Condo HOA problem and what to do

[MichaelL]

I knew that HOAs could be a problem and now I have a big one. I own a condo in Alexandria, VA where my girlfriend lives and I go to visit. It's a vacation home for me but it could be a good rental. It's an area that is appreciating so I have wanted to keep it as an investment.

However I just got a big shock when they sent me the new collection policy that the board approved. The biggest part of the problem is that this new policy applies to special assessments beyond the usual monthly fee.

It says that if you are 5 days late paying the HOA fee (including any related fees or special assessments) a 10% penalty will be added. If not paid in 30 days a notice goes out which says that within 15 days it will go to the lawyer for handling. They will then demand that you pay all of your monthly fees for the rest of the year and they will remove you as a member so that you can't use the facilities like the pool and gym. The monthly HOA is $700 so this would be a lot of money if it happened in early in the year.

Once two payments are behind the legal council is authorized to place a lien and start a non-judicial foreclosure on the property. The payment due will be settled in the order of attorney's fees and courts costs, late fees, maintenance assessments, special assessments and then the usual HOA payment owned.

I have the money to cover this and don't expect to be late, but imagine that you are working for the government and your pay check is late or you are a retiree and you SS check is late due to the shutdown or something beyond your control. Your situation will spiral out of control in no time.

What's worse is that this building is a high rise from 1982. It's possible that they could make special assessments for infrastructure that could be in the thousands. I'm going to have to look over the budget carefully for this reason.

I would not buy the place under this new policy. I'm temped to sell now but I don't have enough equity to cover all of the costs and I'd take a loss over what I paid. I had equity but sold the one bedroom and bought a two bedroom so that we'd be more comfortable as my girlfriend likes living there and I like visiting. I don't have a mortgage so at least that's not an issue.

What's really concerning is that the president of the HOA is a really nasty guy who sits in his condo monitoring the security cameras and then runs down and confronts tenants who he thinks are breaking the rules, like taking too big of a package up the elevator without a special reservation or some such trivial thing. I had a number of confrontations with him and he's a most disagreeable bullying type of person.

I guess this is a warning that you have to be wary of HOAs. I'm not sure how I would have found all of this out before buying.

[JDARNELL]

I set on a HOA board and our late fees are not this draconian. Time to sell.

[ls99]

Vote with feet and pocketbook. Sell.

[ivinsfan]

Just off the top of my head, I'm wondering how many owners are in default currently on their HOA's?

This seems like bringing out a bazooka to swat a fly. In your shoes I'd probably sell it and hope a buyer isn't turned off by this punitive policy.

[Aerides]

What would concern me more is that the board can vote in such broad changes, vs. the HOA as a whole getting a vote.

That's a lot of power. The surveillance by a board member also sounds dodgy, I'd look to sell.

[ncbill]

Board should not be able to make such arbitrary changes...check the bylaws to see if such a fee structure needs a majority or better vote by all the owners.

Also, make sure the board does not have the power to make a special assessment...that should require a majority or better vote by the owners (we require 2/3 majority)

It does sound like a good chunk of owners are delinquent, so as others said I'd sell.

Also check state law...here late fees are capped at $20 for each monthly HOA payment missed, NO interest can be charged, and the legal fees for foreclosure the HOA can charge are also strictly limited ($1,500, IIRC)

[RunningBum]

Quote:

Originally Posted by MichaelL I would not buy the place under this new policy. I'm temped to sell now but I don't have enough equity to cover all of the costs and I'd take a loss over what I paid. I had equity but sold the one bedroom and bought a two bedroom so that we'd be more comfortable as my girlfriend likes living there and I like visiting. I don't have a mortgage so at least that's not an issue.

You don't have a mortgage, so how can you not have enough equity to cover all of the costs? I understand you might take a loss, but what you bought it for is history and shouldn't really be a factor.

[MichaelL]

Quote:

Originally Posted by RunningBum You don't have a mortgage, so how can you not have enough equity to cover all of the costs? I understand you might take a loss, but what you bought it for is history and shouldn't really be a factor.

