Community associations in Virginia are experiencing a collections blip

Finances are tight. The mortgage payment is made, but the condo fee is skipped.

As the recession widens and more people lose their jobs, some condo and homeowner associations are having trouble collecting fees to pay for upkeep of walking trails, pools and landscaping.

More than half of the 10,000 community associations in Virginia, regardless of location, are experiencing a collections blip, real estate experts and community managers say.

The predicament puts associations in a bind, since the delinquent homeowners are neighbors, not some unknown entity, members say.

"We have people who have lost their jobs at Circuit City and LandAmerica," said Gregg Clay, president of the Wyndham Foundation Inc., the homeowners association for community in western Henrico County with more than 1,600 single-family homes, town homes and condominiums.

Circuit City Stores Inc. and LandAmerica Financial Inc., once stalwarts for the local economy, have folded. Scores of other local companies have trimmed staff.

"Homeowners are calling us [about their fees] and asking us to work with them," Clay said. "I've been on the board for eight years and never had people call me and tell me they were struggling."

A delinquent account may end up in collections or a lien could be placed on a property. It's better to work out a payment plan than to let a late account get to that point, Clay said.

"We have been very fortunate and naive, since we haven't had that much of a delinquency problem," he said. "But we are not immune and, more than likely, the problem will rise in the future."

The Wyndham association may have had liens on one or two properties in the past for failure to pay dues. It now has liens on about 10 properties, less than 1 percent of all of the homes there, Clay said. The dues are $198 every three months for most households in the community.

"I don't want to take anyone to court," Clay said. "I want to work with them because they are my neighbors."

Liens prevent homeowners from selling their houses without first paying off delinquent accounts. The arrears include late fees and attorney charges.

Homeowner associations abide by their own governing documents, so methods for collections vary accordingly. But most can prompt homeowners to pay up.

They can revoke privileges, such as denying access to the pool or tennis courts. Or, more pointedly, they may not allow delinquent condo owners to park in the community, since parking places are common property.

Virginia has about 10,000 homeowner and condo associations, with 1,500 in the Richmond area, said David Mercer, a real estate attorney with MercerTrigiani, an Arlington-based firm with an office in Richmond.

"Many are taking a look at their budgets and seeing if they can pull in the belt. Most operate on a lean budget," he said.

Some associations file lawsuits against individuals for failure to perform contractual obligations, Mercer said. "If people have the money, 99 percent will pay. But in this environment, a lot of people don't have the money."

Associations can garnish wages, bank accounts or personal property, taking any number of distasteful actions, Mercer said.

The last resort is to foreclose on a property, but when people owe more than their houses are worth, a foreclosure is not a viable alternative, Mercer said.

Besides, the first and second lien holders -- mortgage companies -- would get first dibs, leaving little or nothing for other stakeholders such as homeowner associations, he said.

Frank Rathbun, spokesman for the Community Associations Institute, a 28,500-member trade organization in Alexandria, said half of all community managers nationwide are reporting serious or severe problems collecting homeowner and condo fees.

"If a house is in foreclosure or someone has lost their job, it is unlikely that they are paying their assessment [dues]," Rathbun said.

In a good economy, most common-interest communities deal with a delinquency rate of as much as 3 percent, he said.

"Now, depending on where they are located, it could be 5, 10, 20 or even 30 percent. And that is putting a strain on association budgets."

The hardest-hit areas are those with the biggest housing bubble and the most foreclosures, such as Arizona, California, Florida and Nevada.

Although Virginia has experienced a rise in foreclosures, the problem here is not severe, said Scott Meardon, president and chief executive officer of Community Group Inc., the Henrico-based company that manages 290 homeowner and condo associations in the state, including 180 in the Richmond area.

Common-interest communities here have not been forced to cut services or increase other people's fees to make up for dues that are not paid, he said.

The Richmond area has been somewhat recession-proof in the past, Meardon said. But with some of the larger companies going under, that could change, he said.

"We are certainly keeping an eye on the situation," he said.

Jane Pritz, community manager for Brandermill in Chesterfield County, said foreclosed houses there have been resold and not lingered on the market, thus not creating a collections problem.

"The board did not increase the 2009 assessments," Pritz said. "They felt that would help residents in a year when the economy is tight."

The dues in Brandermill, which has 4,000 housing units, are about $102 quarterly.

Robert Small, co-owner of ACS West, a community management company, said he has noticed an increase in delinquent dues in the past year. "It's starting to become a problem," he said.

ACS West oversees 80 associations in the Richmond area, including two nearly identical and side-by-side neighborhoods in Chesterfield, one of which is having a collection problem while the other is not.

Small declined to name the communities but said there is no apparent reason why one has trouble and the other does not.

Many associations have had to get creative to deal with the problem, he said.

Some, for example, have hired private process servers to deliver court subpoenas, requiring delinquent homeowners to go to court or face contempt charges.

"Delinquencies are everywhere," Small said. "They don't discriminate."

Contact Carol Hazard at (804) 775-8023 or chazard@timesdispatch.com.