HOA doesn't do anything here, and so no one pays their dues

17 Replies

Just purchased a townhouse as an investment property to be a rental unit with a monthly HOA fee of $145. Speaking with one of the neighboring residences I was told "the HOA doesn't do anything here, and so no one pays their dues"... It's about a 40 year old property with signs of siding and possible roof repair needed, and the HOA seems far less than responsive - so I'm concerned.

Am I going to end up funding my own exterior repairs? Does the HOA have to provide me with financials upon request? If no one is paying their dues, am I facing a large assessment to get anything done?

Jonathan Smith, Real Estate Agent in NC (#285033)
844-YES-BLUE

Prior to purchasing this townhouse, did the HOA/Management group send you a "Resale Certificate"? This packet should have contained all the vital info. needed to determine the health of the HOA, as it should contain budgets, minutes, etc. These docs help you determine whether any special assessments are coming up. If the packet lacked board minutes, this should have made you suspicious and I would have contacted the Management rep. to ask when the last meeting took place. The lack of regular meetings would be a bad sign.

Nevertheless, you now own this property.  I would contact the Management rep. and discuss your concerns asap.

As you push the HOA to take action, it is more than likely that you'll find yourself sitting on the board, if not holding the office of President. This happened to me. I showed up at an owner's meeting and had all kinds of questions on the financials. They made the observation that I was financially astute, I countered that I was a CPA and the next thing I know, the president nominated me to the position of treasurer within about 10 minutes.

If you show up and sound like you want to take action and you're half way knowledgeable, you'll find yourself on the other side of the table so fast your head will spin.

Originally posted by @Linda Weygant :

As you push the HOA to take action, it is more than likely that you'll find yourself sitting on the board, if not holding the office of President. This happened to me. I showed up at an owner's meeting and had all kinds of questions on the financials. They made the observation that I was financially astute, I countered that I was a CPA and the next thing I know, the president nominated me to the position of treasurer within about 10 minutes.

If you show up and sound like you want to take action and you're half way knowledgeable, you'll find yourself on the other side of the table so fast your head will spin.

This is exactly what happened to me and how I ended up as Treasurer of my HOA. I went from being seen as the ignored speculative neighbor that gives the HOA a hard time to everyone wanting me on the board.

Originally posted by @Jonathan Smith :

Just purchased a townhouse as an investment property to be a rental unit with a monthly HOA fee of $145. Speaking with one of the neighboring residences I was told "the HOA doesn't do anything here, and so no one pays their dues"... It's about a 40 year old property with signs of siding and possible roof repair needed, and the HOA seems far less than responsive - so I'm concerned.

Am I going to end up funding my own exterior repairs? Does the HOA have to provide me with financials upon request? If no one is paying their dues, am I facing a large assessment to get anything done?

Definitely don't listen to neighbors. The HOA docs and financials are available to you. And were available before you bought. 30-40 year old condo units is where you see the crap hitting the fan. Roof repairs, exterior repairs and repaint, parking lot and structure repair, fencing......it's usually down hill from there. Even if every one is paying dues doesn't mean there is enough money for repairs without special assessments. I don't think I'm going on a limb by saying that $145/mo is barely enough for maintenance let alone major capex for many HOAs.

Make your lawful request for recent meeting minutes and the last annual budget summary.  

Thank you everyone for the great insight and advice on my HOA concern... very helpful! I do wish I had pushed and obtained the full HOA details prior to purchase; however it was a good price to value with very little cost or effort to be ready for rental.

Jonathan Smith, Real Estate Agent in NC (#285033)
844-YES-BLUE
Originally posted by @Jonathan Smith :

Thank you everyone for the great insight and advice on my HOA concern... very helpful! I do wish I had pushed and obtained the full HOA details prior to purchase; however it was a good price to value with very little cost or effort to be ready for rental.

Don't let "price to value" cloud your thinking on condos. Many are cheap for a reason. They are also the hardest to exit from. Could you easily sell it today for what you paid plus expenses to an FHA buyer? If the unit was relatively rent ready and truly a good investor deal there would have been multiple offers. Were there? How long did it sit on the market? Condos are tricky because you don't control the expenses. Be prepared on the next one.

