The Downside of homeowners associations

Started by GeorgerwilliamsW • 8 replies • 1351 views

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GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

From another thread:

I would like to comment on this if I may. First this sound like an incident that took place with our association. We had started off with a $400 a year in 2006, then in 2008 it went to an extra $200 which total $600, then in October of that same year a special assessment of $370 was added,mind you that this had to be paid in November and December.At the beginning of December the new proposed budget for 2009 is $865 for s/f homeowners and $965 for townhomes. Now these increases are because people hadn't pay for their dues for two years and they stated that they had to increase, also because of not having enough money to go after those whom didn't pay. It was a total of 55 people and only 17 was taking to court before the funds ran out. We have a total of 201 s/f homes and townhomes, with the supposed of being 300. But that stop because again not having enough funding to continue to build. Now our complaint has homeowners, Why should we be responsible of payng the $370 when we were up to date with our Dues! Those who haven't payed , received the same service has those who did.(Lawn, Pool, Tennis, Trash)Now my question has HOA'S, Would or do you think that this is FAIR? We did solve one problem, We has the community was able to take over this year, and vote out the orginal Board Members who was BOWENS! and we have pick new Board Member's and we also have a management company. Please any suggestion on how to start this year off? And remember the $370 is still following us along with the debt that was left from the other Board Members(BOWENS)If their is anyone that have experience of being Board Members, please can you help us the new members with suggestions. Thank-You! Tiwanna Atlanta GA.This is a great illustration of the downside of living in homeowners associations. It is only when times get tough that some of the real issues surface. And even then people will deny them.

When we "choose" to live in a covenant community, we reap the benefits, but we also are saddled with the responsibilities. We become inextricably hooked up with our neighbors--in both good and bad times; when they do smart things and when they do stupid things; and when they pay their fees and when they don't.

No, folks, life ain't fair. It never was, and it never was intended to be. The sooner we get over that notion, the better we can live our lives.

Let me illustrate this with another real life situation. I work in a professional partnership. My income--my livelihood--is enhanced by joining forces with other individuals. At the same time, I will suffer economically if one or more of the partners are unable to carry his or her own weight.

Recently, one of my partners was unable to work for several months due to an illness. He was unable to generate income to our firm The expenses of the firm continued. (We didn't move to smaller offices, for instance.) Our obligations to our clients continued. Our profits declined.

Each partner had to share some of the economic pain of one partner being unable to work. Our partnership income went down, but our expenses did not. Is that fair?

Should we have kicked out the non-performing partner for not contributing his fair share of income to offset expenses? Should we have bought out (foreclosed) his partnership interest (we could do that under the agreement) at fire sale prices? Should we have demanded that he repay all the income we lost while he was ill? (Those are rhetorical questions.)

Homeowners associations are just like that. We are all in it together, and we have to take the hard knocks as well the benefits together. But it seems like people only want the benefits.

It is time to take off the rose colored glasses folks. Get real.

When you buy into a covenant community you have to expect that you will bare a portion of the burden that comes when your neighbors don't pony up fees and assessments for whatever reason.

Everybody in the association has to share the burdens as well as the benefits. That's the trade off to reaping the benefits of covenant community living.

If one or two or three residents are unable to pay their assessments, the lost income may be able to be absorbed by increasing fees among the other residents. But at some point you have to start thinking about cutting back on some expenses (like closing the pool). That has to be part of the expectation of living in a homeowners association.

Only when we accept the notion that living in a covenant community means we have to assume part of the financial burdens of our neighbors. Those covenants hook us together in both good and bad times.

JoeK1 (Michigan)
Posts: 37

Posted:

Generally, I agree with your assessment George. When you sign on the dotted line to become a member of a condo or homeowner association and agree to abide by its rules and regulations, you become “exposed” to a variety of situations not encountered with sole home ownership. You now may become financially responsible for the mistakes or misfortunes of others. Most people in associations do not understand this concept or do not want to accept it.

I would, however, like to point out a different perspective on your partner example. I think this kind of business relationship is based upon a limited number of people who have similar goals, capabilities, work ethic, and in some situations, a voice into who is accepted as a partner. The small numbers contribute to a high degree of comadarie and a willingness to help each other out in a tight situation. In an association, particularly larger ones, this is not the case. You have a high diversity population whose goals are not necessarily aligned. Yes, you even have members who protect their self interests even though it may be at the expense of other association members. It is up to the BoD to sort through all of these situations and to act in the best interest of the majority of owners, even though it may go against their personal beliefs. There are times when leniency is called for and there are times when the hammer is called for.

It is important to remember that an association is a company and a business and not a social group. In any company, it is up to the management to protect its short term interests and long-term survival. It also must deal with its members (employees) who are not performing at the expected level or meeting their obligations. At times leniency is called for with such things as counseling, additional training or development, performance planning, or a change of assignments. There are also times when stronger actions should be taken, particularly if there is a history of bad decision making, incompetence, non-performance, abuse, or situations where personal gain is placed ahead of company gain. In those situations, the management must not be afraid or unwilling to take the necessary tough action, that could include the release of the employee. It has the responsibility to also act on behalf of all the other employees who are carrying their fair share of the load. An association leadership shares this same responsibility to the owners who are carrying their fair share of the load.

