From the Atlanta Journal and Constitution:

Neighborhood pool parties, flowers at subdivision entrances and lifeguards.

More homeowners are behind on paying neighborhood dues this year, say property managers and lawyers who represent hundreds of homeowner and condominium associations around metro Atlanta. Worse, more associations are learning firsthand how home foreclosures generally nullify liens put in place to get months’ or years’ worth of unpaid dues.

The result: More homeowner and condo owner associations worry they won’t have enough money to make budget this year. Some have already cut services to make up for the shortfall. The troubles could add pressure to increase dues when neighborhoods plot out next year’s budget plans this fall.

“In 26 years we’ve been in this business, I’ve never seen the percentage of delinquencies as high as they are today,” said Gavin Cobb, the president of Sandy Springs-based Heritage Property Management, which he said represents more than 300 associations. “We have some communities that are in excess of 25 percent” of homeowners past due.

and:

But lately that strategy has fizzled. The rise in foreclosures is sending more homes back to banks for less than what is owed, leaving the associations’ liens worthless. Neighborhood leaders still can go after the previous homeowners personally, such as trying to garnishee wages, but many communities simply cut their losses and write off the debt.

It’s an increasingly common dilemma.

“Foreclosures are now affecting every community association out there,” said George Nowack, managing partner of Atlanta-based Weissman Nowack Curry & Wilco, which represents about 850 associations. “Some had never seen them before. Some had always had a lot and now are seeing even more.”

Compared with last year, Nowack’s firm has sent out about 20 percent more warning letters for past-due debts of at least $300.

At Country Club of the South, an upscale, gated community in north Fulton, leaders saw worrying signs while trying to collect on dues of $1,405, payable every six months. The fees pay for everything from security to pool upkeep and a recreation center.
The neighborhood hasn’t reduced services, but leaders have had to be more aggressive this year in pressuring neighbors to pay up, said Carol Doerfler, director for the community’s homeowners association. They sent out additional warning letters and made personal phone calls.

“We’ve been hitting them hard and heavy,” Doerfler said.
Extra collection efforts tend to add extra costs at a time that some associations can ill afford it.

“They are getting hit on all sides right now,” said David Grace, whose Grace Management is a Stockbridge-based company that helps associations collect funds and prepare financial statements. To make up for continued shortfalls, homeowner associations can try to increase dues for next year, but it’s likely to be an unpleasant and unpopular strategy.

If the troubles continue, association leaders may have little choice, Grace said. “There is going to be a lot of soul-searching at the end of 2008.”

More spillover as the housing market continues to hurt.