Delinquent condo owners face public shaming (© Jason Henry for The Wall Street Journal)Click to enlarge picture

Sid Schulman stands outside the clubhouse at International Village in Lauderhill, Fla. // © Jason Henry for The Wall Street Journal

Few things agitate Sid Schulman, who often shoots the breeze with other retirees and flirts with female friends at their condominium complex in Lauderhill, Fla.

But it galls him when neighbors stop paying their mortgages and maintenance fees and leave the cost of community upkeep to others. (Bing: What's the average cost of homeowner-association fees?)

"I am paying for these guys," says the 75-year-old, sitting poolside, a diamond stud in his left ear.

In 2009, he took matters into his own hands. Near the mailbox of each condo building, he posted a list of residents who were delinquent on their maintenance fees, with the message "Pay up or move out" in English and in Spanish. He also tried, unsuccessfully, to get the cable company to cut off service to nonpayers.

The public shaming angered some of those named.

"You know where I live — come and tell me that to me face," says Lorena Garcia, 36, who lost her job and ability to pay.

What's your home worth?

The storm that struck the housing market has strewn many casualties: lenders, builders, real-estate agents and mortgage-bond investors. Add to the list the comity of certain communities where residents live close together, some of them paying their mortgages and homeowners-association fees and some not.

As banks slow foreclosures amid concerns about sloppy record-keeping, some delinquent homeowners get to stay put even longer without paying. The delays are inflaming some neighbors who consider that unfair.

Read:  Faces of the foreclosure crisis

The condo complex Schulman and Garcia share, called International Village, has installed a fingerprint-scanning device at its central clubhouse. The scanner keeps residents who are more than 90 days behind on their maintenance fees from swimming in the pools, playing on the racquetball courts and using the game room, which plays host to canasta and mah-jongg competitions.

Article continues below

In a stark example of housing tensions elsewhere, the International Village homeowners association responded to the banks' foreclosure slowdown with an aggressive step: It began its own foreclosures. Florida law permits that under certain circumstances. A nonprofit homeowners association can take temporary title of residential units from people who aren't paying monthly fees that they agreed to pay.

Dip in value fuels tensions
The scene of these frictions is a 28-acre community in southeastern Florida's Broward County that spreads out on a peninsula, surrounded by a canal, a lake and an 8-foot stone wall. Oak trees shade the gated entrance to International Village, at the center of which is the Bavarian clubhouse, built with a 24-foot ceiling and stone fireplace. Three-story residential buildings, each with about 76 condos, are grouped according to their architectural roots, bearing names such as Yorkshire and Bordeaux. In the morning, residents gather at the pool for "aquacise."

Early marketing brochures for the complex, built in the 1970s, lured well-off retirees and snowbirds by promising "seventh heaven for people who insist on living first class."

Easy lending during the housing boom put the condos within reach of lower-income buyers. Michael Schenkel, a real-estate professional who owns three units in the complex and manages others, says that average prices for its one-bedroom condos peaked at about $120,000 in 2006.

Then Florida's sagging economy started costing residents their livelihoods and ability to pay. Garcia bought a two-bedroom condo in International Village in 2005 for $190,000, but she lost her job. With her cash dwindling as she went through a divorce, she says, she stopped making her $1,500 monthly mortgage payments in 2008.

Read:  Condo shopping? Ask these 7 questions before you buy

Special assessments pushed up the monthly maintenance fee she owed to the homeowners association. Garcia didn't pay that, either.

Now, owners of about 128 of the 832 units at International Village, a little more than 15%, are at least 90 days behind on their fees. Banks won't lend on residences in the complex until these delinquencies drop below 15%, Schenkel says.

The problems feed on themselves: "Banks will not write mortgages in communities with high delinquencies," he says, "and property values will not increase until we get financing from major banks." Schenkel says the value of one-bedroom units has tumbled as much as 75%.

With the homeowners association unable to collect maintenance from so many units, the complex is showing the wear: torn screen doors, roofs needing repair, carpets getting shabby. In 2010, the total of delinquent fees passed $1 million, equal to one-third of the association's annual budget.

"The foreclosure process takes over two years," Schenkel says. "You can get away with living for free for two years, not paying mortgage and maintenance."

Read:  Why a foreclosure takes forever and ever

Larry Kornblith, 82, takes a dim view of that.

"The ones who are delinquent are parasites," he says. "If you can't afford it, get out."

Residents who are current on their payments also disagree on how the homeowners association should deal with those who aren't current.

Read:  8 tips for choosing a foreclosure attorney

Doug Meyers, a resident and association board member who owns more than a dozen units and is up-to-date on his payments, voted against installing the fingerprint scanner. He was skeptical it would work. He says some neighbors accused him of protecting residents who were delinquent.

"They make it personal. It bothers me, personally. It hurts me," says Meyers, 54, adding that he now tries to avoid some fellow residents.

Others wanted the association to get tougher. Among these was Michele Tersigni, a 53-year-old resident who works as an administrator at a doctor's office. She won a seat on the homeowners-association board in early 2010 and became its president in May.

She quickly made changes, such as hiring security guards directly instead of through a service, to save money. Responding to residents' complaints about people staying in homes they were no longer paying for, she hired new lawyers who would be more aggressive.