Originally posted by K. M.:

Just purchased a townhouse as an investment property to be a rental unit with a monthly HOA fee of $145. Speaking with one of the neighboring residences I was told "the HOA doesn't do anything here, and so no one pays their dues"... It's about a 40 year old property with signs of siding and possible roof repair needed, and the HOA seems far less than responsive - so I'm concerned.

Am I going to end up funding my own exterior repairs? Does the HOA have to provide me with financials upon request? If no one is paying their dues, am I facing a large assessment to get anything done?

Definitely don't listen to neighbors. The HOA docs and financials are available to you. And were available before you bought. 30-40 year old condo units is where you see the crap hitting the fan. Roof repairs, exterior repairs and repaint, parking lot and structure repair, fencing......it's usually down hill from there. Even if every one is paying dues doesn't mean there is enough money for repairs without special assessments. I don't think I'm going on a limb by saying that $145/mo is barely enough for maintenance let alone major capex for many HOAs.

Make your lawful request for recent meeting minutes and the last annual budget summary.  

 Very, very well said.  Many states have laws that provide members of an community association the right to inspect the books, not sure if NC is one of them.  Either way, it's not unreasonable to make the request to see them.  I completely agree that $145/month is very low and while that's attractive to a buyer, it's only attractive until a special assessment hits.

By the way, if you or anybody in the association has been able to get FHA financing recently, the delinquencies aren't that bad. People often exaggerate the problem, especially disgruntled neighbors and every association has at least one.

Originally posted by @Ana Marie B. :

Prior to purchasing this townhouse, did the HOA/Management group send you a "Resale Certificate"? This packet should have contained all the vital info. needed to determine the health of the HOA, as it should contain budgets, minutes, etc. These docs help you determine whether any special assessments are coming up. If the packet lacked board minutes, this should have made you suspicious and I would have contacted the Management rep. to ask when the last meeting took place. The lack of regular meetings would be a bad sign.

Nevertheless, you now own this property.  I would contact the Management rep. and discuss your concerns asap.

 Take this post with a grain of salt.  Just because meeting minutes aren't included in the resale package doesn't mean that it's necessarily a bad sign.  Many jurisdictions don't require meeting minutes to be part of the resale package, such as my area, so they often aren't included but are available by request.  Also, this is 2015.  Many associations don't hold regular meetings but are financially and physically healthy.  I have 4 of mine that are like this, we meet twice a year, if that, and they've got more money in reserves than the reserve study calls for and they're ahead of schedule on all maintenance and admin issues.

@Marc M. - Having no meeting minutes in the resale certificates where "you" but condos may be the norm, but in areas like Seattle, the ability to rent your condo or town home can be removed if enough owners vote to remove said right.  Minutes will clue you in on whether these types of issues and discussions are happening in the complex.

With that being said, there are still other factors to be considered before buying condos for investment purposes. I consider all factors like minutes before putting my hard earned money in a high-end condo (an investment that comes imo with more risk than say SFR).

Originally posted by @Ana Marie B. :

@Marc M. - Having no meeting minutes in the resale certificates where "you" but condos may be the norm, but in areas like Seattle, the ability to rent your condo or town home can be removed if enough owners vote to remove said right.  Minutes will clue you in on whether these types of issues and discussions are happening in the complex.

With that being said, there are still other factors to be considered before buying condos for investment purposes. I consider all factors like minutes before putting my hard earned money in a high-end condo (an investment that comes imo with more risk than say SFR).

 I'm not disagreeing that minutes are important, I'm simply making the point that their absence from the resale package isn't necessarily an indication of a problem with the association. Typically, they are available upon request by a member of the association.

If you buy a condo, make sure you have a very good realtor who actually reads all of the resale certificate. Because you lack control of your property when you buy a condo, I wouldn't invest in condos.
Originally posted by @Marc M. :
Originally posted by @K. marie P.:
Or

By the way, if you or anybody in the association has been able to get FHA financing recently, the delinquencies aren't that bad. People often exaggerate the problem, especially disgruntled neighbors and every association has at least one.