When it comes to cutting expenses, I agree 100% with you. No matter what the reason is for a shortfall in income (delinquent or late fees, bankruptcies, hardship, etc.) the association leadership has to quickly adjust its spending habits. All too often a BoD will take the easy way out and increase fees to cover the shortfall. This is a bad habit to get into. A much better approach is to eliminate waste that has crept into the system, to improve efficiency, to cut non-essential services, and in drastic situations, even cut essential services. It must do whatever is required to survive.

So, where does all this conversation take us? I think there several important take-aways.
• An association should expect to experience some association fee delinquencies and should adjust their budgets accordingly. They should have a strong collection policy in place and act with leniency when called for and toughness when called for.
• An association should reinforce the owner benefits and liabilities of belonging to an association through its communication channels and on a regular basis.
• An association’s leadership must exercise sound financial management when experiencing income shortfalls that focus on cutting costs and eliminating waste, rather than increasing fees.

Good Luck
JoeK

RobertR1 (South Carolina)
Posts: 5,164

Posted:

George,
Funny, this post you refer to evoked the same kind of thought for me. That certainly wasn't the reason for her posting of course.

It is easy to see your logic and hard to fault it. I do respond, to your post, because I feel you kind of slipped over the priorities that your post generates.

I agree with all you say about what we can expect living in associations, and we sign on for the trip. The stumbling block we can't seem to get around, board wise and by reflection, community wise, seems to be that we don't accept what you are talking about as a truism. At least three years ago, we could see the writing on the wall about this sub prime mess. Did we put plans in effect to handle this the best we could, if it happened to us? I don't think so. I know hindsight is perfect, but here is is, bearing down on a lot of Boards and association and we act like this is breaking news.
Your next to last paragraph contains a little reference to cutting costs and expectations in the associations. That little piece of information should be the first thing on any agenda of the BOD and there should be a plan in place. Nope, as late as this year, our BOD is proposing we have another CPI increase, in part because they can. Our annual meeting will be in April, so far we have not been hit bad by foreclosures, one in the past year or so. I think this waiting till the train light is visible and then trying to make plans is a little late and a dollar short. And of course I, and you are referring to associations (like your business) that has an organization in place that adjustments can be made. Woe unto these associations that don't have a strong orgaization now, and have for one reason or another run the place into the ground. It is past time to start moving the notches in the financial belt of all associations and best to tighten that belt as tight as you can get it. What you thought were essential last year may not be this year.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

I see Joe and I posted at the same time.
It is nice to have comrades in arms.

GlenL (Ohio)
Posts: 5,491

Posted:

GGeorge you pose an interesting question but to make it more relevant to the problems many HOA's are having consider what do you do when instead of one, it's 1/3 or 1/4 of the partners not producing income for whatever reason. You've stopped buying the office Cappuccinos from Starbucks, you've rationed paperclips, reused the carbon paper until it won't copy any more and changed from Charmin in the restrooms to one ply tissue paper and yet there still is not enough for expenses. The only two options I see is either get the productive partners to pony up more or get rid of the dead wood and replace them with people able to pay their own way.

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

MicheleD (Kentucky)
Posts: 4,491

Posted:

I agree with Joe's assessment.

It's a nice attempt at an analogy, but it's still obvious apples and oranges.

JosephW (Michigan)
Posts: 882

Posted:

This isn't jsut about associations, but you wouldn't know that from the news. Wait about 6 months to a year and see all of the services municipalities and states are going to have to cut because of revenue losses due to property taxes declining and not being paid due to foreclosures. People in subdivisions without HOA's are going to see the same decline as HOA's are seeing now. We see it in Michigan before the rest of you, and already, we're seeing 30% reductions in police/fire; snow plowing and road salting only comes after major snows; costs for trash pickup, water, and sewer -handled by cities/counties are going up rapidly. Road repairs, especially residential streets, has become non-existant. (Of course that doesn't stop our politicians from taking trips to Hawaii to attend conferences to "study" the problem), (I bet HOA boards would like to be able to get away with that). Most of our governments don't have a calendar fiscal year so the full impact won't be felt for a few more months. Taxes will have to go up to cover expenses that can't be cut fast enough, and the revenue losses, from Federal to state to local, means that those who can are going to pay mre to cover those that can't.

I think the statement "Life isn't fair" will be the motto for 2009 - not that I'm a cynical, pessimistic jerk - I actually believe things will get better, even if I have to live out of my 10 year old car in the meantime.

Joe

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JosephW (Michigan)
Posts: 882

Posted:

Here is a good upside:

http://www.jacksonville.com/community/jacksonville_community_news/2009-01-10/out_of_adversity

Joe

Joseph West
Official HOATalk.com Sponsor
Community Associations Network, LLC
www.CommunityAssociations.net
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RobertR1 (South Carolina)
Posts: 5,164

Posted:

Joe,
Frost this with our record of effecient or non-effecient record of local government down to the HOA level, and you find you are going to have to play double catch up. I am just like you Joe, I am sure things will get better. But Lord, it sure is scary.

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