I heard a sobering news story on Marketplace last week about the fallout of the housing bust in the Florida condo market. Basically, condo owners in financial distress or in foreclosure have quit paying their condo fees, putting the burden on their neighbors. To make up for the financial shortfall, some condo associations are issuing special assessments to solvent owners. Some owners are facing special assessments of $40,000! Or worse:
Jeremy Resnick is with Upside Down Florida, a firm that helps homeowners who owe more on their home than it's currently worth. He said one client was just handed a bill for $40,000 to help cover an association fee shortfall.
JEREMY RESNICK: In some communities, there's been an assessment for $25,000 and three months later, another assessment comes for the same amount of money.
This isn't just a problem in Florida. Resnick says 51 million people in the U.S. live under a homeowner or condo association, and nearly all of those communities face some financial fallout from foreclosures.
RESNICK: In the bigger areas, in the Miamis, in the San Diegos, in the Phoenixes of the world, these are $50,000 and $100,000 assessments.
By law, unit owners have to pay these special assessments. Resnick says the danger is that huge assessments could tip even more owners into financial crisis.
RESNICK: It's just a cascade effect of where, if you keep reducing the number of residents, you're ultimately going to raise the dues for everybody else that remains. And when people can't take it anymore, it usually means the death of the community.
I can't even imagine how I'd react if I received a $40,000 assessment that I had to pay... Pass out the smelling salts!