When Everything Goes Wrong
June 10, 2013

On April 4, 2013, the Memphis Commercial Appeal ran an article on the Gardenwalk Condominiums in Raleigh.  Gardenwalk Condominiums is administered by Gardenwalk Council of Co-Owners, a Tennessee non-profit corporation (the “Association”).  Apparently, part of the assessments paid by Unit Owners at Gardenwalk Condominiums is used to pay for water.  This is not the water solely used for common areas but, rather, the water used in individual units.  In other words, the Units are not separately metered.  Consequently, water is billed as a common expense.

Over the years, based upon the article, the Association has had numerous financial difficulties stemming from the failure of Unit Owners to pay assessments.  In October 2012, the Association paid its last water bill to MLG&W (Memphis Light, Gas, & Water).  Since the Association has failed to pay its water bill, MLG&W has turned the water off to the entire Gardenwalk Condominiums in January 2013.  All Units have been without water now for months.  Any Unit Owners who remain were ordered by government authorities to vacate the premises by April 11, 2013.

By all rights, this is a horrible situation.  Every Unit Owner stands to lose their investment in their Unit because they may no longer inhabit their Units.  The Association has collapsed for two reasons.  First, many Unit Owners failed to pay their assessments as required by the Master Deed.  Second, those few Unit Owners that did pay their assessments failed to either increase the assessments to address the situation or take the necessary steps to collect the delinquent assessments from those who refused to pay.  Simply put, there is nothing at Gardenwalk that money would not have fixed had the situation been addressed early enough.  Certainly the nation is in difficult economic times.  But which is worse, an increase in assessments to keep the water going or losing your home?

Another interesting question to come out of the Gardenwalk Condominium situation is what will happen next?  Assuming the Association cannot address its financial problems and the governmental authorities refuse to allow Unit Owners to reside at the property, then ultimately the development will fall into a tax sale.  But, it should be noted that each Unit is separately taxed for real estate taxes.  Thus, tax sales will have to be done on each Unit separately.  Ideally, the County would end up running one tax sale on the entire development.  The development could then be sold for redevelopment, subject to each Unit Owners’ right of redemption.  So, for years the Units will sit vacant.  They will likely be gutted.  Per the news article, many have already been vandalized and stripped of copper.  The development may well become a home for vagrants and crime.

When asked what is the worst that can happen if an association does not take care of its common expenses, this is the worst.

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