchased homes and moved into the partially completed communities.
If you are a member of an association that has not yet turned over and you believe your Developer is experiencing serious financial distress, do not wait for it to file bankruptcy. Specific steps may include:
Call for a Special Meeting for the purpose of discussing the association s finances. Insist on straight answers to the hard questions of the solvency of the Developer and financial resources of the association.
Some state statutes require condominium and homeowner associations to conduct annual audits or reviews(with allowable exceptions). If homeowners have questions on finances during Developer control, insist on the annual audit. If professionally managed, work with your association management company in this endeavor.
Identify the amount or percentage of common expenses the Developer has paid to ensure equitable and proper allocation between development and association expenses have and are being paid.
Maximize homeowner involvement and awareness of the situation. If possible, recruit owners to volunteer to perform maintenance or other work, thus reducing the common expense liability to the association.
Lastly, be prepared to seek legal intervention, if needed, to preserve the assets of the association before the Developer drains all available funds.
In addition to the adage Buyer Beware, under the current economic downturn, condominium and homeowner association members must follow the Owner Beware and Act.
Community Associations Left Holding The Bag
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