Condo fees

[aaronc879]

I live in a very low-end condo. Two buildings with 24 units total. There are 5 units in arrear. One of them is X3. At $115/mo each. On top of that they just told us there will be a special assessment of $1000/unit due by May 1st. I can only assume that those who can't or won't come up with $115 won't pay the extra $1000. Anyone know what happens in that case? Lets say 18 units pay and 6 don't, do the 18 have to pay extra to make up for those who can't pay? Would it be worth using limited reserve money to pay for a lawyer to force the others to pay?

I understand fees and assessments are necessary to maintain the buildings and grounds. I just want to make sure everyone pays their share so i'm not paying more than needed. Any advice?

 

[Meadbh]

What do the condo bylaws say?

 

[aaronc879]

What do the condo bylaws say?

I'm looking for them right now. When(if) I find them i'll let you know.

 

[chinaco]

Sounds like the best way to approach Condo living is to rent!

 

[Westernskies]

I live in a very low-end condo. Two buildings with 24 units total. There are 5 units in arrear. One of them is X3. At $115/mo each. On top of that they just told us there will be a special assessment of $1000/unit due by May 1st. I can only assume that those who can't or won't come up with $115 won't pay the extra $1000. Anyone know what happens in that case? Lets say 18 units pay and 6 don't, do the 18 have to pay extra to make up for those who can't pay? Would it be worth using limited reserve money to pay for a lawyer to force the others to pay?

I understand fees and assessments are necessary to maintain the buildings and grounds. I just want to make sure everyone pays their share so i'm not paying more than needed. Any advice?

I'm not a RE lawyer, but here is what I can tell you, based on my experience:

Your HOA needs to file liens on the delinquent units and turn the assessments over to a collection agency to protect the financial interests of the other owners, if they haven't already done so. USUALLY, if the units fall into foreclosure, the bank won't pay back-due HOA dues, just those accrued from the day they foreclosed until they sell the unit off. A collection agency can pursue back dues, unless the owners file for bankruptcy- in which case, yes, you'll be stuck with higher fees to make up for the inevitable budget shortfall. I am on an HOA board that is struggling with this right now. It's an area of mostly second homes and our dues-in-arrears have crept up to ~15% of our annual budget- so we are faced with the prospect of raising dues on the owners who are paying their dues in accordance with our by-laws to cover the shortfall posed by those who aren't- unless we can recover the unpaid dues through collections. What you are seeing is a microcosm of what is going on in the US housing market; where a small % of folks quit paying their obligations and expect the rest to pick up their tab.

 

[aaronc879]

Thanks Westernskies, that was very helpful.

I found the bylaws. It appears they were made using a typewriter in 1982 and never updated so it's difficult to read. However, it mentions several of the things Westerskies mentioned. It also says that if the fees are not paid within 30 days then 12% annual interest can be charged for the fees along with any cost (including attorney's) incurred in the attempt to collect the fees.

It looks like what needs to be done is the Board needs to file a lien on the delinquent units because then they can't sell their units until they pay their fees. Then the Board needs to go to a collection agency to collect the fees. Hopefully they'll do so so that the responsible owners don't have to pay for the others. Thanks for the help.

 

[haha]

Thanks Westernskies, that was very helpful.

I found the bylaws. It appears they were made using a typewriter in 1982 and never updated so it's difficult to read. However, it mentions several of the things Westerskies mentioned. It also says that if the fees are not paid within 30 days then 12% annual interest can be charged for the fees along with any cost (including attorney's) incurred in the attempt to collect the fees.

It looks like what needs to be done is the Board needs to file a lien on the delinquent units because then they can't sell their units until they pay their fees. Then the Board needs to go to a collection agency to collect the fees. Hopefully they'll do so so that the responsible owners don't have to pay for the others. Thanks for the help.

I think you may have the old blood out of turnips problem. If people are delinquent on low end condo fees, they likely have no money. And if the condo is underwater, what good is the lien?

