53% delinquent and lien with VP

I am on the board of a 60some house association. 53% of our homeowners are past due. 47% of those are past due for 2 years or more. This puts a to-date debt to the HOA at around #$21k. We have 2 houses and 1 lot with liens on the property. We have a 3 person board and our President is past due and our VP has a lien on her property. Our community is composed of $150k+ homes with an annual fee of $350. According to our financials we are only netting ~$3k a year. Our biggest expense is our PMC at ~$4.5k a year, however cutting them out would only drop the annual rate of $100/per lot- not worth the savings IMO.

First off let me say- there is not a single bone in my body that would every WANT to take away a home from a family over something so stupid. /rantover

1)
I have seen that communities with over a 15% delinquent rate starts to affect other homeowners property values- any truth?

2)
It is my understanding that you need the signatures of the board to proceed with foreclosures, correct?

3)
Because 2/3 of our board are delinquent- can they both alone bring to vote to terminate our relationship with the property management company (we are not under contract, just month to month at the moment bc the two board members have verbally stated they wont be signing anything)? Our subdivision would most likely vote for this since everyone is past due and it is beneficial to them. Some of our strongest influentially voiced residents are the ones past due (but nobody knows this or even who exactly is past due and I would assume board members are not allowed to publicly release this information).

4) Who all is needed to sign a property management company contract?

5) How do board members proceed with foreclosures without getting discriminated from other residents?

I am the only board member who isnt past due which puts me in the minority. One board member works for the appraisal district and so my husband is asking for my resignation so that I dont piss off the wrong people and have some back door retaliation.

If you were to ask why all the past due- I would say its because people have the attitude of "well the company does a bad job so I just wont pay" or "the rules are stupid and so I"m not paying" (not knowing that a property management company doesnt make the rules- only enforces the documents that were given to them). Ive come together and made a FB page but now it seems that everyone is just complaining to me and this volunteer position is becoming a full time job. Mostly because I'm having to BABY everyone to EXPLAIN the documents that they shouldve read when the bought lots/houses here.

I'm pretty sure our HOA will go under eventually and of course the PMC will just bounce when their insnt enough money to pay them.

what would you do in MY situation?

Hi Stephanie,

Welcome to the forum. Sorry to hear about your development. Not only do you appear to have an apathetic membership, you appear to have a membership who simply no longer cares.

Does the make-up of your development allow for the elimination of the Association (i.e. no common area to maintain)?

As for your specific questions, I would like to offer the following:


Yes. It's an indirect effect vs. a direct effect.

When the housing bubble burst in 2008(?), rules were put into place that have lenders now looking at the financial health of the Association a property is located in. Over the years the rules have changed and they now really only apply to Condominiums vs. single family developments. Unfortunately, even though the rules changed, many lenders still consider them when making loans.

The reason the lenders still try to comply with the lending rules for single family developments is that all mortgages are sold. The biggest buyer of these loans is Fannie Mae and Freddie Mac. The rules developed in 2008 specify requirements loans must meet for Fannie or Freddie to purchase the mortgage. Since they are biggest buyers, if the lenders make a loan for property that doesn't meet the loan specifics, it's harder to sell the note (mortgage).

When notes are harder to sell, the lenders don't want to put as much money at risk. Therefore, those who are in developments that have an Association in poor financial health, that want to sell, may need to lower the asking price in order for buyers to obtain the loan. Appraisals are based on sales (and other things) near the home. Hence, as more sellers need to lower the asking price to allow the buyer to obtain the loan and make the sale, the appraisals will start to be lower. End result, lower property value.


Correct. The Board of Directors are the decision makers for your Association. They are the ones who must initiate any liens for delinquent accounts and, if needed, initiate foreclosing on said lien.


Making public who is delinquent will depend on your governing documents and applicable State law. Typically it's allowed but the benefits of making such information public is questionable.

If the people on your Board are refusing to sign anything to collect past due assessments, then it's up to the membership to oust the Board and replace them with those who will. Unfortunately, it sounds like there is little support within your membership for this.


Typically, just the President of the Association. However, it depends on the wording in the contract and the language in your governing documents.

Keep in mind, the President (who is an officer position) should not sign any contracts without approval of the Board of Directors (who are elected or appointed individuals). The Board of Directors make the decisions. Officers, even if they are the same people (sort of like working two jobs), implement the decisions the Board makes.


By having and following a written policy and applying that policy equally.

If I were to be elected to your Board (and had support of the rest of the Board) I would write and adopt such a policy (if none already exists). Have the policy adopted by the Board and then publish it to the membership. I would then explain to the membership that the policy would be implemented on mm/dd/yyyy. Then I would follow the policy and keep the membership informed of what is happening.

