Empty houses mean higher fees for deed-restricted communities

By Dong-Phuong Nguyen, St. Petersburg Times, Tuesday, December 30, 2008

NEW TAMPA — Homeowners association fees are what keep deed-restricted communities from falling into disrepair. They pay for landscaping and upkeep, security and gym equipment.

But what happens when more and more homes go into foreclosure or enter into short sales, or when paying the fees becomes a low priority for struggling families?

The rest of the homeowners must cover the costs. And it's not just the shortfall they need to make up — a litany of items goes with it.

For a more detailed look at how this growing problem is affecting communities, consider the 1,100 households in Live Oak Preserve in New Tampa, where more than $500,000 in assessments have gone uncollected.

Recently, the homeowners association board approved a 2009 budget that increases fees by more than 40 percent — to $163.79 per household per month — to cover the bad debt and items associated with it, such as stamps and legal bills.

"These are very bad times," Ellen De Haan, the board's attorney, told the more than 60 residents at the budget meeting. "And it's happening everywhere."

Residents must now shell out almost $2,000 a year in assessments — about $200 more than last year — mainly because of foreclosures and short sales. The fees will cover such items as:

• $22,500 for postage and supplies that the association is anticipating it will need for mailings and certified letters to collect the fees. In the first nine months of this year, it spent $16,700 — $7,000 more than what was budgeted.

• $42,000 in legal fees because lawyers will be busy drafting the letters to collect the fees. The board had budgeted $5,900 this year and ended up spending $34,700 through September.
• $250,000 in anticipated uncollected fees.

The board also decided to make the assessments due monthly instead of quarterly, to make the smaller, more frequent payments appear less painful.

"It's pretty steep for some people to pay on a quarterly basis," said board chairman Rick Feather, adding that late fees will not be assessed during the first quarter of 2009.

Feather also emphasized that several contracts, such as for lawn and landscaping work, were renegotiated, bringing some costs down.

But one issue that has rankled residents in Live Oak is a bulk cable deal between the developer and a cable company that charges the community $1.1-million for cable — including cable for the unoccupied homes.

Many residents who attended the meeting blasted Feather for his role in the agreement, asking for ways to get out of the contract. The contract does not expire for 11 more years. Some residents have taken their fight to the federal level, meeting with Federal Communications Commission officials earlier this year for help. The FCC has not made a decision.

"If our neighbors need food, we will gladly step up and give it to them," said resident John Cutter. "We just don't want to pay for their cable."

Another resident, Realtor Martha David, said she thought she knew what she was getting into when she moved into Live Oak, but she feels she was misled.

"(The developer) presented to us that we would be saving money and have all these extra features,' " she said. Today, 25 houses in her 125-home village within Live Oak are vacant. "Now we're paying for people that have foreclosed and people who have walked away."

De Haan, the board attorney, likened living in a deed-restricted community to establishing a business with others.

"You went into a full equity partnership with everybody who lives in this community," she said. "As homeowners, you have to make it up. You're all partners in this business."

Comment: This situation is also becoming a major issue for the condominium market as foreclosures are running well above the single family residential market.