Drop in property owner fee payments hurting smaller communities

Property management companies in southern Beaufort County say they are seeing an increase in delinquencies on property owners association assessments in small communities, a problem that is leading to more aggressive collections in some neighborhoods.

Ron Fenstermaker, president of IMC Resort Services, a management group that oversees about 50 condominium and small housing communities throughout Bluffton and Hilton Head Island, said he's seen delinquencies grow "exponentially" in the past six months due to a variety of factors, including an increase in home foreclosures and generally tight budgets among homeowners.

He knows of one neighborhood where the delinquency rate is as high as 20 percent, but he refused to name it for fear it would lead to a reduction in property values.

Fenstermaker said he sees the highest number of assessment delinquencies in neighborhoods with a lot of investment properties, where the homes were bought to be sold for a profit when the housing market was booming. There are also more delinquencies in lower-priced neighborhoods, he said.

At least one upscale gated community in the area has not reported an increase in delinquencies. Peter Kristian, general manger of Hilton Head Plantation, said delinquencies in the plantation historically hover in the 4 percent range, and he has not seen that change. The plantation usually works out a payment plan with the property owner, he said.

But for small communities, just a few delinquencies can strain both property owners associations and dues-paying residents, Fenstermaker said.

For example, if 46 homeowners in a neighborhood of 246 houses don't pay their dues, "the burden falls on the other 200," Fenstermaker said.

Facing diminished budgets, POAs in some cases must cut back on services, maintenance and upgrades.

But the situation in southern Beaufort County isn't critical yet, said Fenstermaker, who has been in the management business for 11 years. Though he's seen plans to paint buildings and enhance landscaping come to a halt in some communities, associations still have money for necessary services, like pest control and pool maintenance, he said.

Raising assessments is an option, but one that places more of a burden on the dues-paying homeowners. Instead, IMC has begun to more aggressively pursue those who don't pay.

For example, the POA at Brighton Bay on Hilton Head Island, which IMC manages, is shortening the grace period on paying monthly dues.

Diane Williams, Brighton Bay's board president, said liens are filed on properties whose residents don't pay assessment within 60 days of the due date. If the owner doesn't contact the attorney after another

15 days, the POA will file a lawsuit. The POA also has authority to foreclose on residents' homes for not paying.

"If they're not going to pay, you've got to get them out as quickly as possible," Williams said, noting that the 153-unit Brighton Bay condominium complex has not had to cut back any services or planned upgrades.

Beyond more aggressive collection policies, Fenstermaker said, IMC has come up with a number of alternative methods, like taking away parking privileges, to get homeowners to pay their dues.

"It has put a dent in delinquencies, especially among people who rent," he said. "(Homeowners) lose a renter if they don't have a parking pass."

IMC also is allowing homeowners to come up with payment plans, if they can't afford to pay the fees all at once.

However, "if you default once, you're gone," he said. "People who don't pay don't like us much. We don't let them slide."

Katherine Bundy of Bundy Appraisal and Management in Beaufort, which manages more than 20 property owner associations including several in Bluffton, said she also has seen a noticeable increase in the number of people not paying dues during the past year.

"We've seen an increase in foreclosures, and therefore, an increase in people not paying assessments," she said.

She said yearly fees have to be raised to make up the costs of running POAs.

"Raising dues is the only alternative," she said. "I haven't seen services cut, but that doesn't mean it won't happen."