Need Help and Advice

I'll get right to it.

My husband and I bought raw land in a community that has an HOA (NEVER AGAIN). We bought the land back in 2006. There are 233 parcels in the sub-division. Each parcel is 5 plus acres. There are 17 shared Wells among the 233 parcels. There are around 50 homes built in the community. We pay 432.00 per year for HOA Fees, and $150.00 per quarter for Well maintenance fees whether we have a home built or not. These Well maintenance fees have been going on since 2007. I'm no technical engineer, but I can't believe that these Wells are breaking down this often, and for the past 8 years they have been fixing them. When I ask for a cost breakdown from the Association, all I get is a budget sheet. This HOA is making $35,000 every quarter from these Well maintenance fees. The property values have dropped so low, because who wants to buy land and pay these types of fees. Right next store 1 acre lots are SELLING for 35,000. Our beautiful lots are selling for 45,000 - 55,000 for 5 acres. It's ridiculous. We are stuck paying these fees and can not sell the lot. I want to report this HOA, and don't know where to begin. Can someone help.

Cindy,

My association has just three wells for 1600 parcels originally 36-acres or larger. The state ordered one of our wells shut down due to nitrate contamination. From serving on the board I can attest to the fact that shared wells are one major pain in the butt. The state requires testing each month; the person who gathers the samples must be a certified well operator and the testing must be done in a certified facility. The costs for all this testing remain the same whether you draw any water from the wells or not.

The equipment is not free, either, nor is the cost of drilling the well. One of our residents spent over $30,000 to drill their own well, which later failed when the casing shifted and trapped a broken pump near the bottom.

I agree, however, that your association should provide you with the documentation to justify the costs. State law gives you the right to see the books. ARS 33-1805 requires that the association provide access to the records or copies within ten business days of receiving a request. The bad news is that there is no government agency to assist you. If your association will not respond to your written requests you may need to hire an attorney to pursue this matter.

Yes, we've been to a few meetings.

No, not under development control. All lots have been sold to individuals and none are owned by the HOA or Developer if that is what you mean..

There are reserve funds, but this has been going on for 7 years, 105,000 per year. Not including the HOA fees.

I am on 'municipal water'.

My average water bill is $45 / m $135 / quarter.

Your issue would be ??????

Report what? The well fees are for current expenses and future expenses. The HOA isn't making any money, that statement is ridiculous. The money is used for HOA expenses which is "your" expenses. 17 wells is a ton of wells for only 233 homes. Each well must be maintained per state and local standards, tested, etc.

To see where your money is going, you really need to get more info. Go to more meetings. Etc....

I see your having buyer regret because of the expenses. But I doubt these expenses were a surprise as there are many expenses in an HOA, its no secret. You obviously didnt know what you were buying if this comes as a surprise.

If you dont like the land, sell it. Simple as that.

My $.02. As a Hoa member in "good standing" you are entitled to review documents of the Association.

I'd ask for the following:

1). ask for the monthly/quarterly operating budget AND general ledger (AR/AP). I suspect you're only getting the "annual budget" which is a very high overview of cash flow/expenses.
2). ask for the past 3-5 years of audits, tax filings (you may or may NOT be entitled to this)...but it's worth asking for, so you can determine how much the HOA has built up the reserves and if they had to pay any federal or state/local taxes.
3). This is going to take a lot of work, but go to the County/City office and find the original plots/real estate tax assessments, then search for each sold subdivided plot.***you will want this because I suspect the "wells" and value of the "wells" are detailed in the governmental property details.
4). I am assuming you live in AZ, which is somewhat of an aired/dry area...and always in need of water/wells/springs/aquifers...have you thought about selling your "well rights" to local farmers, water companies?
5). If there are only 55 homes (people living there actually using the well water) are their assessments the same as yours?

I'm not sure if your state or County has a real estate Board of Equalization, but if you do...you can petition an appeal/adjustment to the assessed value of your land, conversely if you can prove "comps" are much higher you might get taxed more...but the silver lining is you can sell your land at a higher rate, if tax records show "actual market value".

The HOA is essentially running a water company. Take a look at the budget for your town's water dept sometime, you will be surprised how much it takes to run.

Cindy,

Here is another angle you may need to look into.

I do not work in the real estate business but my understanding is that in Arizona when a developer sells parcels of 36 acres or fewer he is required to comply with the requirements of a subdivision and this includes paved roads, electric, sewer, and water.

The fact that you have a water bill separate from your HOA assessment suggests that there is a third party involved in the water business. It is possible that the developer formed a separate corporation for the water. If so, that corporation may be under the control of the Arizona Corporation Commission due to being a "public" utility. This is a long shot but may be worth looking into as the water company would be required to justify its rates to the Utilities Division of the ACC.

Have you ever researched to see who owns the real estate where the wells are located? That may give you a clue as to who operates the water company.

Not only the pumps but likely the associated piping, storage tanks, water softener, perhaps outlets (fire hydrants), specialized equipment (if any), etc. plus the reserves to pay for replacement and possibly new wells or to take existing wells deeper.

What I know about wells is very little. My father and a neighbor shared the cost of putting one in on their property in Prescott (AZ). I know the hardness of the water took it's toll on the pump and they never got the expected 15-20 years expected life from them.

"Once the well serves more than one owner or can be used by multiple owner's guests it is NO LONGER a private well."

John, perhaps in SC, but not Virginia. Our subdivision has a 'shared well system' (like Cindy's, tho not as large). They are considered private wells by the state, and fall under the private well regulations. If the number of users reaches a certain bogey however, it jumps to the much more stringent regulations for 'water well systems'. (I'm not sure what the number is but it's a lot more than one.)

I'm still not clear on the rules in Arizona, but I'm guessing the wells are considered private -- which may partially explain why it's easier to play fast & loose with the homeowners' funds. Just my opinion.

PERFECT

You made a bad investment. It happens. Sell it and cut your losses.

This conversation rings a bell in my memory.

It was an HOA where once the development was under HOA control, they discovered that the developer owned the water/sewage company providing such services to them. The developer was still making money off the association.

I forget the outcome.