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Benefits of Community Associations Part 1: Are HOAs really as bad as some portray?

 

Community Associations have been the subject of a lot of bad press lately. An Associated Press article is typical of news reports that lambast associations. The article tells about a 55-and-older condo complex in Florida. According to the article, units in the Inlet House condo complex used to be worth $79,000, but sold for as little as $3,000 after rats started chewing through toilet seats and sewage started leaking from the ceiling. The article goes on to vilify the condo association for levying a $6,000 special assessment on residents and then foreclosing on owners who don’t pay their dues.

In its eagerness to blame the condo association for the woes of these senior citizens, the article and many blogs pointing out the “abuses of HOAs” miss an important point: the association may be the only group really looking out for the interests of the owners. Let’s look at what the article does not allege: it does not allege that the Association was responsible for the rat infestation or the sewage leak and it does not allege that the Association could have prevented the housing meltdown that contributed to the decline in property values.

On the other hand, by levying a special assessment to pay for plumbing repairs, the association not only fulfilled its obligations under the covenants; it corrected a health hazard by taking steps that will hopefully help increase unit values in the condo complex. ­­­­Conversely, by refusing to pay their dues, a minority (17 of 60 units in the complex are delinquent) of the owners make their neighbors shoulder a higher percentage of the cost than they deserve.

This scenario is replicated in communities all over the country. Associations, staffed by volunteer board members, provide valuable services to owners by enforcing covenants and maintaining common areas that directly affect property values and the ambiance of the neighborhood. Occasionally owners will disagree with a particular bylaw or assessment, but when they respond by refusing to pay, they only pass on the problem to their neighbors. As more owners stop paying their dues, the costs multiply for everyone. The association then has the unsavory choice of raising dues for the people who do pay or taking action to collect from the people who don’t.

The current mortgage foreclosure crisis has aggravated this situation. In a survey of 1,500 community managers, only 19% reported that the rate of assessment delinquency in 2005 (before the foreclosure crisis) was higher than five percent. Now, 65% of the responding community managers reported delinquency rates above five percent. That increase in delinquency translates, in many cases, into higher dues and assessments for those who are paying, as associations attempt to compensate for the lost revenue. Despite this downturn, an overwhelming majority (71%) of people who live in neighborhoods with associations continue to have favorable opinions of their experience living in a community association.

When an owner gets seriously behind in payments, the association has the option, like any creditor, of placing a lien on the property and foreclosing. Whether foreclosure is practical in each case depends on a number of factors, including the amount of the debt and the equity in the home. If enough owners are not paying their assessments, foreclosure may be the only way to collect funds for important maintenance and repairs. An owner who persists in not paying dues and assessments may force the association into foreclosing.

Every situation is different, every person is different, and every association is different. Clearly, news stories will not focus on the overwhelming majority of associations that are not in a crisis situation, because those associations are not “newsworthy.” In these difficult economic times, those volunteer board members in your local homeowners associations have a statutory fiduciary responsibility to make decisions in good faith and in the best interests of the association. In many instances, they are the only people looking after the interests of everybody over their own self-interests.


Tarley Robinson, PLC, Attorneys and Counsellors at Law

Williamsburg, Virginia

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Susan Tarley

Susan chairs the firm's common interest community (HOAs and Condos) practice area. She was admitted into the College of Community Association Attorneys (“CCAL”). Susan is one of fewer than 150 attorneys nationwide to be admitted to CCAL, for distinguishing herself through contributions to the evolution or practice of community association law.

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Filed under: Common Interest Community, HOA, HOA litigation, Jason Howell, Real Estate Litigation, Real Estate Strategies, Susan B. Tarley, Unit Owners Association by Susan Tarley

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