CLEARWATER — Island Escape is a nice little condo complex with what has become a big problem throughout Florida: an owner who isn't paying his condo fees.
The occupant of Unit 110 is nearly $7,500 in arrears, forcing the other nine owners — some of them on fixed incomes — to pay his share of maintenance costs as well as their own. Adding to their pique is the fact that the tardy owner also hasn't paid his mortgage in two years, meaning he has been enjoying the waterfront life for free.
"Here's a classic case of somebody using and abusing the system,'' says Wesley "Skip'' Shepherd, president of the condo association. "We're paying the insurance, the water, the sewer, the taxes on his place and the guy's living there for nothing."
As the economy staggers along, more associations face that problem.
"The issue of owners defaulting on their maintenance payments is becoming rampant,'' says Ryan Poliakoff, author of New Neighborhoods, a consumer's guide to condo living.
"It's not like rent and there's a landlord who can take a hit,'' Poliakoff says. "Instead, the other owners have to pony up, and it's either written off as bad debt by the association or the association is simply going to have to increase their dues to cover owners not paying.''
Poliakoff, vice president of the 240-unit Ocean Palms in Hollywood, says there are South Florida condo complexes in which 40 to 50 percent of owners are in arrears. One association was so strapped for money that the local utility company temporarily shut off the water to all units.
The cost burden is even greater at Island Escape because it is small, Shepherd says. "We're just little guys. We ain't got 100 people in here where we have a gigantic income. My wife plants flowers. Other people do things around here.''
Shepherd called the St. Petersburg Times after reading a story about Larry Holzer, the owner of Unit 110. Although Florida authorities revoked Holzer's appraisal license three years ago, he started a company that hires appraisers, several of whom say he has failed to pay them.
Holzer bought his condo on Island Way for $335,000 in 2005, the peak of the real estate boom. In February 2008, Deutsche Bank started foreclosure proceedings, but those were automatically stopped when Holzer declared bankruptcy. A judge dismissed the case because Holzer failed to make required payments to creditors.
In 2008, the Island Escape condo association also tried to foreclose on Holzer for not paying his condo fees. It won a judgment last June, but the foreclosure sale was canceled when he declared bankruptcy again.
Since moving in, Holzer has made only sporadic payments of his fees — which are now $325 a month — and owes $7,492, Shepherd says. As a result, the other nine owners each have to pay $33 a month extra, or nearly $400 more a year.
"It's caused hardships on everybody else at a time when everybody's budget has been made a little tighter,'' says Shepherd, a marine consultant whose business has slowed in the recession.
Like Island Escape, many condo associations are starting their own actions to evict owners because of the long delays in bank foreclosures.
In many cases, "banks are choosing not to foreclose because they know that once they do, they become responsible for association maintenance fees,'' says Poliakoff, the condo expert. "Another trick is the situation where banks foreclose and get a judgment but don't let it take effect. Then they have an extended period in which they don't bother to take possession and they don't have to pay maintenance.''
Thomas McGrady, chief judge of the Pinellas-Pasco circuit, said there have been "a fair number'' of liens filed by condo associations in the past six months. "I know it's creating problems for them,'' he says.
But the practical effects of the liens can be limited.
Whoever holds the first mortgage, typically a bank, has priority over the association lien and would be the first to be paid off if the property is sold to a third party at a foreclosure sale. If nobody bids on the property, the lender takes title. In that case, under Florida law, it is only responsible for condo fees going back six months or 1 percent of the total loan value, whichever is lower.
Among pending bills that would make life harder for delinquent owners is one by state Sen. Mike Fasano, R-New Port Richey. It would bar such owners from using recreational facilities maintained by the association.
Holzer did not comment on the foreclosure actions. In an e-mail, he said "the damage (from the Times' recent story) has been sustained and is quantifiable.''
In December, a judge dismissed Holzer's bankruptcy case for failure to make payments. The Island Escape association will be back in court Feb. 22, hoping to collect the condo fees or get Deutsche Bank to resume its own foreclosure action, Shepherd says.
"Somebody has got to take responsibility for this property that we're not only accumulating taxes on but providing services for and maintaining. Why are we supporting him when we have a hard enough time supporting ourselves?''
Susan Taylor Martin can be reached at [email protected]