Meanwhile, most developers set HOA fees artificially low, and association-governed communities remain virtually unregulated
By Deborah Goonan, Independent American Communities
A report from KSL-TV highlights the trouble with association-governed communities — unpredictable fees, and internal community conflict when members fight about how to spend or save their collective money.
Townhome owner Amanda Collins complains that her dual HOA fees (one for her townhome association, and one for the master association) have doubled in ten years, from $150 to $300 per month. Yet, despite the spike in fees, her townhome association is fighting a legal battle with the developer, and thinking about ending its snow removal services.
Across town, Rep. Elizabeth Weight recounts her recent neighborhood struggle to oust an HOA board that she says allowed fees to get way out of control, and took a hardline approach to enforcing restrictions and imposing fines.
According to the report, experts readily admit that developers set HOA assessments artificially low during the new home construction period, in order to attract more qualified buyers, and make it easier to obtain mortgage financing.
None of this is news to IAC, but it’s refreshing to see more media attention to the harsh realities of HOA life.
‘A rude awakening’ for many Utahns as HOA fees rise | KSL.com
By| Posted Apr 10th, 2018 @ 8:01am
SOUTH JORDAN — Before Amanda Collins and her family moved into her South Jordan townhome more than a decade ago, she made sure to ask about the fees for the two homeowner associations, or HOAs.
“One of my first questions with the real estate agent was, ‘Do you expect the HOAs to continue to rise?’” Collins said.
In the beginning, the combined payment for both HOAs in her Daybreak community totaled about $150 per month.
“Every year both HOAs have increased,” she said. “I don’t think there has been a single year that the HOA hasn’t gone up.”
Fast forward to today, and she’s now paying more than $300 per month — which covers community activities, exterior maintenance, landscaping and other amenities.
“I had no idea in 2007 that my HOA in 10 years would double,” she said.
On top of that, her sub-association HOA, consisting of 389 homes in her section of the community, is blowing through cash on emergency repairs, fighting a legal battle with the builder and has considered cutting services like snow removal.
State lawmaker Rep. Elizabeth Weight, D-West Valley City, says she knows all too well the headache that HOAs can cause. A few years ago, she and her neighbors challenged their board of directors over fees, fines and overbearing enforcement of rules.
“It was intimidating and hurtful to the community,” she said of the neighborhood’s atmosphere that caused her to act.
Weight got a copy of her HOA’s governing documents and discovered she and her neighbors were on their own to fix what they didn’t like about the way their community was being governed.
“I actually called attorneys at the state level, county level and city level to see if there was any enforcement capability on their levels of these documents — there isn’t,” Weight said.
Experts also encourage potential buyers and existing HOA members to obtain the governing documents for their community, usually available at your county recorder’s office. You can also obtain financial records to see how much money the HOA has set aside and compare that to the most recent reserve-funds study.
Other helpful tips include checking for any active lawsuits or other legal trouble with the HOA, attending board meetings and talking with residents to gather more information about the history of the association.
Read more (video):
Of course, the report only scratches the surface.
And the “helpful tips” offered by unnamed “experts” are simply naive.
There’s no question that HOA industry trade groups are making the case for beefing up reserve funds in the communities they manage. On the surface, that appears to make sense. One reserve studies expert from California, Robert Nordlund of Association Reserves, has been promoting a limited study of the effects of “strong reserves” on home values. The 2017 study focused on condominium associations in a Los Angeles neighborhood, and looked at the relationship between level of reserve funding and closed home sales. The study concluded that condos located in associations with at least 70% reserve funding fetched sale prices 12.6% higher than condos in communities with under-funded reserves.
In some respects, it seems to be common sense. Well-funded association-governed communities tend to be well-maintained. And well-maintained homes and communities are more desirable to buyers.
But here’s the other side of the coin: association management schemes that inflate repair and renovation costs, steering fat contracts to family, friends, and business associates. The real estate management industry is increasingly vertically integrated, but, quite often, does not operate with transparency or integrity. Everyone in the food chain takes a cut of the business, from the contractors who do the work, to the management agent sourcing the vendor, to the bank providing the financing.
It’s no wonder HOA fees continue to rise faster than the rate of inflation.
Countless examples are chronicled here on IAC, but here are two, just to illustrate my point.
And, as for expert recommendations to obtain information about an association-governed community before you buy in: good luck with that.
There’s a most disturbing trend happening in the HOA industry — it’s becoming less transparent, despite state legislative efforts to regulate developers, management companies, and HOA boards.
The home buyer will often find little to no internet presence for the association-governing board of a community they are considering. If the developer is still selling new homes, the buyer will find information about floor plans and amenities. But don’t expect to find a publicly accessible copy of the governing documents for the association. The buyer generally won’t find public disclosure of HOA assessments, and definitely won’t be able to see a schedule of fees and fines.
These basic disclosures, as well as board/association meeting agendas and minutes, and financial records such as the reserve study, are hidden behind a password-protected, members-only login page.
The indsutry trend is to force home buyers to pay for disclosure documentation. And the cost of presale disclsoures is rising, too. Some buyers report spending hundreds of dollars for disclosure documents.
By the way, there aren’t many associations that will welcome prospective buyers to their board meetings. In fact, quite a few associations would rather not have their owner-members in attendance at board meetings, desptie the fact that some states (but not all states) mandate open meetings.
And, one of the most common complaints of homeowners: their association boards and community managers are evasive when it comes to allowing members to examine official financial records, in spite of state law giving owners that right, with few exceptions.
Of course, most state laws are not consistently enforced by any regulatory authority. It’s often up to the housing consumer to lawyer up and sue their association — effectively suing themselves — in hopes of forcing the board and management to abide by state law or the community’s own governing documents.
Utah is one of several states that require each association-governed community to register, but, as noted by KSL-TV, no one enforces that requirement either, and there’s no consequence for failing to register with the state.
So housing consumers end up with shadowy, unaccountable pseudo association-governments, many of which continue to raise assessments, fees, and fines when an unexpected emergency presents itself, or when the timing seems convenient for a few stakeholders who stand to profit from the HOA crisis of the day.