By Deborah Goonan, Independent American Communities
Myth #1: HOAs protect property values
What factors determine the value of your property?
Certainly, the desirability of the location is a factor. Safety and security are important. For some people, a good school district is a critical factor. For others, proximity to work and/or transportation is equally important.
Most people want a clean neighborhood where the streets are well maintained and trash is regularly picked up. Attractive homes are also a factor, but is there a limit?
Of course the HOA industry has convinced a minority of consumers that HOA rules and covenants protect property values.
The problem is, sometimes those rules go too far. Here are some examples:
When homes associations go bad (Kansas City Star VIDEO)
How many consumers truly believe that the color of your neighbor’s basketball backboard would make or break the sale of your home? If your neighbor has a cordovan garage door instead of one that is painted off-white, does than mean a buyer might knock thousands of dollars off their offering price?
I highly doubt it.
But there are two fundamental factors that truly affects property values: the financial condition of the Association and the level of maintenance and services.
When services are not consistently provided and/or if/when the HOA finds itself underfunded to perform its duties, property values will plummet like a stone.
It’s the very same dynamic that we see in municipalities — when the tax base is eroded, services are cut. When services are cut, those who can afford to move take their tax dollars to a different municipality. That puts even more strain on the city they are abandoning. Over time, without thoughtful economic intervention, you end up with slums plagued by concentrated poverty and crime. Don’t kid yourself, the very same thing occurs in HOAs all across America.
Petty Rules for Keeping Uniform Appearances (KUA) don’t protect property values. Responsible citizens and a healthy economic environment protect property values.
Myth #2: HOAs, particularly condos provide the benefit of maintenance-free living
Theoretically, that’s true. But what about reality?
The truth is, if your maintenance-provided condo or townhouse association fails to budget for long-term maintenance, you’re likely to run into problems by the time the Association reaches 20 – 30 years of age.
If many of the owners have limited incomes, an economic recession can have catastrophic results. When owners cannot afford to pay assessments due to job loss or health expenses, it can be difficult for some Associations to make up for the budget short fall. The truth is, if there’s not enough money to keep up with regular maintenance, decay is accelerated.
And if the majority of condo owners are more interested in keeping assessments low than providing proper maintenance, minority owners have very little control over the situation.
Only the board members can order maintenance of common areas and the exterior surfaces of dwellings. If you have a responsible board, great news! If not, you could be in for a wild ride. There is no straightforward regulatory framework in place to force your Association to perform maintenance. Local building code enforcement agencies are generally unable or unwilling to assist, unless the housing project is partially funded with public tax dollars. As private entities, most condo associations don’t fall into that category.
You cannot withhold your assessments in protest. If you do, you risk lien and foreclosure of your property so the condo association can collect its dues, plus interest, collection costs and legal fees. Your only recourse is to file a suit against the Association, but that also costs thousands of dollars.
The bottom line: there’s abolsultely no guarantee that your HOA will consistently maintain the property to high quality standards.
Here are just three examples that disprove these two HOA myths:
Angry residents dig for truth amid signs of decay in HOA (Judy Thomas, Kansas City Star) VIDEO
According to residents of Quivira Falls, Overland Park, Kansas, the subdivision has been neglected for many years. The Board struggles with insufficient funds to make necessary repairs and maintenance of the landscape, common fences, balconies on condominiums, and the exterior surfaces of townhouses.
A previous HOA President, who had served more than 20 years, left the Association with almost no money when he relocated. He subsequently died before homeowners could get answers in court about what happened to millions of dollars.
A former contractor for Quivira Falls collected photographic evidence of structural wood rot in several structures, when his former employer insisted that he merely cover up the wood rot with new siding. Several homeowners in the Association remain embroiled in legal battles over this and other issues with the HOA. The city is reluctant to get involved in the dispute, and the HOA refuses to investigate the contractor’s claims of a cover up. So owners and the HOA are at a legal impasse. Home values remain roughly half of what they were previous to the recesion.
PHOTOS: Families Relocated From Leonia Building In Danger Of Collapse (Leonnia, NJ)
Jerry DeMarco 07/30/2016 (Fort Lee Daily Voice)
Nine families were evacuated from a 10-unit brick condo building, when the city Fire Department declared the building unsafe. The rear wall has bowed out 6 inches. Photos tell part of the story, and it has been reported that the 1950s structure shows signs of overall neglect. The condo association president is in the process of obtaining estimates to make repairs, and the residents are living in hotels or staying with family members.
These owners are facing the likelihood of a costly special assessment – one that could well exceed the value of the building.
Water could be shut off again at West Palm Beach condo (Alex Hagan, WPTV 5, West Palm Beach, FL) VIDEO
Condo owners feel trapped, Sober house operator may be community’s only hope
(Kimberly Miller – Palm Beach Post)
Green Terrace Condo has suffered a turbulent history. At one time, it used to be a nice place to live, with units selling up to $160K at the height of the housing boom. But following years of neglect and the economic recession, owners are lucky to receive $20-$35K for a unit. By 2015, only three units were owner-occupied, the remainder occupied by tenants.
The HOA was taken over by Ken Bailynson in 2014, after he acquired 35 of the 84 units at rock-bottom prices. As HOA President, Bailynson raised assessments from roughly $500 per month to more than $1200 per month, which was supposed to finance some of the deferred maintenance. Bailynson opened a Sober House business, and many remaining owners, unable to pay the high assessments, have been forced out by threats of foreclosure.
The FBI raided the Sober House in 2015 and shut it down. But the condo complex remains in deplorable condition, and its water utility bills have been seriously delinquent for the past couple of years. The City recently threatened to shut off the water for the second time in less than a month.