HOA's in trouble?

User Forum Topic
Submitted by Chance the Gardener on January 10, 2007 - 11:30pm

What happens to an HOA when a significant number of units in a building go into default? When I am looking at units in these "upside down" buildings, should I be concerned about the health of the HOA? If the HOA is cash poor b/c 10% the units are not paying monthly dues as they slip into foreclosure, won't the costs be spread to the other units?

Submitted by anxvariety on January 10, 2007 - 11:55pm.

Maybe the HOA's landscapes buddies just get a little less slush.. How do HOA's determine who to contract things(jacuzzi repair, landscape, fencing) out to?

Submitted by RottedOak on January 11, 2007 - 6:08am.

The board of the HOA would either make the contracting decisions directly or turn them over to a professional management company. Any financial shortfalls caused by defaults on HOA dues could only be passed on to other owners if the dues were changed or a special assessment passed. That would typically require a vote of the association to approve. So it would depend on the attitudes of the owners in that building. They might prefer pay more to keep all their amenities, or they might prefer to cut back to avoid an increase.

Submitted by tugg49 on January 11, 2007 - 8:38am.

May not spread but if there's a major maintenance issue the "special assessments" can be painful. Our HOA "team" put off doing the roof and a rainstorm flooded a large unit via the drywall ceiling and it cost us a fortune for the deferred roof and repairs to the unit. We were in a small 8-plex and it hurt. Get the financial staement from the HOA and see how "liquid" you are.

Submitted by Carmin Gaedelica on January 11, 2007 - 8:39am.

Last time I was part of a condo association, the defaulted dues were treated as a lien against the property which has to be resolved in the sale.

Our assoc took a pretty hard stand and sicced the collection agencies pretty quickly on deadbeat owners.

Submitted by Chance the Gardener on January 11, 2007 - 9:16am.

CG - I think time have changed. Most homes are upside down, many with a second or third mortgage and with tax liens. I can't imagine that HOA's have much success getting their's.

Submitted by Cow_tipping on January 11, 2007 - 9:28am.

Screw the damn HOA. I am the freaking president of mine, and we are approaching 50% default. We have to raise the dues just so the defaulters get a free ride while the rest of us pay more and more and more ...
I'd never buy anything that has any community amenities. Imagine if our dues were 5 times the measly 90 a quarter they are now. I know of communities where that is the case and it sucks. Ours is going down in flames. We have a play ground and a sign and a common area. All of which need to be maintained ... yuck.
People need to stop letting builders put houses in HOA's cos sometimes thay can save by not buying lights and what not, but the people living there pay for it forever.
Cool.
Cow_tipping.

Submitted by 4runner on January 11, 2007 - 9:41am.

50% default rate on $360 a year??? That is un-f'in-believeable. Start liening with a vengeance.

If you feel comfortable posting it, what is the name of your HOA?

Submitted by masayako on January 11, 2007 - 10:10am.

Just to put things in perspective, if NODs jump SO HIGH to the point where HOA becomes a problem, well, my friend, HOA would be the last thing we worry about.

Submitted by Chance the Gardener on January 11, 2007 - 10:15am.

I'm not sure what you mean. If I can afford to live in the building, and I'm going to live there long term, what affect will rampant NOD's have on me other than their impact on the HOA and the upkeep of the common areas? If I'm buying the condo to live in for life, all I care is that the condo remain livable and that my monthly costs don't skyrocket b/c others aren't pulling their weight. As long as someone is paying the HOA, I'd actually prefer that the building be empty!

Submitted by Cow_tipping on January 11, 2007 - 10:19am.

Asbury Place HOA, managed by Hawthorne management company. I'm in Charlotte NC.
We managed to get 50% defaults in under 4 years. That is the long standing tradition of alienation ... where they'd raise the dues one month and throw a block party next month.
They'd also break every rule in the book first because the boards were a$$holes and now cos they are clue less and have never read the book.
My goal is to have this freaking thing bankrupt by the end of the year. BTW our brilliant Manager forgot to send out fee notices to people ... running 2 weeks, damned if I remind her. There goes the next year ... or this year. I am hell bent on taking it to pieces and tossing it into the street.
Watch this space ... unlike president bush I am not clueless and I definetly am not going to be led by my nose by the rest of the corrupt idiots.
But all of this will do nothing for those of you who live in SD or elsewhere. Vote with your dollars ... dont buy anything that has a HOA, and heck dont buy anything that has a community pool or whatever crap. Pitiful, our rinky dink play set area is so messed up ... I dont even freaking know why developers put that sheite in there.
Cool.
Cow_tipping.

