By Deborah Goonan, Independent American Communities
Another threat to affordability of homeownership for Americans: hefty special assessments charged by your homeowners or condominium association.
Owners in Club Monaco Condominium (Denver) recently received an invoice for more than $16,000 per condo unit from their Association. The money is needed to repair outdoor decks and stairways that residents use daily to enter and exit their condos.
It’s yet another example of an Association Governed Residential Community that has failed to set aside adequate money in a reserve account to pay for inevitable long-term repairs.
Club Monaco was constructed in 1980. To put the amount of the special assessment into perspective, a 2-bedroom unit recently sold for $184,000. That indicates that owners at Club Monaco probably have relatively modest household incomes.
According to the report from Fox 31, owners have the option of paying off the assessment in $100 monthly increments. That’s probably easier than coming up with $16,000 in 90 days. However, doing the math, it will take more than 13 years to pay off the entire balance!
And what if another major repair is needed a few years from now? Will there be yet another special assessment? How far can assessments rise until owners are no longer able to afford to pay them?
Here’s the report, with video, so you can see the type of condo construction at Club Monaco.
Note the interview of a Community Associations Institute (CAI) attorney. Do you get the feeling that this “news” report is an attempt at better Public Relations for the industry trade group?
Of course – the usual advice is offered: read your covenants. You “agreed” to pay your fair share to the condo or homeowners’ association when you purchased your home.
Are there still homeowners who don’t realize this basic truth about life in Association Governed Housing? Perhaps there are some who are still completely uninformed.
But, let’s face it, simply reading the covenants before you purchase won’t solve the root problems of Association Governed Housing: poor long-term financial planning and lack of individual control over how your assessment dollars are spent.
Now, I’ll fill you in on some more of the unpleasant details.
Did you realize that you “agree” to pay any amount authorized by the HOA or condo board – limited only if your ByLaws require a membership vote for budget increases or special assessments? Buyer Beware – not all ByLaws give owners veto power over an assessment increase.
Of course, allowing owners to vote on whether to approve a special assessment sometimes has another unfavorable outcome. The majority might vote against an assessment that is needed for essential maintenance such as replacing the roof or major repairs to plumbing. If you happen to live in one of the units with water damage or mold from a leaky roof or plumbing, you will not be very happy if your neighbors vote to delay repairs indefinitely.
That happens very frequently.
Likewise, unless you happen to serve on the board of your association, you will have little, if any, direct control over which repairs are proposed, whether or not your board will diligently seek bids for the best value, and when the work will be completed. If your HOA board or management company makes a bad choice of contractors, it can create even more problems for homeowners.
This blog is chock full of examples of deferred maintenance, non-competitive bidding of contracts, and owners bitterly divided over their money.
Have an example of your own to share? Feel free to comment below.