REAL ESTATE

Neighbors: 'Zombie' condominiums also a drain

"Unfortunately, we are faced with (the issue) on a daily basis," one representative said.

Akiko Matsuda
amatsuda@lohud.com
Leslie Fulton, secretary of one of the homeowners associations at Heritage Hills in Somers, left, speaks with Karen Jahn, property manager with Heritage Management Services, in front of one of the several abandoned condominium units at Heritage Hills. The unit has been abandoned for about three years.

You've all probably heard by now about abandoned "zombie" homes.

Similar issues involving abandoned condominiums are less widely known — but can be just as troublesome for neighbors.

"It's been a huge problem, much more than people realize," said Southeast town Councilwoman Lynne Eckardt, who has been trying to bring attention to the problem on behalf of constituents affected by the issue.

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Zombie properties are those with their ownership in limbo: Mortgage holders have left, but banks have yet to take ownership of the properties through foreclosure.

Zombie homes affect many communities in the Lower Hudson Valley, particularly where property values have been slow to climb back since the recession. In those areas, some homeowners have chosen to walk away because their homes remain worth much less than what they owe, and they can't sell.

Neighbors of abandoned homes have raised concerns with elected officials because, as those abandoned homes deteriorated, they create blight and bring down their property values. That's led to recent changes in what the state requires of banks with control of those properties.

Issues with zombie condominiums, however, have been less visible because the outside of condominium complexes are maintained by homeowners associations at the cost of the member condo owners. That maintenance work, as well as other repairs, are shared by fewer people when one or more units are zombies.

"Especially in smaller condominium complexes, when, say, there's a capital improvement that has to be done, all of a sudden, you have fewer condominiums that chip in to do that," Eckardt said.

Associations may also pay to heat the abandoned units to keep pipes from freezing, she said.

The burden continues to grow in affected communities, where, in some cases, years have gone by since units were abandoned, Eckardt said.

'Zombie' impact 

The meticulously maintained streets and gardens in the Heritage Hills condominium development in Somers do not show any signs of distress. But at least one of the 30 condominium associations in the 2,600-unit complex has been affected by "zombie" units.

Two units in the 84-unit Condo 7 cluster have remained abandoned for about three years, after their owners died, said Leslie Fulton, secretary of the cluster's association. Both units were "under water," meaning that property values were less than what the owners owed. Families of the deceased have walked away, Fulton said.

Between the three years' of common charges and payments for the ongoing $1.5 million roof renovation project in the cluster, the remaining homeowners have paid about $70,000 extra to fill the gap, Fulton said. And they haven't seen the light at the end of the tunnel because the foreclosure process on the units hasn't started.

"The unit owners feel resentful of their obligation to pay to have these units maintained at their expense," Fulton said, adding that she has been calling the banks and government agencies to get their attention. "The roofing project was supposed to be a five-year project, but we're not going to finish paying for it in five years."

To make matters worse, even when abandoned units are foreclosed and sold to new owners, the association is unlikely to recoup unpaid common charges and assessments from the sale of those units: Property taxes and mortgages have priorities over the condo association's lien. Even if a condo association can go after a former owner in court, the process is likely to be successful only when that owner has the money available to pay back the debt.

Widespread issue 

Marty Watkins, executive vice president and chief operations officer with McGrath Management Services, which maintains about 100 condominium communities in Westchester, Putnam and Dutchess counties, also said abandoned units have been an issue in some of the communities that his company manages.

"Unfortunately, we are faced with (the issue) on a daily basis. It affects our operating budget. It affects how we conduct our businesses," McGrath said. "Sometimes they have to divert their expenses and increase their collections, which are not really suitable for most people that are on a budget. That's the reality of condominium life today."

Statistics on the number of abandoned condominiums are not available, but John LaGumina, a Purchase-based attorney with expertise in condominium and community-association law, said there were "hundreds" of them in the state, particularly where housing markets are still relatively weak, such as Dutchess and Putnam counties and northern Westchester.

South of that, the market is better, making a zombie condo situation less likely, he said.

"If I own a unit in lower Westchester, the value is increasing. Once (the value) gets higher than the loan, then the owner just sells it," LaGumina explained.

Slow process 

People affected by "zombie" properties, as well as some elected officials, have blamed banks for dragging their feet on foreclosures.

"What used to take nine months is now taking three, four, six, seven years and beyond. And these units are sitting vacant," said LaGumina, a past president of the Hudson Valley Chapter of the Community Associations Institute, a trade organization representing homeowner and condominium associations and management firms.

But banks maintain that the state's foreclosure system — which requires lenders to foreclose through the state court system — is keeping them from moving faster.

"It's well known that New York state's foreclosure time frame is one of the longest in the nation, at nearly 900 days on average," said James Bopp, past president of the New York Mortgage Bankers Association. "New York MBA and its membership recognize that this is a serious issue in the state and have been providing the New York state Legislature and the governor possible solutions and recommendations on how to get New York's foreclosure process in line with most other states, as part of our effort to help fix this problem."

Gov. Andrew Cuomo last month announced new legislation that would require banks and other mortgage holders to maintain abandoned properties even before the foreclosure process is complete. The state has also started collecting information on zombie properties, including condominiums, by setting up a hotline (1-800-342-3736) to report them paired with an online registry.

Senate Independent Democratic Conference Leader Jeffrey Klein, D-Bronx, who sponsored the legislation, said although the new law doesn't directly address issues with unpaid common charges, it will help reduce condo associations' burden in the future because the measure aims to expedite foreclosures on vacant and abandoned properties.

But Bopp is skeptical.

"It will most likely take years to work through the backlog of foreclosures that have been created by New York's flawed foreclosure process," he said.

Twitter: @LohudAkiko