Onslaught Of Chapter 11 Filings Expected From Condo Associations Suffering From Decrease In Maintenance Fee Collections, Deadbeat Unit Owners?

In South Florida, the Daily Business Review reports:

• In a move an increasing number of condo associations are expected to follow, the Maison Grande in Miami Beach has filed for bankruptcy.(1) Facing almost $1 million in claims by unsecured creditors, a troublesome recreational lease, and at least 100 unit owners [out of 502] delinquent on payments of their fees, the association filed a Chapter 11 petition last month in U.S. Bankruptcy Court in Miami. As one of the first condo association bankruptcies of the current economic crisis, “it’s definitely cutting edge,” said attorney Mark Schorr, a solo practitioner in Fort Lauderdale who represents the Maison Grande association.

***

• [Attorney Robert] Kaye represents a Tamarac condo association that is considering bankruptcy. With half of its 280 unit owners delinquent on their maintenance fees, the association is in the red to the tune of $50,000 per month, he said. Kaye also represents a Palm Beach County condo association that is likely to file for bankruptcy after losing a court case against a roofing contractor. A judgment of $130,000 could grow to more than $300,000 after attorney fees and court costs are added, he said. “They can’t afford that, and 20 percent [of 120 unit owners] already are delinquent in paying fees,” Kaye said. These associations, which he declined to name — and many more — are likely to file for bankruptcy protection as they run out of funding options, he said.

***

• As foreclosure filings have soared in the wake of the housing and financial market bust, they can take almost two years to complete. That means condo associations still must maintain the foreclosed units, and the remaining condo owners must pick up the tab of their non-paying neighbors. “As long as lenders are extending foreclosures into 18 months and two years, the associations are pretty well stuck because there is no cash flow and they can’t raise funds necessary to operate,” Kaye said.(2)

For more, see $1 million debt sends condo association into Chapter 11.

(1) Go here for the Maison Grande's Chapter 11 Case Management Summary, filed with the Federal Bankruptcy Court in Miami pursuant to Local Rule 2081-1(B), and which provides the facts and circumstances surrounding the filing of its bankruptcy petition.

(2) In a related story, see South Florida Sun Sentinel: Community associations confront squatters (Options are limited for associations):

• In some cases, squatters are owners of units in foreclosure who stop paying mortgage or maintenance fees and leave their electricity, cable and water bills for the rest of the association residents to pick up while they live cost-free. In others, they are holdover renters in units or homes in foreclosure who stay put without paying a dime in rent or other fees.