Learn more about our management packages today —
Call toll free (888) 565-1226

How One Condo Association Went from Near Collapse to Solvency in Nine Months

How One Condo Association Went from Near Collapse to Solvency in Nine Months

July 22, 2011

In less than a year, the Venetia Country Club, an association in Largo, Fla., went from more than $350,000 in delinquencies—and near-collapse—to having reserves in the bank. In this week’s tip, we hear how board member Scott Simms helped turn it around with help from Tampa-based LM Funding.

“Venetia was days from having the whole complex’s water shut off and having no hurricane insurance,” says Simms. “I’d heard of LM Funding through a contact in the property management business. By the time I contacted them, we had a 55–60 percent delinquency rate to the tune of around $350,000–$400,000.”

Venetia’s board started by giving LM Funding a fraction of its delinquent units on which to pursue collections. “We didn’t give LM Funding every single unit that was behind,” says Simms. “We picked out about 20 units owned by investors who owed us $10,000–$12,000 and who we knew had no intention of paying us.”

How could LM Funding help? “We work with condo associations, not HOAs, because the statutes in Florida for each are different,” explains Frank Silcox, CEO. “We help them with their delinquent accounts by providing up–front cash in exchange for assigning to us the late interest charges and fees that have accrued on the accounts. We pay all legal costs and pursue recovery of the delinquent accounts. When we get payoffs, we retain the interest and fees, and the association gets the back assessments. To date, we’re averaging 92 percent recovery.”

How does LM achieve those results ? “What we do particularly well is on bank foreclosures, instead of settling for the statutory safe harbor amounts, we’re recovering 100 percent,” says Silcox. He’s referring to the Florida law that allows banks that have foreclosed on condos to pay to the association the lesser of 12 months’ delinquent assessments or 1 percent of the mortgage amount. “We’re averaging over 600 percent recovery on the statutory minimum.”

The difference between the statutory amount banks are required to pay and the total amount owners may owe can be substantial. “If you’ve got an owner who hasn’t been paying the assessments and the bank has stalled the foreclosure, there could be three years of back assessments,” says Silcox. “When banks foreclose, they’re obligated to settle up with the association. Often they’ll argue that they don’t owe the entire, say, $30,000 in delinquencies for a unit, but, say, $1,500, or 1 percent of $150,000 mortgage. We’ll challenge the banks on that.”

To learn more about our Turnaround Case Study: Venetia Country Club, see our new article.

Best regards,
Matt Humphrey

Printer-Friendly Format

Authors: Superadmin

Read more from Source Site