Alabama Condo Associations Assess Under Insured Owners

Foreclosures haven’t hit local condominium associations in coastal Alabama as much as their peers in some states, but that may change as new assessments are sent out to help pay for insurance.

Condo foreclosures hit a plateau about six months ago, according to attorney Daniel Craven of Gulf Shores. “We’re not in as desperate financial condition,” as other parts of the country, he said. “And collection efforts on delinquencies have held their own.”

Craven represents more than 100 condominium and property associations in the area.

Shortfalls may be more common among newer associations that haven’t had much time to build up reserves, according to condo managers. But older associations are also hurt if no reserves have been maintained.

Many associations assessed owners after Hurricane Ivan in 2004 to make repairs that weren’t covered by insurance, or in some cases where associations were under-insured, condo managers said.

Craven said condo insurance rates are down to 60 cents per $1 value, which was close to what rates were before Ivan.

“Insurance rates have dropped dramatically in the condo sector,”he said.

Condo boards are now asking for an assessment for insurance costs rather than including it in the annual budget, said Lolly Holk of Meyer Real Estate in Gulf Shores, which manages 17 associations.

And associations are moving more quickly on delinquencies than in the past, condo managers said.

“Associations do not let the owners get too far behind on their dues before popping liens on them,” Holk said. “The owners have so many days to get the money in and if the association sees it going real far, they will keep updating those liens.”

There are 13,169 condo units available for lease in Gulf Shores, Fort Morgan and Orange Beach, according to the Alabama Gulf Coast Convention and Visitors Bureau. All have a condo association and many of those associations are managed by local rental agencies.

The condo dues at the Gulf range from $200 per month to more than $1,500, depending on the size and age of the unit, managers said.

“We’ve had very few foreclosures, and the ones we had were in trouble before the market” slowed down, said Linda Moore of Kaiser Realty in Gulf Shores, which manages numerous condo associations. Most owners who did have problems had several units in different complexes, she said.

A condo association’s budget is based on the assumption that all the unit owners are going to pay, according to Craven. “Ultimately, if it doesn’t happen, it can hit the pocketbooks of other unit owners. Most associations are very aggressive in turning a collection problem over,” for legal action.

In addition to liens, associations can handle delinquencies with lawsuits and garnishments on wages or bank accounts.

Alabama’s condo law offers protection to condo associations on the payment of dues, but not on special assessments, according to Craven. If a unit goes into foreclosure, the lender or other foreclosure entity must pay up to six months of back dues that are owed to the association, he said.

At Meyer, owners that are two months behind on association dues area heading toward a lien, Holk said. The collection time has been reduced to 60 days from 90 days by many association managers, she said.

“One of the issues we’ve addressed with the boards is that we understand that the guy next door is your best friend and golf partner, but we’re looking out for the best interest of the association,” Holk said.

Some of the associations are trying to keep the monthly fees down to make the units attractive to potential buyers. But Holk says the informed buyer should be looking at the financials and what’s in reserve. “That tells a greater story than the monthly maintenance fee,” she said.

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Information from: Press-Register,
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