Our current policy for assessments consist of the following:

30 days - written letter
60 days - Second notice
90 days - Third notice sent by certified mail (so there is a paper trail)
120 days - fourth notice

120 days - Notice of agenda item for next board meeting about escalating collection efforts and inviting the member to attend and be heard.

Day after the meeting - Notice of Boards decision sent by certified mail. This letter will also state that if the account isn't brought current by mm/dd/yyyy, the matter will be turned over to the attorney for collection.

mm/dd/yyyy + 1day - Issue turned over to attorney with instructions to lien and, if after x amount of time to foreclose on the lien

OR

Instructions to the attorney to seek court judgment and take necessary steps to collect (could include lien and foreclosure or, with a court judgement, the ability to seize bank accounts or other personal property to satisfy the debt.

Keep in mind, based on what you told me, whoever does this will not make friends. They will likely make enemy's (especially to those who you start collections on). In a small development, this could be an issue. However, this is what is needed.

The other option, is to petition the court for receivership. this is not recommended except in dire cases. The reason is that the receiver works for the court - not the membership. Their job would be to put the Association back on track financially. Assessments would be raised to cover expenses and pay the receivers salary (could be $100K per year). There may be special assessments. There would be liens and possibly foreclosures.

Regardless of how it's done, it's imperative that the Association be on the path to get and maintain financial health. If that's not possible then consider simply disbanding the Association and eliminating the deed restrictions. If common area and amenities prevent disbanding, and you can't get the association on the path to financial health, you should seriously consider selling.

What needs to be done can be done. However, it will take a lot of work, dedication, thick skin and the support by a majority of the membership.

First, you're a better person than me for not pursuing foreclosure. I was always taught if you owe a bill pay it and if you can't, talk to the creditor and see if you can work out a settlement. When you don't pay, bad things are SUPPOSED to happen. That concludes MY rant.

I think it's time for a major community meeting to lay everything out so these people can decide what they want to do. Part of the agenda should be booting out the board members who are delinquent - they shouldn't be in a position to make any decisions for the community if they can't/won't set a good example.

You'll also need to tell people about receivership and how it would be a bad, bad thing for your community. Basically, if no one steps up to do anything and your association can't pay its bills, the board (or you, since it looks like you'll be the last person standing) will have to go to a court and ask a receiver be appointed for your association. The receiver's only job is to see that the bills are paid and answers to the judge, so the homeowners won't have ANY say whatsoever as to how the community is run. Homeowner's costs will go up considerably because you'll now have to pay court costs, the receiver's expenses AND your assessments. By the way, the receiver will be able to increase them to whatever level's necessary to run the association. Think you'll be able to see your house under THOSE conditions? I think not.

If there are homeowners who say "the rules are stupid and I'm not paying" or "I don't like the management company so I won't pay," remind them paying one's fees and bitching about the rules and/or management company are separate issues. You can always change management companies and check your documents to see how the rules can be changed, then have homeowners vote on what they want to keep or get rid of. Yes, it'll require some work and YOU shouldn't have to do it alone (you do have a life outside the association after all!)

If this is a community of detached homes, perhaps it's time to consider if the homeowners even want a homeowner's association and that'll have to be discussed as well. It's not simply a matter of saying "Ok, no more HOA," fire the property manager and everyone moves on to do whatever. There are legal implications which will probably require an attorney to help you through it (and yes, that costs money, so people may as well start paying up).

Of course, you could sell your home now and watch things go to hell in a hand basket from a distance, but I'm not sure you'd get a good price if a potential buyer starts asking questions and sees how crappy things are. Good luck, whatever you do.

We cant start the legal paperwork even if I wanted to because the other 2 board members are delinquent/have liens. They most definitely wont proceed with foreclosure procedures on themselves...

So I believe these are the options.

1)Call a BOD meeting and ask the 2 members to step down voluntarily.
1a) They do and I replace them with who I see fit at a later time as an "Action without Meeting" decision and we move forward
1b) I call a BOD meeting (to save face for them) in hopes they dont show up (harder during work hours )and do so 3 times to declare them "vacant"
1c) They dont and I explain that I will gather votes to have them removed (petition to recall the election for their 2 spots) which I cant find in our bylaws but am looking

(I want to know if I can get into trouble by telling other residents that the reason I am asking for the petition is bc they are delinquent??)

Depends on what the Texas law says:
It could say that it overrides existing docs.
It could say that the HOA can choose not to opt in to the new rules.
Ask your PMC how it works.

Quorum requirements typically found in bylaws. Reducing the number will require an amendment to the bylaws. Your bylaws should tell you how many votes you need for an amendment to the bylaws. Unlikely that there is any provision that allows the board to make quorum changes without a member vote.

Steph

It might be time to gather a few fellow owners to discuss how to deal with the present BOD Members who are delinquent and what can be done about it. It could range from them catching up, them resigning, you all starting legal action against them, etc.