Submitted by no_such_reality on January 11, 2007 - 11:14am.

Get the financial staement from the HOA and see how "liquid" you are.

And look with a cynical eye. I lived in a townhome complex that was 35 duplex structures. Each two stories high and 1300-1500 sf per unit. Essentially 35 large homes.

The complex had $350,000 in roofing reserves and was at 20 years with original shaker roof.

Not only did the HOA blow through the $300K downgrading to an asphalt shingle, but because of unforeseen termite damage (well known in the community), a special assessment of $3500 was due. This is after all bidders got the chance to inspect 3 units.

So, think what a repair is going to cost you in an SFR, multiply by two, and add a factor for incompetence and graft.

Want another one? My current rental last year needed to do terminte tenting. Since the HOA newsletter comes to the house, I know the special assessment for the owners was $3000, luckily it came with a monthly option $94/month for the next four years. Plus, all the owners had to foot themselves off to a hotel for a three day weekend.

Submitted by PerryChase on January 11, 2007 - 11:25am.

My friend lives in an old high-rise building in Chicago. His HOA are about $600/month. The HOA wants a special assessment of something like $5000 per window to replace the old windows. If I remember well he has 9 large windows = $45k!

Submitted by Cow_tipping on January 11, 2007 - 11:31am.

Guess what ... we are at no reserve and we have a crapola shingle roof on the 56 duplexes that are supposed to be replaced. Those are 4 years or so old and I'd probably not anticipate any more than 4 more.
The T/H dues are 90 a month houses are 90 a quarter and they are both really really at 0 reserve. We are supposed to clean their gutters and maintain their lawns and what not, and we are dropping in the red, fast ... very very fast.
Cool.
Cow_tipping.

Submitted by ph90802 on January 11, 2007 - 12:53pm.

My experience was with a condo association in Long Beach, CA. I lived in an 81 unit building for ten years starting in the mid-90's. I'd bet that 75% of the units were foreclosed on at least once. Downsides to the association included extremely tight finances, lowered reserves, deferred maintenance, etc. Quality of life issues included some really scary tenants moving in, too many people in some units, increasing number of security issues and break-ins as the neighborhood and building suffered, cars broken into in the "secure" underground garage because scary tenants wouldn't wait for the gate to close - which allowed undesirables to sneak in. Also we had additional maintenance to the pool and pool area restrooms because of misuse/abuse by low-rent tenants and their kids, additional maintenance to building exit doors and related hardware and more frequent maintenance on elevated walkways (replacing the carpeted runners) and elevators due to the increased frequency of move-ins and move-outs.

You may not be worried because you plan on staying there forever, but you're going to hate it when it starts to resemble Baghdad outside your front door. The HOA needs to be firm in its resolve to keep the quality of life in the building up. If tenants are a problem, start pestering the landlord, fining him for multiple tenant violations until it's easier for him to just evict the damn tenants and re-rent it. The minute anyone's late with dues, hire an attorney and start liening, garnishing wages, etc. The squeaky wheel gets the grease and once they realize they're paying your attorney's fees on top of their dues and late fees, you'll become a priority in their payment routine.

Pete

Submitted by Carmin Gaedelica on January 12, 2007 - 9:29am.

...start liening, garnishing ...

Precisely the point I was trying to make.
We had a lax association (and HOAs are totally dependent upon board leadership for good or ill) that allowed too many of the rules to be ignored.
Once we started assessing liens and our management company started charging late fees most (note the qualifier) of the deadbeats, including non-resident owners, straightened up.
Of course, the real key in condos is the owner to renter ratio.
I would also say that associations that resist raising fees end up not keeping up with the maintenance.
With a lot of effort (and expense) we managed to clean up our place but as a result of that experience I will never go condo again - at least until I'm too old to mow and paint myself.