When I was figuring out my exit on a condo last year I checked FHA eligibility. There were 6 condo associations that had their FHA cert. in this city of 350K (mine was not one of the precious 6). The buyer pool was pretty much cash or conventional only. The HOAs are not going the extra step to get certified.

Agreed that people will exaggerate and HOAs are rife with unhappy members and gossip.  That being said, the visual clues in my area rarely lie.  HOAs don't/can't spend money they don't have.  The exterior, the grounds, the parking lot......any deferred maintenance is easy to see. And it's pretty much always there in my markets in attached condo units over 30 years old.  It's the rare condo association that is is high end and has it's financial and maintenance act together. 

Originally posted by K. marie P.:
Originally posted by @Marc M.:
Originally posted by K. marie P.:
Or

By the way, if you or anybody in the association has been able to get FHA financing recently, the delinquencies aren't that bad. People often exaggerate the problem, especially disgruntled neighbors and every association has at least one.

When I was figuring out my exit on a condo last year I checked FHA eligibility. There were 6 condo associations that had their FHA cert. in this city of 350K (mine was not one of the precious 6). The buyer pool was pretty much cash or conventional only. The HOAs are not going the extra step to get certified.

 Only 6?!  That's crazy.  I'm always surprised at the number of associations here that don't have it but I would guess that number is closer to 50-60%.  6 is just unbelievable.  

Originally posted by @Marc M. :
Originally posted by @K. marie P.:
Originally posted by @Marc M.:
Originally posted by @K. marie P.:
Or

By the way, if you or anybody in the association has been able to get FHA financing recently, the delinquencies aren't that bad. People often exaggerate the problem, especially disgruntled neighbors and every association has at least one.

When I was figuring out my exit on a condo last year I checked FHA eligibility. There were 6 condo associations that had their FHA cert. in this city of 350K (mine was not one of the precious 6). The buyer pool was pretty much cash or conventional only. The HOAs are not going the extra step to get certified.

 Only 6?!  That's crazy.  I'm always surprised at the number of associations here that don't have it but I would guess that number is closer to 50-60%.  6 is just unbelievable.  

I'm wondering if I overstated that. There were six HOAs that showed up on the website but now I'm thinking the search must have been for the zip code and not the city. Even so, the city only as 10 zips and this the condo is in a major one. It's on the right side of the tracks (highway in this city) and in a big condo zone. FHA buyers were out as an exit. If the HOA had its FHA cert I would have stayed in the deal, done the mini rehab, and resold retail. I sold as-is to an investor buyer.

Run for president of the HOA , start collecting the dues , file foreclosure on those who dont pay .You could buy the whole place .

Originally posted by K. M.:
Originally posted by @Marc M.:
Originally posted by K. M.:
Originally posted by @Marc M.:
Originally posted by K. M.:
Or

By the way, if you or anybody in the association has been able to get FHA financing recently, the delinquencies aren't that bad. People often exaggerate the problem, especially disgruntled neighbors and every association has at least one.

When I was figuring out my exit on a condo last year I checked FHA eligibility. There were 6 condo associations that had their FHA cert. in this city of 350K (mine was not one of the precious 6). The buyer pool was pretty much cash or conventional only. The HOAs are not going the extra step to get certified.

 Only 6?!  That's crazy.  I'm always surprised at the number of associations here that don't have it but I would guess that number is closer to 50-60%.  6 is just unbelievable.  

I'm wondering if I overstated that. There were six HOAs that showed up on the website but now I'm thinking the search must have been for the zip code and not the city. Even so, the city only as 10 zips and this the condo is in a major one. It's on the right side of the tracks (highway in this city) and in a big condo zone. FHA buyers were out as an exit. If the HOA had its FHA cert I would have stayed in the deal, done the mini rehab, and resold retail. I sold as-is to an investor buyer.

Some RE agents will actually run an HOA through the FHA process free of charge just to get a deal closed. I've had that happen a couple times before, the only sticking point is that it depends largely on getting cooperation via docs and statements from the PM, which can be tough to do.

@Jonathan Smith all of the above! Get involved, get info, and round up concerned homeowners to protect your investment. Sometimes the easiest thing to do is just sell and take a loss then deal with malarkey. Good luck

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