Condos Getting in Trouble

SUBHEAD: Condominium boards on Maui are being drained as maintenance fees dry up. This will hurt tourism.

Image above: Kauhale Makai Condominium on the ocean in Kihei, Maui, Hawaii. From (

By Harry Eagar on 26 May 2010 in the Maui News - (

A condo owner who had his water shut off after he stopped paying common area maintenance fees said he could get by for a while, but condo associations on Maui may not fare as well.

Nai'a Properties President Penny Munroe, who has managed multifamily properties on Maui for 15 years, said two of the condo associations she works with are on the verge of collapse because so many apartment owners have fallen behind on their fees.

"I have never run into this before," Munroe said.

Munroe said the Condominium Council of Maui has been trying to educate condo associations for a year and a half about the looming financial crunch. Nai'a has insisted that its clients write budgets that anticipate uncollected debts and prepare to manage shortfalls.

Ron Wilson was featured in a story Sunday by The Maui News about condo owners who fall behind on their fees. He said his association, Kanani at Wailea, is not in danger of financial collapse but is having trouble collecting from members like him who cannot pay their maintenance fees.

Wilson's condo was foreclosed and sold at auction, although he is continuing to live in the unit until Bank of America tells him to move out.

After he stopped paying fees, his association warned that it would cut off his water if he didn't settle the debt. Wilson filled buckets and tubs with water, and his service was turned off Sunday morning.

"It's a good lesson in conservation," he said Monday. "I realized how much water you waste and how much you really need."

He said he "could hold out all summer," but since BofA will have to file notice of its takeover within a few days, the bills will then be the responsibility of the bank, which should answer at least part of the Kanani association's problems.

Associations have few options when they cannot collect, said Munroe, but she was surprised to hear that Hawaiiana had followed through on its plan to shut off water. Hawaiiana did not respond to inquiries.

Munroe is very worried that associations with big accounts receivables are going to fail. "It's going to start happening," she said. "What with the foreclosures, the filing for bankruptcy and the lease rent negotiations, people just cannot pay."

Two of her clients are very shaky, she said. The boards have done what they can to cut expenses, including deferring maintenance and cutting services.

Munroe recently attended a conference on the Mainland, where condo associations also are facing this problem, although the amounts of money are often larger in Hawaii.

"They're in the same boat," Munroe said, who met with other associations to share ideas about how to deal with the problem.

There is little precedent to suggest what options are available. As far as Munroe knows, only one condo association in Hawaii went into bankruptcy, some years back, and that was not a matter of finances.

She is also concerned about the snowball effect of condo budget cuts. It's bad enough when services are cut for full-time residents, but cutting services for units that are run as short-term rentals can drive away tourists even more.

One of the Nai'a's nearly broke clients is entirely investor-owned, all absentees, with no resident manager and no on-site presence, she said.

Boards did not expect such problems, she said, and already one board member she knows has resigned, "because he couldn't deal with it."

"We have a well-trained, large team of attorneys and other experts" on Maui who are exploring every avenue for rescuing the finances of hard-pressed associations.

Wilson said that isn't a problem at Kanani, where he was board president last year. It has 32 units, of which only three are not paying dues: his place, one that was never occupied and one that is in foreclosure but occupied by tenants.

There was no point in shutting off the water on the unoccupied unit, and it would not make sense to shut off the tenants, who are not responsible for the dues, he said. That left him.

"I'm camping out," he said. Friends have called, offering him a place to shower and tips on finding a new home.


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