From Centre Daily:
Condos feeling mortgage crunch
At Glen Waye Gardens Condominiums in Silver Spring, Md., 21 owners are more than 30 days behind on their monthly condo fees. Two other owners have not paid since they bought their units, one in April 2005 and the other in September 2006. Both properties went into foreclosure.
The lost fees, which make up 5 percent of the association’s annual budget of $1.3 million, have pushed the condo board to dip into its reserve funds to fix the roof and replace a water heater.
“When those things go bad, you have to spend on them. You have no choice,” said Vicki Vergagni, president of the 214-unit community’s board. “We’ve had to use way too much of our reserves.”
In a sign that the turmoil in the subprime mortgage industry is affecting entire communities and not just individual homeowners, condominium association officers, property managers and real estate lawyers say they are noticing more delinquencies in monthly fees.
“If someone is not paying their mortgage, they’re not paying their condo fee, and the condos need money to pay bills,” said Jeffrey van Grack, a community association lawyer with Lerch, Early & Brewer in Bethesda, Md.
About one in six Americans live in a community run by a condo or homeowners association. Fees pay for such services as water, garbage removal, cleaning and repairs.
“When times get tough, either because mortgage terms start to weigh in or the economy takes a dive and people are not making enough money, you do see an uptick in delinquencies,” said Joe Douglass, a community association lawyer at Whiteford, Taylor & Preston in Washington.
…
Many communities do not have large pots of money in reserve. It is worse for older communities because they tend to need more expensive capital improvements.“Associations aren’t corporations,” said Frank Rathbun, vice president of communications and public relations for the Community Associations Institute, an Alexandria, Va.-based group for condo and homeowners associations. “They essentially operate year to year. They collect in assessments what they believe they need to pay for amenities and services that residents expect.”