You are right. I would have an investment loss. I guess I should have said appreciation. I have 100% equity since I bought for cash. I incurred about $10,000 in costs when I sold the one bedroom and bought the two bedroom. I had $30,000 appreciation in it. I have enough appreciation left to cover the brokers fees if I sold but I'd not recover my other costs.

[cathy63]

Just for purposes of comparison, since I was looking at this yesterday and have it handy. Our Condo governing docs (in California) say that assessments are imposed at the beginning of the fiscal year, but paid in monthly installments. It sounds like yours are similar in that they are attempting to collect the entire year's assessment once someone falls behind on their installment payment plan.

In ours, if you fall delinquent by the amount of two monthly assessments, you get a pre-lien letter and have 30 days to bring the account current before the board can file a lien. There's no requirement for the board to actually file the lien, it's something we (I'm on the board) would vote on if it ever happened. I can't imagine that we would vote to file a lien against one of our neighbors who wasn't getting paid due to a government shutdown or something similar, but we're a small group and we all know each other.

We also have the option to suspend the membership rights and privileges of any member who's in violation, but it requires a hearing and notification, and again it's just something we could do, but we don't have to take that action.

Our collections are applied in this order: emergency assessments, special assessments, regular assessments, penalties & fines, legal fees, late charges. I think this is much more owner-friendly than your association's policy of paying the lawyers first.

In our case, the Assessment Collection Policy is one of the documents that you receive before you purchase a unit and it's also sent out to all owners whenever it's modified, so you would know about it before buying. Since you just got a copy of it, I'm guessing there's some similar law in Virginia and either they just established a policy after having not had one, or they had one and this is an update. Your association's bylaws and your state law probably require the board to adopt a policy for handling delinquencies.

If you do decide to sell over this, you might want to spend some time researching Virginia's laws on HOAs before buying another unit. I suspect that the current policy is going to be the standard one that's permitted by law in your state, and every association is going to have the same rules, because the way these things get written is that the board hires a lawyer to produce something that conforms to the law.

[Souschef]

Unfortunately, you do not live there full time. Otherwise you could organize a group to vote the present board out of office.
There must be enough people fed up with the Gestapo tactics.

[OldShooter]

Quote:

Originally Posted by RunningBum You don't have a mortgage, so how can you not have enough equity to cover all of the costs? I understand you might take a loss, but what you bought it for is history and shouldn't really be a factor.

+1

More broadly, ALL costs that have already been incurred are "sunk" and should not be a consideration in evaluating the economics of a contemplated transaction. More: https://en.wikipedia.org/wiki/Sunk_cost

[Jerry1]

Quote:

Originally Posted by Souschef Unfortunately, you do not live there full time. Otherwise you could organize a group to vote the present board out of office. There must be enough people fed up with the Gestapo tactics.

But there is probably no one willing to take on the job. That's how those types stay in those positions. My guess is he doesn't work only longer and if he had a lawn, he'd be making sure you stay off it.

[MichaelL]

Quote:

Originally Posted by Jerry1 But there is probably no one willing to take on the job. That's how those types stay in those positions. My guess is he doesn't work only longer and if he had a lawn, he'd be making sure you stay off it.

That's right. He's retired from the government and doesn't have much else to do. I've thought about taking the board on but from what I've seen the other tenants are mostly passive and wouldn't do much.

[MichaelL]

Quote:

Originally Posted by cathy63 ...I suspect that the current policy is going to be the standard one that's permitted by law in your state, and every association is going to have the same rules, because the way these things get written is that the board hires a lawyer to produce something that conforms to the law.

You are probably right about this situation. The notice that I got has a preamble that sets up the situation, making it seem that this is a new policy, and it doesn't say that it's an amendment. My concern is that in my case we have an aging high rise with 294 units and an over zealous president of the board.

I lived for 10 years in a 45 unit condo in California and didn't have a problem. The president of the board was a nice guy and my next door neighbor. California law looks out for people more than some other places as well. Virginia allows for non-judicial foreclosure where no further notice is required once you have a lien.

