As more and more condo owners and developers across the country fall into bankruptcy, their associations are suffering right along with them. Consider The Maison-Grande Condominium in Miami Beach, Fla., which was fined repeatedly by the local government for various code violations. The association said it couldn’t address any of its issues because it owed more than $110,000 a month to the building’s former developer, Coral Gables, Fla.-based Dorten and Robert Siegel. So, in June, the condo association declared Chapter 11 bankruptcy.
This trend will only accelerate, especially in Florida, says Robert Kaye, a partner at Ft. Lauderdale, Fla.-based law firm Kaye & Bender. “A number of associations have units that are upside-down, and they all have no money,” Kaye says.
Such problems are systemic of the times: Too many units have owners who aren’t paying their dues. “We have properties where roughly 35 percent to 40 percent of the owners aren’t contributing,” says Gary Poliakoff, founding principal of Becker & Poliakoff, a Ft. Lauderdale, Fla.-based law firm.
Still, there has been some proposed legislation to make the lenders pay the association dues on units they control, but that hasn’t gone far. Kaye believes the Maison-Grande case could eventually serve as a litmus test. If the court grants the association some relief, there could be even more filings in the future. “There are probably other condos around here where the bankruptcy helps them with their situation,” Kaye says.
If these associations don’t get relief through the courts or legislation, they could face additional losses of services.