Homeowners fight over money: $6K HOA special assessment

By Deborah Goonan, Independent American Communities

Here we go again, with yet another HOA fight over money . The HOA board for Lincolnshire, a subdivision in Mission, Kansas, recently proposed a $6,000 special assessment to repair roofs, gutters, and chimney caps on its 33 townhouses. But under protest of homeowners, that proposal was rejected by the board last Thursday.

According to the details, published in the Kansas City Star, homeowners disapprove of current board president Ellen Hoerle, who initiated the special assessment proposal. Resident owners complain that the board President does not even reside in the townhouse she owns. She lives in Minnesota.

According to some owners, the current board is just as bad as the former HOA board they ousted several months ago. Lincolnshire homeowners don’t trust their current HOA board, either.

Owners say there’s no transparency, and they don’t know how their money is spent. They cannot understand why their $180 per month assessments won’t cover at least part of the cost of needed repairs.

Understandably, homeowners want to see the details of contractor bids. Is the bid figuring in a 10% kickback, which was the case with the former HOA manager on a previous siding project?

Without full transparency and access to detailed financial records, some homeowners suspect that the previous President and Manager mismanaged their assessment dollars.

HOA planned to assess every owner $6,000 for roof repairs. Here’s how residents reacted

BY JUDY L. THOMAS
jthomas@kcstar.com

December 03, 2018 05:30 AM
Updated December 03, 2018 11:46 AM
Faced with a budget shortfall and leaking roofs on some homes, a Johnson County HOA president decided drastic measures were necessary to tackle the problem.

She devised a plan: Require each homeowner to pay a special assessment of $6,000, due by Feb. 1. The assessment amounts to nearly three years’ worth of dues. Homeowners pay $180 per month for items including lawn care, snow removal, parking, fences, roofs and pool.

Owners in the Lincolnshire subdivision in Mission, a community of townhomes along 51st Street near Interstate 35, are livid about the action, which some say they only learned about in recent days. It’s yet another symptom, they say, of a homeowners association marred by mismanagement and a lack of accountability.

Read more here:
www.kansascity.com/news/article222487480.html?fbclid=IwAR0yijCEQ0T09eYOznoHB4lF0ex48Mr224m_WD3R88FRYOvgpN7NwqnlpUU#storylink=cpy

Everyone agrees there’s a problem

Notice that homeowners all agree that the roofs need attention. But they don’t agree on a plan for each owner to come up with $6,000 by February 1, especially if the amount of the contract is inflated.

The reaction of Lincolnshire homeowners is so typical of association-governed communities in similar situations: aging, worn out exterior surfaces or infrastructure needs repair, but, for one reason or another, the HOA has no money saved up to do the work. Homeowners angrily rebel against special assessments.

Whether or not Lincolnshire homeowners are the victims of an embezzlement scam, years of wasteful HOA spending, or HOA board incompetence is debatable. The full truth may never be known.

However, no amount of arguing about how the homeowners got to this point will solve the immediate problem of paying for repairs to their leaky roofs.

Unfortunately, Lincolnshire homeowners are stuck with out-of-control HOA assessments, no matter which course of action they choose.

(Pixabay.com free image)

Addressing KC Star reader comments

Based upon one comment following the KC Star article, $6,000 is mere peanuts compared to “multiple $25,000 special assessments” for some homeowners in Chicago.

Check out the following comments. Ouch!

Kansas City Star reader comments 1

Is “due diligence” possible?

Are homeowners in Lincolnshire “ignorant” for not doing their “due diligence” before purchasing their homes? Is it fair to compare owning a single family home without the HOA to owning a so-called maintenance-free townhouse with a homes association?

I’d say those are both unfair statements.

First, pre-sale home inspections of common interest property such as townhouses and condos generally only examine the interior of living units. A buyer does not pay a home inspector to take a close look at the exterior surfaces such as common roofs, siding, chimneys, and rain gutters. Ditto for the condition of community pools, roads, storm water infrastructure, or any other common property.

