I own a nice townhouse in Philadelphia region which is part of a community with an HOA. The problem is that the HOA is broke, has lost FHA status and is under threat of bankruptcy. For full context, more than 55% of owners do not pay their dues. HOA is almost $36,000 behind on its monthly bills and is owed almost $415,000 in dues and dues-related penalties and fees. The HOA board is essentially defunct (no annual meeting in over 4 years, and we have less than the required number of board members). I pay my dues and I am also trying to get on the board so I can (hopefully) have more information and help bring about some change. However, the reality is that the HOA is very close to going under and we're not guaranteed to be able to turn it around. My unit is great, but with the financial issues, the complex is not well kept. Landscaping had to be cancelled in order to maintain trash removal. There are several plumbing issues. There are potholes in the parking lot that will cause flooding if it rains and will only get worse after it snows. There are some abandoned units now, as well as some up for Sheriff's sale. The last couple of people who have tried to refinance have been unable to, and I have heard one or two stories of people being denied financing to purchase and being required to purchase for cash. So it's a pretty big mess. I guess my question is - what are my options here? The property is rented out but I'm concerned that as the neighborhood declines it will be harder to rent at market rate and/or the quality of renter will decline. I'm concerned that if the HOA goes bankrupt it will end up costing us several additional thousand dollars. I would love to sell the property, but I'm not sure how I can under the current conditions. I've owned the condo for about 6 years and it's been slowly going from bad to worse. I'd be open to putting out some cash to get rid of it, but I'm not even sure it's possible to find a buyer given the circumstances. Is there an option I should be considering outside a conventional sale that could be successful despite the ongoing issues?
What a mess. Be careful about joining the board of a defunct HOA with bad recordkeeping. If they can't pay your landscaping bill they probably can't pay D&O insurance. Talk with the board about placing liens on properties that owe the HOA. Make sure the HOA has appropriate legal status and ability to collect dues. If things go bad and you need to take a loss talk with a lawyer about your options regarding the current and former board members to see if you have any recourse there.
I was in a somewhat similar position a few years back. (The HOA was fine but the HOA was suing the builder over picayune "defects").
These are disclosure items. MANY buyers will be turned off and some lenders will not lend. If you really need to sell, it may have to be a cash buyer.
In my case, it got to the point where the only properties for sale in the complex were for sale by government agencies and prices fell by 50%. Then the lawsuit settled and all was right with the world again.
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