Law Suits & Courts

Communities find creative ways to collect homeowner fees

Posted on Thursday, June 30, 2011

The sun was getting high and Alex Diaz de Villegas was perspiring as he rode a golf cart across a Homestead community's 60 lushly landscaped acres.
He inspected recently planted palms and visited three newly built gatehouses where guards screen nonresidents by asking for identification.
"You would never think this is a public road with public access," said Villegas, who heads the South Dade Venture Community Development District. "Since we built [the gatehouses], the traffic count dropped about 20 percent. People used to cut through the neighborhood."
The road leads to 2,269 single-family homes spread over 16 subdivisions in the Waterstone I and Waterstone II communities.
The neighborhoods are located in a ZIP code that is plagued by some of the highest foreclosure and home loan delinquency rates in the nation. Yet Waterstone's upgrades and green expanses hide any sign of distress.
But like many homeowners associations, Waterstone II is struggling to collect maintenance fees from its property owners. HOAs have discovered they have little power to force homeowners to pay up.
Now, Waterstone II has struck a deal to transfer control of its clubhouse, pool, gatehouses and other amenities to the community development district. The CDD will use its taxing authority to collect fees from delinquent homeowners and pay for the upkeep of Waterstone II's amenities itself.
Not everyone is convinced giving the CDD control of the amenities is the way to fight revenue shortfalls. Waterstone II's sister community has rejected transferring its pool and clubhouse to the CDD, in part because it would open them up to public use.
Simple Strategy
For the CDD, the strategy is simple. Using its ability to levy taxes, the district agrees to incorporate HOA fees into its tax schedule. If distressed owners don't pay their taxes, the county sells tax certificates and gives the CDD its share, said William Rizzetta, whose Tampa company, Rizzetta & Co., manages 118 CDDs in Florida, including three in South Florida.
"The collection method for payment in a CDD is more stable, if you will," he said. "Just from an operational standpoint, it is a great benefit."
Villegas wants to capitalize on that advantage and persuaded Waterstone II's homeowners' association to sell its clubhouse to the district, whose board consists of owners from both communities. The CDD is to take over the clubhouse next January.
Villegas said the district can collect 100 percent of the homeowner fees to maintain the clubhouses, eliminating any shortfall caused by delinquent owners.
"Many of these homeowners' associations are struggling because between 20 and 40 percent of the owners are not paying [their dues.]" Villegas said. "That creates bad debt and that increases everybody's HOA dues."
Since the economy collapsed in 2008, community associations have been desperately looking for ways to collect from delinquent owners.
The district's pitch made sense to the owners in Waterstone II, where Villegas lives. The Waterstone II master association plans to transfer its clubhouse, gym and swimming pool, to the district on Jan. 1.
"The CDD is better equipped financially to withstand things that may happen to the community in the event of a catastrophic [incident] like a hurricane or flood," said Bruce Imhoff, a master association board member. "They are more financially secured than the master association."
He expects the district to have better access to low-interest rate loans for future improvements. The district could apply for government assistant programs like Federal Emergency Management Agency reimbursements in case of emergencies.
Villegas said the deal would eventually save owners money and generate funds to upgrade the facility.
"It would cost people the same amount of money to maintain the clubhouse minus the bad debt," Villegas said. "That would generate between $100 and $200 a year in savings to the homeowner and create about $380,000 a year to be invested back into the clubhouse."
South Dade Venture's plan to own a clubhouse is rare among community development districts, real estate experts said. But this could signal a trend among struggling homeowners associations within community development districts, said attorney Lisa Magill, a shareholder with Becker & Poliakoff in Fort Lauderdale.
When it comes to collecting dues, "A CDD has a lot more leverage than an HOA," she said, adding that CDD fees have collectionpriority over mortgages and HOA dues.
"It is something worth considering for HOAs," said Magill, who does not represent the district or Waterstone I and II.
Deficiency Cure
Also in Miami-Dade, when the South Kendall Community Development District agreed to buy the clubhouse at Tuscany Villas, nearly 60 percent of 581 owners in the community's CDD were not paying clubhouse fees, said Alex Sabe, chairman of the South Kendall CDD. A third-party entity owned the facility and kept raising fees to compensate for the budget shortfall, he said.
The CDD acquired the clubhouse in 2010. Collecting fees through property taxes has cured the budget deficiency, Sabe said.
"That was one of the main benefits that we saw because the receivable was so high that we needed a way to minimize that loss," he said.
Sabe paid $110 a month in clubhouse fees before the sale. Now, he pays $60 a month and expects the fees to be reduced to $35, once repairs and upgrades are completed.
"It is a significant saving," he said.
Some Opponents
Unlike their neighbors in Waterstone II, owners at Waterstone I oppose selling their clubhouse to the CDD. They say the downside of the sale outweighs the benefits. Once the CDD owns the clubhouse, it would be open for public use. The district could charge nonowners a membership fee and conduct background checks on prospective members, Rizzetta said.
"If you want to regulate who uses the facility, keep it private, keep it in the HOA," he said. "If you want a better collection mechanism for collecting money to run it, then the CDD would be a better alternative."
If the clubhouse were to be sold, the Waterstone I Master Association would not have a say in how the facility was run or its budget, said Mark Reyes, president of the association. Potentially, the CDD could get carried away upgrading both clubhouses, inflating the taxes.
"That drew the line for many people [in Waterstone I,] as they already felt the South Dade Venture CDD has overstepped its original bounds and purpose," he said.
The district was created in 2003 to issue bonds to pay for roads, sewers and drainage systems, lake maintenance and street lights, among other infrastructure.
Waterstone I homeowners pay the CDD about $700 a year to pay debt. Owners in Waterstone II pay about $1,000 yearly. Also, the owners pay $633.50 a year to maintain the common areas of the CDD, Villegas said.
CDD fees have increased as the district issues new bonds to complete more projects. For example, the district issued a 20-year public safety bond in 2008 to pay for three guard houses and widen roads, Villegas said. The cost per home for the bond was $85 a year for 20 years.
Reyes said his Waterstone I neighbors would see little savings under the proposed plan to transfer their clubhouse to the CDD, so there wasn't much of an incentive to take the deal.
"Our budget for the clubhouse is $26.50 a month, so many people failed to see any savings," he said.
Paola Iuspa-Abbott, Daily Business Review


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