Ha

 

[aaronc879]

I think you may have the old blood out of turnips problem. If people are delinquent on low end condo fees, they likely have no money. And if the condo is underwater, what good is the lien?

Ha

Your right, I may just be screwed no matter what. Things are going to end up costing me more than they should but selling and re-buying something else would likely costs even more so i'm kind off stuck.

 

[aaronc879]

If people are delinquent on low end condo fees, they likely have no money.

In at least 2 of the cases it's not because they have NO money. In one unit i've noticed both people smoke like chimney's and they're constantly coming and going. They could pay their $115/mo by not smoking and driving less often. Unfortunetly they're 20 year olds who don't give a $h!t. The other unit constantly has a party going almost every night of the week. Lots on alcohol plus I smell marijuana in the hall often. If they spent the money on necessities instead then they could afford it. I'll have to ask what's up with the unit that is in arrear X3 because something badly need to be done about that.

 

[haha]

In at least 2 of the cases it's not because they have NO money. In one unit i've noticed both people smoke like chimney's and they're constantly coming and going. They could pay their $115/mo by not smoking and driving less often. Unfortunetly they're 20 year olds who don't give a $h!t. The other unit constantly has a party going almost every night of the week. Lots on alcohol plus I smell marijuana in the hall often. If they spent the money on necessities instead then they could afford it. I'll have to ask what's up with the unit that is in arrear X3 because something badly need to be done about that.

Good luck with it; it isn't really fair that the responsible owners should foot the bill for the others.

Ha

 

[Gotadimple]

Sounds like the best way to approach Condo living is to rent!

Actually, the best way to approach condo living is to understand what you're getting into before you sign the earnest money agreement. That means:

* walking the entire property with your real estate agent, looking at how well it is maintained
* asking to see the latest budget results and minutes from the last annual meeting
* asking to see the CCR's (codes,covenants, and restrictions)
* asking if the association (or their management) has done a reserve analysis and what it tells them
* asking if there is a special assessment currently being collected or a future assessment (in the next 2-3 years) planned. The board/management co should know this

Then, if you like the answers sign the earnest money agreement and proceed to closing.

-- Rita
(Treasurer, small condominium association)

 

[Martha]

The only twist that I would put on this is that in some states unpaid condo fees that are liened do in fact take priority over a mortgage. So, I would check to see if this is the case in your state. Anyone who owns a condo in a building with unpaid assessments should find out the law in their state regarding priority. I am very disinclined to buy a condo these days unless HOA liens are super liens.

If the mortgage has priority, then I would push the collection hard to get the condo into foreclosure by the bank. Once the bank owns the condo they are at least responsible for fees from that date forward.

No matter what, in this climate condo associations need to be very aggressive with unpaid HOA fees. Do not let up on your association.

Collection agencies are not created equal. I would suggest getting a lawyer to start foreclosing on units that did not pay fees. It will cost now but might prevent more serious problems later.

 

[MichaelB]

In Florida the law allows HOAs to foreclose on the homes - and they are doing so, more quickly than the banks.

Your HOA needs to see what state law allows. This is a problem that only gets worse, as many banks will not lend for properties where association delinquencies are greater than 15%.

 

[haha]

Actually, the best way to approach condo living is to understand what you're getting into before you sign the earnest money agreement. That means:

* walking the entire property with your real estate agent, looking at how well it is maintained
* asking to see the latest budget results and minutes from the last annual meeting
* asking to see the CCR's (codes,covenants, and restrictions)
* asking if the association (or their management) has done a reserve analysis and what it tells them
* asking if there is a special assessment currently being collected or a future assessment (in the next 2-3 years) planned. The board/management co should know this

Then, if you like the answers sign the earnest money agreement and proceed to closing.

-- Rita
(Treasurer, small condominium association)

Ooh do many agents ever hate to hear this request!( All of them that I have encountered.) They want you to part with your $5000, then start reading, and reading fast at that. I can't really blame them, but it makes shopping a trial. From their POV a dissatisfied buyer seems to look better than no buyer at all.

