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Touble in "Condo-ville"

By Peter Olson, Esq.

Saw this sobering article entitled Collateral Damage for Condo Owners. It's a sad tale of the impact that foreclosures are having on unit owners who haven't had financial difficulty themselves when their fates are tied to others due to the shared responsibility that is condo living.

Barbara Sanz has never missed a mortgage payment, but the plunge in real estate is punishing condominium owners like her anyway.

Four years ago, she bought her first condo in a glassy new Miami tower when the building was filling up. Now nearly one in six residents in the 43-story building is battling foreclosure and their contributions to the building association are shrinking. Each of the remaining owners has had to chip in an extra $1,000 assessment and $50 more a month for cable and Internet. That is on top of Ms. Sanz?s $450 monthly maintenance fee.

Even though she pays more, her building has broken washers and dryers and unusable exercise equipment, and her hallway is spotted with mold.

The question I'm asking myself is how does one protect themselves hypothetically from buying into a building where there are a high number of foreclosures? The 22.1 disclosures required by the Condo Property Act can be helpful but I can envision scenarios where the 22.1 "snapshot" wouldn't tell the full picture. I suppose the level of reserves or association savings is even more important now with the foreclosure concerns. If the condo association is small enough you could do a quick look at the recorders office to see if there are any lis pendens notices on any properties but that's not a fail safe. And that's probably not realistic if it's a 300 unit high rise or something.

Any ideas?

Full post as published by Closing Real Estate in Chicago on June 25, 2008 (boomark / email).