CG

Submitted by Cow_tipping on January 12, 2007 - 11:19am.

We are 130 some houses (detached SFR's on .2 acres and up) and 56 attached duplexes. We have a high owner ratio - almost 90% I would say. generally its all very good. Our board has a long history of alienation and we are leining the delinquents. but the basic idea is, we want to cut it loose. No more association. Pay till you're caught up if you are delinquent and that ends it. I hope that's what we end up doing.
Cool.
Cow_tipping.

Submitted by ph90802 on January 12, 2007 - 2:09pm.

I had one other experience when I lived in Mesa, Arizona that might interest some of you. It was condo, but the units were two story and in clusters of 4-6 units. The association paid for the water and each unit had a separate exterior water main with shut off valve in case of maintenance/emergency.

Since the association was paying the water bill, we were effectively the utility provider. So when you got too far behind on your dues (usually absentee landlords), we had a plumber out to shut off the water by removing a section of the supply line and capping it. In order to have the water turned back on, the owner had to pay back dues and fines PLUS the plumber's fees to come out twice.

One owner tried to complain to the health department but they agreed that we (the HOA) were acting as the water utility and therefore were justified in shutting off service if the bills were past due.

Let me tell you - that cleared our past due problems up QUICKLY. Tenants won't pay rent on units with no running water and they get really pissed off when told that their landlord hasn't been paying his bills but he requires them to pay their rent on time.

Pete

Submitted by tibuan on February 24, 2009 - 2:05am.

spam post deleted

Submitted by macromaniac on February 24, 2009 - 8:33am.

Bottom Line:

Don't buy condominiums. Buy SFR's with no HOA. Trust me...you could create a whole TV sitcom around this...

Submitted by CDMA ENG on February 24, 2009 - 9:48am.

macromaniac wrote:
Bottom Line:

Don't buy condominiums. Buy SFR's with no HOA. Trust me...you could create a whole TV sitcom around this...

Don't you mean drama?

:P

CE

Submitted by jpinpb on February 24, 2009 - 10:26am.

More like reality tv.

Submitted by urbanrealtor on February 24, 2009 - 11:56am.

Most of the business I do is condos.

I have found that the biggest deciding factor in value is the competence of the management.

The biggest problems are always with the small (like 8 units) complexes that are self-managed.

My favorite was a couple of months ago where the "president" of the HOA had not held a meeting since 2006 and was currently running a deficit with a reserve account funded to the tune of about 30%.

Nobody even had a copy of the cc&r's and the insurance was insufficient for any type of lending.

In that case, I strongly suspect the president was just keeping the dues.

Even in the meltdown complexes, the professionally managed hoa's tend to minimize the likelihood of insolvency or unexpected assessments. Of course that does not eliminate the reality of living in a common-interest development.

Submitted by Diego Mamani on February 24, 2009 - 6:17pm.

I think this is an interesting subject. Some time ago I thought of lending money to HOAs to try to get some decent returns. But, what collateral can they offer? Liens on all the houses there? I would need to first do title searches to find out how many houses have any equity in them.

Submitted by davelj on February 24, 2009 - 6:38pm.

Diego Mamani wrote:
I think this is an interesting subject. Some time ago I thought of lending money to HOAs to try to get some decent returns. But, what collateral can they offer? Liens on all the houses there? I would need to first do title searches to find out how many houses have any equity in them.

Banks lend to HOA's routinely. They get a senior lien against the HOA's cash flow (dues). It's obviously not riskless, but if you put yourself at the very top of the payment chain - before any other expenses get paid - you should get paid back if the loan amount isn't absurd.

Submitted by Diego Mamani on February 24, 2009 - 7:35pm.

Thanks Dave. That sounds nice!

Submitted by paramount on February 24, 2009 - 11:33pm.

Our HOA hired Merit Properties to manage the day-to-day needs of the community.

Merit always seems to get the contract renewed, although I have I would never recommend Merit to any HOA.

We pay $92/month - if I ever move I will NEVER buy in a HOA again.

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