Ha

 

[Brat]

In this market the buyer should be able to take the time they want to review the documents. The buyer's job isn't to make the seller/Realtors happy. They will say things like usual and customary, yatta yatta. I don't think it is inappropriate to ask for some earnest money that is totally refundable with the return of the requested documentation within the agreed time frame but getting all that paperwork together isn't a small task.

A good seller's realtor should have requested that info from the seller and have it ready to go.

One possible concern of the Realtor is that s/he may be required to enter the unit 'pending' in their database within a few days. To have a unit show pending, then when you don't proceed it to change it, might scare off other potential buyers. The way to avoid that is to ask the Realtor to make the info available at his/her office for your preliminary review before extending an offer.

 

[Gotadimple]

Ooh do many agents ever hate to hear this request!( All of them that I have encountered.) They want you to part with your $5000, then start reading, and reading fast at that. I can't really blame them, but it makes shopping a trial. From their POV a dissatisfied buyer seems to look better than no buyer at all.

Ha

True, if they are a seller's agent. But, if you have established a relationship with a real estate agent, in Washington, they become your "buyer's agent" -- assuming you have signed an agreement naming them as a buyer's agent. At that point, they can press for all the details you require.

A motivated seller would generally be willing to loan you their documents for review, before the earnest money agreement is signed. And, as Brat suggests, inspecting the documents at the Realtor's office is a good idea.

-- Rita

 

[Bestwifeever]

I'm pretty sure that DD's offer for a condo and later a townhouse was made contingent on her and her DH's review and acceptance of the HOA documents. In reality they bought the properties after reviewing the docs, and I don't know how easy it would have been to get their earnest money refunded, but the wording re the review of the docs was that they could have backed out based on their review for any reason ("You allow pets? We're backing out!" or "You don't allow pets? We're backing out!").

 

[packrat44]

2010 was the first year I tracked all spending for the full year. I spent $11,974. I know i've had some years that were less and don't think i've ever topped $15,000.Quote)

Percentage wise, this is going to be a major (negative) impact on your annual expenditures.

 

[packrat44]

Good luck with it; it isn't really fair that the responsible owners should foot the bill for the others.

Ha

Similarly, a responsible house owner who would like to sell their house should not suffer because of those who default on their loans. Life is not fair. Never has been, never will be.

 

[Scrapr]

You could post the delinquent owners name in the lobby. Like this guy did in Fla.

Housing Distress Pits Neighbor Against Neighbor - WSJ.com

They had some facilities they could lock out the past due HOs

 

[Westernskies]

You could post the delinquent owners name in the lobby. Like this guy did in Fla.

Housing Distress Pits Neighbor Against Neighbor - WSJ.com

They had some facilities they could lock out the past due HOs

We published our list of delinquent property owners in the HOA newsletter... And restricted access to community facilties to those members in good standing, if you're behind on your HOA dues you can't use the aviation facilities, clubhouse, etc.

No backlash so far.

 

[clifp]

The only twist that I would put on this is that in some states unpaid condo fees that are liened do in fact take priority over a mortgage. So, I would check to see if this is the case in your state. Anyone who owns a condo in a building with unpaid assessments should find out the law in their state regarding priority. I am very disinclined to buy a condo these days unless HOA liens are super liens.

If the mortgage has priority, then I would push the collection hard to get the condo into foreclosure by the bank. Once the bank owns the condo they are at least responsible for fees from that date forward.

No matter what, in this climate condo associations need to be very aggressive with unpaid HOA fees. Do not let up on your association.

.

I am considering downsizing and moving into a Condo. One of my biggest concerns has always been the Condo fees which are often pretty hefty in Hawaii. These articles add yet another wrinkle to the decision.

How would I go about even determining if Condo fees have a priority in my state. Googling "condo fees hawaii bankruptcy" didn't produce any obvious answer.

