The Impact of Arrears IOU...and You, and You

 As the recent recession has lingered on, co-ops and condo associations across  the region—from luxurious waterfront high-rises to sprawling suburban developments—have found more of their residents in arrears with their monthly fees. Some of  these people have lost jobs, and unemployment has forced them to prioritize  (and sometimes skip) their monthly bills. Credit cards and mortgage payments  often are paid first, followed by utilities and property taxes.  

 Condo fees can get back-burnered when a resident’s finances are tight—partly because of the fact that the association board members aren’t likely to show up on the doorstep of a resident in arrears and demand payment.  Thus, residents who are in arrears often don’t immediately feel an impact from the failure to pay.  

 Even so, there is a real cost resulting from shareholders and unit owners not  paying their share. Essential building maintenance sometimes cannot be done due  to lack of funds, or important capital improvement projects such as new windows  throughout the community may have to be put off indefinitely. Simply put, too  many residents failing to pay their monthly fees could ultimately lead to extra  fees for every resident—and can be downright disastrous if a major repair comes up and the HOA is caught  seriously short of funds.  

 Real Impact

 It’s a building, and being just one resident, not paying your monthly fees won’t have much impact, right? Wrong, says Denise Lindsey, vice president of Access  Property Management in Flemington. "Until it's explained, a lot of homeowners  don't understand that they are part of an association, and that the only way  the association gets its funding is from the homeowners' maintenance fees."  

 While a percentage of monthly fee scofflaws aren’t doing so out of necessity, most residents who don’t pay do so because they've fallen upon tough times. “The vast majority of people who are not paying are in economic trouble,” says Jules Frankel, who is with the accounting firm of Wilkin & Guttenplan, PC in East Brunswick. But sympathy for neighbors notwithstanding, “The reality is that everybody else ends up paying for those who aren’t paying.”  


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