Pipes freezing. Strangers changing the locks.
These are difficult times at Wingate Place on the South Hill. Two of 10 units at the condominium have been vacated by owners who could no longer make payments.
The remaining residents are paying the heating bills to prevent more water damage. Maintenance fees, now split eight ways instead of 10, are also becoming burdensome, especially to the three owners on fixed incomes.
Meanwhile, Wingate owners’ association president Brian Pangrle says he has been playing hide-and-seek with banks holding mortgages on the abandoned units. He wants them to pay the fees.
He suspects a lender was behind the change of locks on one empty unit. It took several phone calls to obtain a key from the property preservation company that did the work. He threatened a second group of intruders with trespass charges and called the police.
“It’s like layers of the onion,” he says, with mortgage servicers reluctant to unmask banks that do not want the units. If the banks foreclose, not only do fees become their responsibility, but they also must take substantial losses on balance sheets already running red with bad debt. When they do foreclose, they can dodge fees for some time by simply not informing the owners’ association.
Pangrle, a lawyer, says he can force the issue by filing a foreclosure action himself, but that will cost about $6,000, money neither he nor his fellow owners can afford to spend. Washington is among the few states that give homeowners associations a “super lien” that puts them ahead of mortgage holders in a foreclosure, but the most they can recover is six months worth of fees.
Owners fed up with increasing maintenance bills can try to sell their units, but with the likelihood of taking a substantial loss themselves. There are 224 condos for sale in Spokane County, almost a two-year inventory considering only 14 sold in November.
The squeeze between mounting fees and declining values is hardly unique to Wingate Place. An oversupply of condos has hurt values everywhere: Consider the markdowns to fractions of original listing prices necessary just to rally bidders for the recent auction of units at The Village at Riverstone in Coeur d’Alene.
The Federal Housing Administration, which has taken its lump on condo financing, will impose new lending standards Feb. 1 that will make qualifying for its insurance much more difficult, especially for small associations like that headed by Pangrle.
He and Brian McLean, 2010 president of the Washington State Chapter of the Community Associations Institute, say the pressures of running a condo association during a period of severe economic stress are beyond the abilities of most residents. They are usually amateurs, yet big condo projects represent millions of dollars in investment.
No one wants to raise fees, McLean said, but exhausted reserves are a big red flag to any buyer who takes the time to examine the resale certificate required of sellers. Too few buyers pay the certificate the attention it deserves, he adds.
The condo group would like some relief from the Legislature — an extended super lien, disclosure when a bank repossesses a unit — but McLean says his expectations are low given the budget deficit lawmakers will be focused on.
Pangrle warns of a potential “snowball” effect if ever-higher assessments push more owners out, increasing the burden on those who stay behind.
You can only peel onions for so long before you start to cry.
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