By Deborah Goonan, Independent American Communities
A reader forwarded this KHON TV report on Village Park homeowners’ association in Honolulu. A homeowner contacted the news station when she received notice of a special assessment from her HOA.
Here’s the KHON TV report:
Village Park residents are being asked to pay up to cover for their neighbors who aren’t paying their homeowners association fees.
A resident asked us to look into it using the Report It feature on our website.
The homeowners association sent a letter to residents saying everyone will have to pay an extra $80 by next month because too many homeowners have not paid their dues.
So how is this allowed to happen and is it legal to make the others pay?
By all accounts, it doesn’t seem fair, but experts say there really isn’t a better option.
Read the announcement sent to homeowners:
Yes, I know an $80 special assessment is minor. Here on IAC, you can read about plenty of Association-Governed Communities facing special assessments in the thousands, tens of thousands, or more.
But that’s not the point in today’s blog. There are larger issues to consider here.
First of all, it’s readily apparent from the tone of the TV report and the dozen or so comments made by viewers, that Village Park homeowners are intentionally being divided into payers versus non-payers. The non-payers are cast as deadbeat, and the message sent to homeowners is full of whine:
It’s so unfair that homeowners that pay in full and on time have to pick up the slack for those who haven’t paid their HOA assessments.
It almost makes me wonder whether the industry trade group is behind this report, especially with recent publicity of the wrongful HOA foreclosure class action lawsuit that is underway.
But, considering our nation is so politically divided, and it has become so popular to blame one group of people for all the economic and social upheaval in America, it’s not that surprising that the first reaction of many homeowners is one of outrage and anger toward their neighbors.
Now let’s put the issue in perspective. There are a number of critical facts left out of this report.
How many vacant homes?
For example, we don’t know how many of the non-paying accounts are vacant homes. Chances are, a significant number of the 200 delinquent accounts are still in mortgage foreclosure limbo.
If a property owner is not paying the mortgage, they certainly aren’t going to pay the HOA fees, large or small, particularly if the home is still underwater and they have moved out of the property. In fact, some of the homeowners might have never resided in their Village Park home – it might have been purchased merely as an investment property.
Are lender foreclosure limbo accounts collectible? Probably not.
Is collection process reasonable?
Yes, some of these 200 accounts are likely owner-occupants who have not paid their assessments for one reason or another. But once the account goes to collections, their $130 unpaid balance can quickly balloon to thousands of dollars including late fees and attorney fees. If a homeowner finds it difficult to pay $130, how much more difficult will it be to pay off hundreds or thousands more?
Some will do it, even though, with exorbitant collection costs, it amounts to extortion. Others will lose their homes to HOA foreclosure over a few hundred dollars in unpaid assessments.
Did you know that the HOA does not benefit from those added fees? Does it make sense to spend 5 to 10 times the amount of assessment delinquency to pay fees of attorneys and management companies?
Are these unpaid assessments related to fines?
Sometimes HOAs can go overboard with issuing fines for minor rule violations. I cannot say that’s the case in Village Park HOA, but it’s been known to happen in many Association Governed Communities.
In many HOAs, when a homeowner makes a regular assessment payment, it may be diverted first to disputed, unpaid fines. Of course, then that makes the account delinquent on assessments! (A few states, such as California, apply payments to unpaid assessments first. However, most state laws will allow Associations to divert payments to fines, late charges, and attorney fees first.)
So homeowners should ask to see the records of delinquent accounts to see if fines are at the root of the shortfall on assessments needed to operate the HOA.
Consumers, taxpayers pick up slack for non-payers all the time
Finally, consider this fact.
All businesses recognize that some of their customers are going to fall behind on payments, or stop paying altogether. As long as the number of uncollectible accounts doesn’t get out of hand, it’s a normal cost of doing business. A business owner factors this into the annual budget, and often charges a slightly higher price for products or services to make up for any predictable shortfall.
Your local government works the same way, when it comes to property taxes and provision of municipal or county services. A small percentage of taxpayers won’t pay their annual tax bills. Guess what? If you pay your taxes faithfully, you’re paying slightly more than you should, to make up for the late-payers and non-payers. It’s just that you’re less likely to know about it, and less likely to feel the pinch, because the budget deficit is spread out among many more taxpayers.
By the numbers
The report on Village Park HOA provides some important numbers:
- 200 of 1800 homes have not paid their annual assessments of $130
- 100 x $130 = $26,000 in unpaid dues
But let’s do some more math, shall we?
- $80 special assessment x 1600 paying accounts = $128,000
- $26,000 unpaid accounts / 1600 paying accounts = $16.25 per unit
- $128,000 to be collected from special assessment – $26,000 reported unpaid assessments = $102,000 for…what exactly?
Why are homeowners being assessed $63.75 more than the actual assessment shortfall? Apparently it is to pay for late fees and attorney fees for collection.
Now that should be the reason for homeowner outrage.