Second does anybody have advice as to what one are warning signs for a Condo association in financial trouble. Does a potential investor have the right to look at associations books?

 

[Martha]

I am considering downsizing and moving into a Condo. One of my biggest concerns has always been the Condo fees which are often pretty hefty in Hawaii. These articles add yet another wrinkle to the decision.

How would I go about even determining if Condo fees have a priority in my state. Googling "condo fees hawaii bankruptcy" didn't produce any obvious answer.

Second does anybody have advice as to what one are warning signs for a Condo association in financial trouble. Does a potential investor have the right to look at associations books?

A quick look shows me that Hawaii revised statutes chapters 514A and 514B govern condos and liens for assessments. Without giving any advice, my scan of the law looks like there is no superpriority lien. It looks like at least at one time there was priority given for up to $1800 in unpaid fees and assessments but it looks like this was a temporary law that likely has expired. The more I poke around the more it looks like such superpriority is rare. Lobby of the lenders I guess. Please don't rely on this, I know nothing about Hawaii law and there may be amendments or separate temporary laws or something else that may govern.


Bankruptcy is another issue. Most liens survive bankruptcy. It is just the personal liability that gets discharged. The real issue is what happens in a foreclosure by the lender. At least the lender should be liable for fees and assessment arising after they take title.

 

[Nords]

One of my biggest concerns has always been the Condo fees which are often pretty hefty in Hawaii.

The lack of value in condo fees drives me nuts. It's turned me off the whole condo concept.

As a buyer you're entitled to HOA info, which would include delinquencies & liens. Those are also somehow available to the lenders, but I don't know whether that's legal filings (definitely for liens but not so easy for delinquencies) or the coconut wireless. But if you didn't buy with a mortgage then you might not find out about the problem until the special assessments start rolling in.

I'd say that delinquency/lien info should be a realtor's/seller's disclosure item and subject to litigation if it later turns out to be a problem.

 

[sheehs1]

Very timely article for me. My daughter who is 23 just signed paperwork to buy a 1,300 square foot condo in Va. Beach Va. I am standing on my head as my experience with condos makes me very leary of them. She won't listen to me. I'm not saying the situation will be similar to the one my mother had ...whose condo ended up in her trust...for me to handle at her death but...it certainly opened my eyes. The builder built these condos with stucco...on the bay. Years later balconies were deemed not structually sound and there were moisture problems with the stucco. HOA voted a special assessment per owner of $25,000 to redo all balconies and resurface all condos with hardy plank. This may have been a worst case scenario...but in dealing with condos one has to think about worst case.
My daughter knows all of this and is still proceeding. She is a teacher on a teachers salary ...has some investment income and K1 income...so she can afford it...but what she may not be able to afford is getting a whack from the HOA.
Two red flags: First...while the builder is reputable ....this set of condos is getting wrapped up in the HOA that is for another development across the street. So..as a unit owner she will also be responsible for whatever happens with that development....including common ground expenses and upkeep voted on by the board ...and her set of condos may not be the beneficiary of said decisions.
Second...the builder gave her $10K off the sales price for a December purchase incentive and also "gave her" (tongue in cheek), $10K for upgrades. She only got those when she signed that she would use their mortgage company. The interest rate quoted for a conventional 30 year loan...is 1/2% higher than the national average and 1/2% higher than my own bank quoted here locally. I think there must be some breach of Fair Lending Laws by mandating that she use their mortgage company. They must have gotten around that by "giving" the incentives...in return. Don't know. Need to do some research.
This is her deal....and I don't want to intrude but so much ..or embarrassing her by creating a stink. I have gone so far as to read some of the By-Laws, pointing out where it can bite her in the behind, giving her the amortization schedule which shows how little equity she is paying into each month...pointing out that she is financially better off...letting her money grow on the side and renting a nice apartment...but as I said...Ive gotten no where.