[W2R]

Quote:

Originally Posted by MichaelL I'm temped to sell now but I don't have enough equity to cover all of the costs and I'd take a loss over what I paid. I had equity but sold the one bedroom and bought a two bedroom so that we'd be more comfortable as my girlfriend likes living there and I like visiting. I don't have a mortgage so at least that's not an issue.

Sell, take the loss, and chalk it up to experience. Maybe consider buying just a normal detached SFH instead of a condo, next time. Or not. Buy what makes you happy. Right now you don't sound very happy with your condo!

[MichaelL]

Quote:

Originally Posted by OldShooter +1 More broadly, ALL costs that have already been incurred are "sunk" and should not be a consideration in evaluating the economics of a contemplated transaction. More: https://en.wikipedia.org/wiki/Sunk_cost

Yes that's true and I might have to just eat the sunk costs if I sell. I'd just like to get a nice return and recover everything but that might not be realistic.

[Cut-Throat]

Quote:

Originally Posted by MichaelL I have the money to cover this and don't expect to be late, but imagine ..................... my girlfriend likes living there and I like visiting. I don't have a mortgage so at least that's not an issue.

I read your post and a couple things that I have quoted stood out to me....... Since you don't expect to be late with payments and your girlfriend likes living there and you like visiting, nothing really has changed that much and you really don't have a Big Problem now, you may just be anticipating a Big Problem in the future.... You have to ask yourself how likely this problem will manifest itself to you.



So I'd relax a bit and just wait and see what happens... The HOA Guy has probably pissed off other tenants as well you, and something may be brewing that could change things...


Anyway, since you don't have a problem currently, Patience is on your side.... I would not make any drastic moves now, or you could start a bunch of new unforeseen problems with your girlfriend

[MichaelL]

Quote:

Originally Posted by Cut-Throat I read your post and a couple things that I have quoted stood out to me....... Since you don't expect to be late with payments and your girlfriend likes living there and you like visiting, nothing really has changed that much and you really don't have a Big Problem now, you may just be anticipating a Big Problem in the future.... You have to ask yourself how likely this problem will manifest itself to you. So I'd relax a bit and just wait and see what happens... The HOA Guy has probably pissed off other tenants as well you, and something may be brewing that could change things... Anyway, since you don't have a problem currently, Patience is on your side.... I would not make any drastic moves now, or you could start a bunch of new unforeseen problems with your girlfriend

Right, it's more about what might happen under this policy. I'm going to start by looking a the rules for voting on assessments and at the budget to cover infrastructure. My girlfriend would not like to have to move and I don't really want to take any kind of loss. I just don't want to get hit with a big assessment and be forced to pay or get foreclosed on. I also don't like this creep having this much authority. He's already been harassing my girlfriend over little things like flower boxes on the balcony and a string of ornamental lights. I can imagine the power trip he will be on if he's enforcing payment.

[ivinsfan]

Quote:

Originally Posted by MichaelL Right, it's more about what might happen under this policy. I'm going to start by looking a the rules for voting on assessments and at the budget to cover infrastructure. My girlfriend would not like to have to move and I don't really want to take any kind of loss. I just don't want to get hit with a big assessment and be forced to pay or get foreclosed on. I also don't like this creep having this much authority. He's already been harassing my girlfriend over little things like flower boxes on the balcony and a string of ornamental lights. I can imagine the power trip he will be on if he's enforcing payment.

The assessment thing is out of your control, if they do an assessment for something you have to pay it no matter what. You can't sell with an assessment hanging over your head. It's none of my business but does your GF pay you rent? If you don't feel comfortable owning in this building she will have to move and she'll live through it. flower boxes and lights no item is too small to Bit$% about, life's too short to put up with that crap...

[OldShooter]

Quote:

Originally Posted by MichaelL Yes that's true and I might have to just eat the sunk costs if I sell. I'd just like to get a nice return and recover everything but that might not be realistic.

You have already "eaten" all sunk costs.

You might also want to look at the "endowment effect," wherein we humans usually value something we already have more highly than we would value it if we didn't have it. More: https://en.wikipedia.org/wiki/Endowment_effect

I think that remembering this kind of stuff helps me make better decisions.