And most state laws don’t require homeowners, condominium, or cooperative associations to conduct and report results of regular inspections of common elements or property. So how is a home buyer expected to perform full due diligence?

Generally, the seller and the HOA provide the bare minimum level of disclosure to a buyer. State disclosure laws don’t require HOAs to provide information on the condition of common property to home buyers. So it’s safe to assume that many home buyers will be hit with surprisingly high HOA special assessments within a short time after their purchase.

And, as for the statement that “anyone is an idiot for buying a home involving an HOA,” that’s a bit harsh, too. After all, in many growing housing markets, it’s next to impossible for a buyer to find a home in their price range and preferred location, that does not come with mandatory HOA membership. (See the Census Statistics here.)

Quote Get what you want get rid of what you dont

What’s the alternative to HOAs?

One commenter says HOAs need to be dissolved. But two commenters think that’s unwise or impossible.

Kansas City Star reader comments 2 Source: www.kansascity.com/news/article222487480.html?fbclid=IwAR0yijCEQ0T09eYOznoHB4lF0ex48Mr224m_WD3R88FRYOvgpN7NwqnlpUU%5B/caption%5D

Let’s look at this idea of abolishing the HOA.

Certainly, for a subdivision of single family homes, there’s no compelling need for a homeowners association. The catch is, the community must identify responsible parties, other than the HOA, to maintain infrastructure such as roads, street lights, stormwater ponds and pipes. The same principle would apply to community swimming pools, parks, or other common land or amenities.

In fact, the most challenging part of dissolving an HOA is getting the local government to agree to take over maintenance of common areas, or, in the alternative, liquidating common parcels of land by selling them to third parties.

Usually, handing over infrastructure to local government involves homeowners agreeing to a tax assessment to bring infrastructure up to municipal standards, as a condition for future public maintenance.

Homeowners in Lincolnshire are fortunate, because a the city of Mission made an agreement in the 1980s to take public ownership of the subdivision’s roads. In most cases, HOA documents burden private homeowners with ongoing maintenance and eventual reconstruction of infrastructure.

The second biggest challenge is convincing a supermajority of parcel owners that the world will not come to an end if there’s no one to enforce the “no purple houses” rule. (Good grief. If that’s your biggest fear, get a life!)

What’s at the root of this irrational fear?

Some property owners view the HOA as a “business entity” meant to protect property values, whereas most homeowners view their neighborhood as a place to live in peace. Those two very different perspectives that are very hard to reconcile.

What about multifamily property?

Of course, abolishing the HOA or condo association usually means that the property must be converted to standard rental apartments with a single owner/landlord for the building or community.

Alternatively, dissolving a condo association can be accomplished if 75-100% of unit owners (depending on state law and governing documents) agree to sell the entire building or community to a real estate investor.

In recent years, IAC has followed dozens of reports of condo terminations, deconversions, and proactive marketing of condos. And many more of these transactions are not publicized.

Possible-impossible-options-choices-alternatives (Pixabay.com free image)

But what if residents of condo associations want to continue to “own” their properties?

One out-of-the-box option would be to convert the condominium association to a cooperative business.  In this hypothetical situation, unit owners would become shareholders and silent investors in a professionally managed residential or commercial real estate enterprise.

Shareholders would either hold a proprietary lease to a unit for personal occupancy, or hold it as a commercial investment, with the right to lease the property on a short-term or long-term basis, depending on the business model.

Instead of unit owners engaging in self-governance, each shareholder would pay and rely upon a professional property manager to maintain their investment. In order for this model to work, however, state Attorney’s General would have to ensure strong oversight and accountability of professional managers to all real estate investors and consumers visiting or residing at the property.

HOA alternatives are possible, even for multifamily housing.

But change isn’t easy.

It’s obvious that the time has come to explore new options. And those options must be carefully considered and evaluated, so we don’t continue to deal with the same broken housing and real estate models we’re trying to avoid.

Advertisements