HOAs have long been the enemy (or friend- depends on how they’re treating you today) of many homeowners. Responsible to enforce the CC&Rs and Association Rules & Bylaws, their job is to keep consistency among properties and ensure that everyone pays their fair share of dues and/or assessments.
However, with the economic downturn, more and more HOAs are left to shoulder the burden of those who can no longer afford to pay and banks who either pay late or try to stick someone else with the bill. As a result, the HOAs are swinging back. Put in the precarious position of having to maintain the continuity (& lights and common areas) for everyone else who does pay, they have to make do with whatever their budget and reserves will allow.
True story, I list bank owned homes and have for a few years now. After getting tipped off by my bookkeeper that the electric had skyrocketed on a vacant 2 story luxury townhome in Tempe, upon investigation late last night, I was SHOCKED to find out, someone had run 3 outdoor extension cords from my listed home to an outlet in the common area just next to the entrance gate to siphon off electricity for the common area of the community- I’m (well, really Fannie Mae) getting stuck with the bill to light up the main entrance!! (Note: as of when I wrote this blog, no one is available at the HOA management company to respond). My once $40-50 electric bills skyrocketed to $343 in ONE MONTH due to whoever had the gall to pull that stunt!
On the flip side of the coin, HOAs are having to get aggressive with non-paying homeowners going to extremes like hiring private investigators to track down those who ignore notices, placing liens on homes and even foreclose as though they were a bank. This has homeowners downright steamy despite the fact that homeowners are the ones they are trying to protect. In some instances where there is no management company, homeowners are pitted against their neighbors to try to keep the rules enforced and payments coming in.
Whereas once when you bought into a community, typically new buyers would pay a nominal transfer fee (frequently split or absorbed by the buyer or seller) of a few hundred dollars. Now, homeowners buying into communities may find themselves paying hefty fees or upfront sums to beef up the HOA reserve accounts AND find out that what they thought was a small monthly assesment is more like an albatross.
About a month or so ago, I was under contract with a client on a home in the tony Biltmore (Phoenix) area to purchase a luxury condo that had been picked up by the seller at a trustee’s sale and was being sold for a fraction of the going cost. Upon further investigation of the HOA financials, we discovered that the developer had not been paying his share of the monthly assessment on roughly 15 unsold units. After 3-4 years of nonpayment this equated to a $300K+ deficit in the budget and a domino-effect bout of lawsuits (homeowners against the developer, HOA against the developer, homeowners against the HOA)- it was a nightmare. Additionally because of the effect of 20% of the units not paying dues the monthly assessment went from roughly $500/mo to almost $800! Conventional financing also went out the door due to the number of non-paying units being so high. My clients promptly canceled after the fear of some unforeseen, unbudgeted cost that would result in some outrageous assessment hit them like a baseball bat.
The long and short of it is this: though they are easy to blame HOAs are entities struggling to maintain the status quo like many other Americans do every day. When push comes to shove, they have to protect themselves financially whether or not it suits all of their individual homeowners. The flip side is buyers have to be extra vigilant when purchasing in to communities where HOAs exist, especially for multifamily projects because HOAs have a greater liability for everyday costs with larger amounts of common costs than it’s single-family counterparts. Be sure to read through the HOA financials provided with a fine tooth comb.
If you don’t understand what you are looking at, ask someone who will. If you don’t like what you see, this is grounds to exit the contract. So, make sure to READ & UNDERSTAND all the details (CC&Rs, Rules/Regs, financials) BEFORE you complete the purchase. You wave your rights walk away after you close. If you are aware of what’s at stake, it can save you the hassle of finding out you’ve locked yourself into a community that will not work for you and your family.
Please feel free to send me your HOA questions and I’ll do my best to answer them. I’m on my HOA board and have had lots of fun interfacing with HOA management companies and other board members. 🙂