Can you protect your association when developers fail?

We are already hearing stories about developers walking away from projects before all of the units are completed or sold. This is an association’s worst fear, but history shows that associations can emerge from these situations and remain solvent.

I run an association that was in that same situation in the early 90’s. The developer had a history of successful developments, but then the economy soured and banks were no longer lending money, the developer had no choice but had over the keys to this 166 unit complex with only a hand full of units sold.

Here are a few of the issues we experienced:
• A bank stepped in and attempted to run our association
• Units were rented by the new owner (the bank) to cover the costs of the monthly fees which were now their responsibility.
• The bank took over the efforts of selling and financing units – the same units they told the previous investor they could not finance.
• They were eventually forced to sell the complex for pennies on the dollar to an international investor because they could no longer hold the debt.

Each of these issues created their own problems for our unit owners. I am working on a detailed version of this document for our next Common Interest magazine. If you are interested in this topic or concerned about this possibility pick up the next issue of our magazine.

The good news is you can remain solvent and emerge from this type of nightmare as a healthy association. Hopefully we can provide you with a few ways that you can head off the problems we experienced and continue to experience as a result of investors that were more interested in profits than they were in the health of our complex.

Look for the complete article in our September Issue of Common Interest - Reserve Specialists/Finance/Banking.

Michael Zimmer is the President of The Meadows of Southington Condominium Association, Inc. Michael has served on the board of directors for this 166 unit complex in Southington for over 15 years and has held the position of President for the last 12 years. He can be contacted via email at mjzimmer@bigplanet.com. You can also read his postings on our association blog: caict.blogspot.com