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Helping Condo Owners Budget Bad Debt

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By RICHARD WHITE

Tribune correspondent

Published: January 25, 2009

As you know many condo associations are dealing with some residents' inability to pay assessments as owners face foreclosure. As a result of the rules governing foreclosures, for the first time our association expects to incur bad debt expenses this year.

Do you have any advice on how bad debt should be handled in developing the annual budget and on the financial books of the association?

JL

Naples

Get guidance from your accountant and be savvy in developing your budget. Keep your members aware of the shortages. Once the budget is approved, as the weeks pass, you may find that the bad debt makes it impossible for the association to afford necessary repairs, replacements or services. At that point you may need to approve a special assessment.

Many homeowner associations have members who are delinquent in paying their annual fees. If an HOA board of directors instructs its attorney to start a lien foreclosure on a property because of nonpayment of the dues, and the property comes up for foreclosure bid on the courthouse steps, can anyone, including other association members and the board members, bid on the property?

GT

Riverview

If the property is foreclosed and the judge orders a public sale, anyone can bid on the property. The sale will include repayment of the outstanding senior claims. You would need to make sure you know which liens or claims will remain on the property.

It is called a public sale so anyone can bid. But consult professionals before you bid on any foreclosed property so you know what you're bidding on.

Richard White is a licensed community association manager. He does not offer legal opinions; any other questions and comments concerning association operations can be sent to Richard White, 6039 Cypress Gardens Blvd., No. 201, Winter Haven FL 33884-4115;

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