HOA in Receivership

Started by NathanD • 16 replies • 3101 views

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NathanD (Illinois)
Posts: 5

Posted:

Hi, I'm new to the forums and have been searching through to see if I could find a related topic, but so far nothing to answer my questions....

I'm looking into buying a couple of condo's from a bank, however the HOA is in receivership, and I was wondering if I would be able to take the HOA out of receivership ?? I understand that it has to be 50%, but I did see a large amount of the properties are bank owned... properly the reason the HOA went into receivership, but I'm hopefully trying to secure all the bank owned properties and re-run the complex, with the HOA.

Any advise? Also am I able to get control of a HOA in receivership ??

Thanks for your time

NathanD (Illinois)
Posts: 5

Posted:

Quote:

Posted By NathanD on 05/25/2011 6:47 PM
Hi, I'm new to the forums and have been searching through to see if I could find a related topic, but so far nothing to answer my questions....

I'm looking into buying a couple of condo's from a bank, however the HOA is in receivership, and I was wondering if I would be able to take the HOA out of receivership ?? I understand that it has to be 50%, but I did see a large amount of the properties are bank owned... properly the reason the HOA went into receivership, but I'm hopefully trying to secure all the bank owned properties and re-run the complex, with the HOA.

Any advise? Also am I able to get control of a HOA in receivership ??

Thanks for your time

51%*

GlenL (Ohio)
Posts: 5,491

Posted:

Theoretically you could get it out of receivership if you met all of the conditions of the court to remove it from receivership. Unless you are planning on renting all of you new properties, you will probably have a very hard time unloading them. With the new conditions set by Freddie & Fannie et al, any potential purchaser would have IMHO a very hard time qualifying for any type of legitimate mortgage.

Studies show that 5 out of 4 people have problems with fractions

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Nathan:

Have you checked on the HOA fees set by whoever is overseeing the receivership? One item to watch with regards to receivership is how much the fees are potentially going to be while acquiring the properties and attempting to get out of receivership. Generally they are quite a bit higher due to paying an attorney or other individual set as the potential reciever/trustee overseeing the HOA. Also, usually the HOA has no say in what the receiver chooses to set for HOA assessments. I have not checked statutes in your state, but in many other states that is the general rule of thumb.

NathanD (Illinois)
Posts: 5

Posted:

@GlenL - I'll be buying with cash anyways, and looking to rent them all out, and run it as a property investment and gaining 51% and running the HOA, I have read on this forum, that most banks won't touch condos with more than 15% in foreclosures, so if I buy most of the property from the banks with cash, then I should be right to go on from there.

@JanetB2 - Hey! - Thanks so much for the information, I didn't really think about that - in relation to the HOA having a higher assessment. Is there any way publicly to find how to actually take over the HOA from what the court has done? - I mean an attorney or other individual wouldn't want to run them forever would they?

If anyone is reading this, and has faced getting control of the HOA from a receiveship, I'd like to know the process you went through...

Thanks again for your time

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Nathan:

When I did a search on your state statutes using “condominium receivership” the following came up:

765 ILCS 605/14.5
http://www.ilga.gov/legislation/ilcs/documents/076506050K14.5.htm

805 ILCS 105/114.05
http://www.ilga.gov/legislation/ilcs/documents/080501050K114.05.htm

765 ILCS 605/18.7
http://www.ilga.gov/legislation/ilcs/documents/076506050K18.7.htm

I would potentially recommend that you check the County Records and see what has been filed with regards to the HOA. From a quick glance at one of the statute links it mentioned something about filing documents. These documents will possibly tell you more information.

I have not experienced ... just know from statutes and various info it is something to potentially avoid going into if at all possible.

FredS7 (Arizona)
Posts: 927

Posted:

Maybe it's in receivership because of indifference/ incompetence/ bankruptcy a on the part of the present owners. If you had enough voting power you could re-establish decent management (and likely reduce monthly costs). I'm not an investor but this sounds to me like something that would only make sense at fire-sale prices.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

I'll be buying with cash anyways, and looking to rent them all out, and run it as a property investment and gaining 51% and running the HOA,

Well your dreams of running the HOA just because you own 51% of all the properties may not come true. Read your CCR's. Also the current board of directors may not vote you into office. Your 51% may mean nothing.

Just playing devils advocate......

GlenL (Ohio)
Posts: 5,491

Posted:

Steve with 51% guaranteed votes as property owner, he can vote whoever he wants onto the controlling Board.

Nathan it's not just the percentage in foreclosure, they won't make loans to COA's with fewer than 50% lived in by the owner and depending on the local office to determine what it means, fully funded reserves.

Studies show that 5 out of 4 people have problems with fractions

NathanD (Illinois)
Posts: 5

Posted:

@JanetB2 - Thanks so much for that information - I'll go through all that, and see if I can find some information, very helpful, thank you

@FredS7 - Hi Fred, I believe since the complex is 50-70% owned by banks, I'm thinking that's the reason the HOA went into receivership, because having a look through these forums, it seems that banks don't pay HOA fees... so if 50-70% of the complex isn't paying HOA fees (because their bank owned) then they aren't getting enough income to function.

