Condos & Issues Part 3
When people buy condos, they expect their monthly HOA dues will cover many of the responsibilities they would otherwise have as owners of single-family homes, like cutting the grass and paying the water bills. The downside is that your fate is tied to 50 or 100 other people who may stop making their condo payments. Now, because of the high foreclosure rates, condo owners have quit paying their HOA dues. Condo associations are now faced with shortfalls and will not be able to pay bills, such as pool care, maintenance and utilities. Recently I read about a condo project that had 38 foreclosures in a 244-unit building and the unpaid HOA dues nearly cost the residents running water because the HOA could not pay for it. In addition, repairs to its ceiling lobby were left undone and wiring and ducts were left exposed when the HOA ran out of money.
In Miami, Chicago and San Diego, I have heard where condo owners were having to adjust to economic woes by sometimes having to mow lawns themselves and working in shifts for building security. What motivated people to go into the condo market and led to overbuilding was the expectation that it would be easier than owning a home as far as maintenance is concerned.
If an HOA faces such a scenario to get through the short-term shortfall, they could institute a special assessment against all the owners to make up the difference. Next, the Board of Directors could create a “zero-tolerance” policy for late condo association fees. Instead of waiting months to take action, proceedings could be started to collect late dues within 30 days. Waiting too long actually makes the situation worse for the condo owner to pay an overdue bill.
The HOA could also begin requiring escrowing three months’ of condo fees to protect the governing body from this type of problem. When it comes to condo fees, the HOA needs to be vigilant that it has policies in place to protect itself financially for the betterment of the whole development. When purchasing a condo, you should find out how many foreclosures are currently in the project, request a copy of the treasurer’s report and find out how much money is in a reserve account to pay for capital improvements and/or repairs. CLICK HERE for Part 1 “Condos and Issues”, where I wrote about liens and pending assesments. Today I spoke to a woman who owns a condo in Ohio. She was assessed $13,000 for snow removal last winter.
In a recent issue of The Oregonian, it was reported that there are approximatley 1,300 unsold high-end condominiums just in Multnomah County. Others say that number is more like 7,500. Make sure you know what you’re getting into when purchasing a condo.
UPDATE **** I’ve received requests for information about the Tanglewood Condominium lawsuit – here’s their website for additional information – FYI.
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Betty Jung
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