@GlenL - Hi Glen, thanks for that information... what does COA's stand for? (Sorry I'm new to this forum...) The plan I have is soaking up all the bank owned properties in the complex (since there are some deals to be made "fire sale") but I can now see why nobody else has taken on the role, because of the cost of funding it would require, and the lack of funding they would get from the banks... I was under the impression that if more than 15% of the units were in foreclosure then the banks wouldn't lend full stop.... I'm now under the impression by your comments, that they would have to be owners that reside in the units??? - I'm not looking to do the apartments up and sell them, just keep them as rental investments, and if I can get control of the HOA then I can bring the cost per month down as well, which I'm sure the remaining owners would want... The problem is... now the complex owners can't sell because banks won't lend to future owners because of the foreclosure rate - so I can see the other units going down hill as well, because they can't sell... and within 2 years I can't see the HOA being able to survive on 30-40% (of it's potential income (that's if everyone is still paying their HOA)). With community maintenance, insurance, repairs, etc...

I'm really just trying to see how I get the HOA out of receivership... I just thought some ex-presidents might have seen a case where it goes into receivership then is pulled out by the home owners...

Thanks again for all your comment's, starting to learn alot on this forum

NathanD (Illinois)
Posts: 5

Posted:

The other thing I wanted to ask, is, as president do you need any training/courses that you have to undertake to do such a role? Stay I get control of the HOA out of receivership and back into the homeowners hands, can't anyone just stand up as President?... Given that the board members have to be from the complex...

GlenL (Ohio)
Posts: 5,491

Posted:

Quote:

Posted By NathanD on 05/26/2011 5:39 PM
The other thing I wanted to ask, is, as president do you need any training/courses that you have to undertake to do such a role? Stay I get control of the HOA out of receivership and back into the homeowners hands, can't anyone just stand up as President?... Given that the board members have to be from the complex...

COA Condominium Owners Association vs HOA Home Owners Association which refers usually to stand alone homes.

You will need to have a Board, either other homeowners or your family and friends. You would start by reading and learning the CC&R's (Covenants, Conditions and Rules) basically all of the documents governing the Association including the Articles of Incorporation. For instance the CC&R's might require Board members to be homeowners which you might need to change to allow outsiders (yourself included if you don't plan to live there) on the Board. Typically it requires 66-75% to change the Covenants so you might not have enough votes to do it. You also need to read the Illinois Condo Act and comply with its statutes. Since you are new to this you might consider joining your local CAI Community Associations Institute and perhaps hiring either an experienced Properties Manager or Community Management Company to run the day to day stuff.

Condominium Property Act:
http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2200&ChapAct=765%26nbsp%3BILCS%26nbsp%3B605%2F&ChapterID=62&ChapterName=PROPERTY&ActName=Condominium+Property+Act.

Studies show that 5 out of 4 people have problems with fractions

FredS7 (Arizona)
Posts: 927

Posted:

>The other thing I wanted to ask, is, as president do you need any training/courses that you have to undertake to do such a role?

You are required to have the same amount of training as that required to become a parent (that is, none).

As to what you NEED...well that's another story.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

Posted By GlenL on 05/26/2011 10:06 AM
Steve with 51% guaranteed votes as property owner, he can vote whoever he wants onto the controlling Board.

Many CCR's have provisions to limit the power of one owner with multiple units. This is done so the owner with the most units doesnt run the place by himself and run it into the ground or only fix things that help the controlling owner at the expense of all the other owners.

DJ1 (Ontario)
Posts: 798

Posted:

Anyone remotely considering investing the kind of money you are talking about would be a fool not to obtain professional advice rather than rely on an internet forum. No offense to the members.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By DJ1 on 05/27/2011 9:24 AM
Anyone remotely considering investing the kind of money you are talking about would be a fool not to obtain professional advice rather than rely on an internet forum. No offense to the members.

No offense taken … now it has become obvious that apparently the OP has never lived or knows anything about HOA’s I would have to agree.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Alarm bells are going off on this situation BIG time...Seems Mr. Nathan may be one of those seeing the forrest for the trees types...Sounds like a great idea to buy foreclosed properties from a bank for "cheap"...The reality is this is just a BAAAAAD idea and to pay cash??? REALLY bad idea... You NEVER pay cash for a house even if you can...

A HOA isn't an entity separate from any one owner. It is ALL the owners. It's not something you purchase. It is something your a member of. The HOA is in receivership because of lack of interest and money the owner's have put into their HOA. It means the owners don't want a HOA but haven't gotten it together enough to disband it. One person can't just buy the whole thing up and now run a HOA...That's NOT a HOA. That is a DEVELOPMENT.

Our HOA if we decided NOT to run it ourselves, had to be turned over to a Management company. It was that managment company that the dues would then be paid to. Which is probably the direction this poster should look into rather than somehow paying lots of money to be the "greatest owner of them all"...

There is alot of issues to cover here. The poster may want to do more homework on just purchasing alone. Buying a foreclosure isn't as simple as one thinks it is. Plus paying cash for a house doesn't allow you to take the tax breaks out there for owning a home. You forfeit alot of equity and good credit potential. There still is insurance to consider. Even if you don't have a mortgage, you need to have your home insured. If the property is going to be used for rental use, that has it's own set of issues. It's NOT pure profit and can really effect your tax burden. Not to mention the repairs, maintenance, and rental agreements/eviction costs.

This sounds like someone with grand ideas that will find out the follow through isn't soo grand...

Former HOA President

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