HOA out of money

Started by MaryM20 • 10 replies • 4536 views

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MaryM20 (Florida)
Posts: 3

Posted:

Hello, I am hoping someone will bring some light to our community's problem. On the last HOA meeting we were informed that we are eating at our reserve and will be out of money soon. The property manager said she has not paid herself in the last month. Her suggestion was that we raise the monthly fee to make up for those not paying. Someone voiced concerned at that, saying that if the fees go up then they may as well get added to the deliquent list. I am not surprised by that statement and I am sure that deliquent list will grow by multiple numbers and then we are back to the same square or worse, because even less people will be paying.

The property manager is already dealing with liens & foreclosures, but with not enough money coming in, the attorney's fee is eating the reserve fast. Now we have cut down on the amount of times the grounds get taken care of. They are also trying to find a cheaper home insurance.

So, the question is, if we go broke what then? Does the gov't take over our HOA? What are the pros & cons of that?

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

Filing corporate bankruptcy is not the end of the world. If the association runs out of money, it could either file voluntary bankruptcy or it could be forced into bankruptcy by creditors, including mortgagees.

The federal bankruptcy court would appoint a referee/receiver to manage the affairs of the association under the watchful eye of the court. Owners would forfeit control of the association.

Most likely a conference would be called among unit owners, creditors, mortgagees and others to work out a suitable arrangement. If the property were desirable, most likely (speculation) assessments would be increased, and the holders of foreclosed units would agree to pay assessments in order to protect their interests.

Since it is relatively novel, bankruptcy of a homeowners association would provide some unique considerations to the court and could lead to some creative agreements among the interested parties. Their may be nothing to prevent a private, profit making corporation from purchasing the rights and assets of the association and running it for profit.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Mary - what kind of non-collectable rate do you have to put you in such a position?

WHY are lawyer's fees so high?

Get a Finance Committee going ASAP. Re-evaluate your budget and
all a special meeting of the members to lay out all the financials.

CUT, CUT expenses. (that may include your PM and the lawyer)

Non profits can spend only what they bring in. So if the mowing does not get done due to there being no funds, so be it.

You need to take a real good look at your revenue / expenses or expect what george has outlined for you.

MaryM20 (Florida)
Posts: 3

Posted:

George & Susan, thank you for your insight. I am not a board member therefore they don't share the financials with me. They say it is only for board members to see. I believe our bad situation is due to foreclosures & some people simply not paying or out of jobs. If the gov't does take over our HOA, would that make our homes less desirable for people to buy? Most of us owe more on our comes than they are currently worth so we don't sell not only because people are not buying, but also because we can't afford to sell. For now I am just trying to learn as much as I can understand if the choices they are making are in fact the best.
Thank you again to the both of you.

KirkW1 (Texas)
Posts: 1,665

Posted:

I believe you would find that every resident has a right to know a good deal of information concerning the financials. The only thing you should be be able to see is which units are behind.

EllenS1 (Florida)
Posts: 1,148

Posted:

Mary,

As an owner you are etitled to see all the financials and I believe you must be able to see them or receive them 10 days after your request. I suggest you have your request in writing or email.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

What government is going to take over your HOA or Condo?
A court judge may appoint someone or some company to manage the HOA. I am sure HOA's have dissolved, but do they get dissolved by the government or some assigned entity. by approval of the courts?

I don't know but we seem to have some authoratative answers here, so what is the proceedure and what is the end product, if any if it is dissolved. What happens to the common assets? Can the court order the State to pull any licensing requirements, how about taxable property for the county or state?

Are the procedures the same in all states? Is there a financial limit on liabilities? Can the court declare the Board responsible (if proper)?

What triggers this whole process, can it be done if the HOA/Condo is viable and solvent, are there other forms of associations in some states that a Regime could fall under?

Who has experienced this process?

SteveP5 (Florida)
Posts: 50

Posted:

Quote:

Posted By MaryM20 on 04/29/2009 7:51 PM
George & Susan, thank you for your insight. I am not a board member therefore they don't share the financials with me. They say it is only for board members to see. I believe our bad situation is due to foreclosures & some people simply not paying or out of jobs. If the gov't does take over our HOA, would that make our homes less desirable for people to buy? Most of us owe more on our comes than they are currently worth so we don't sell not only because people are not buying, but also because we can't afford to sell. For now I am just trying to learn as much as I can understand if the choices they are making are in fact the best.
Thank you again to the both of you.

Hi Mary
I have the same problem that you have to a degree. I checked my By-laws and it gives me the right to examine the association's books so go look at your by-laws and see what it says under Rights of Mortgagee.
This year we have a much cheaper insurance and are poorly covered if we should experience a hurricane this year.

Anyway, I'll share a funny story. Last year to save the Association money rather than have them hire a painter to come paint the walls around our trash area I got the paint mixed at home depot and painted the area myself. One of the home owners complained that the work was not done by a licensed contractor.

LOL People!

SteveP5 (Florida)
Posts: 50

Posted:

Quote:

Posted By SteveP5 on 05/01/2009 9:52 AM

okay scratch the above comment...

JohnM3 (Florida)
Posts: 288

Posted:

First of all a few facts. If a HOA goes into Bankrupcy the following happens a person is appointed to run the HOA. He then takes total control of the HOA and in addition he is paid a salary of 75000 to 125000 dolllars a year he does not have to answer to the Members at all. The salary is paid by the members so take a copy of the existing budget and add 100,000 dollars for his / her salary. Then realize you loose control................over everything.

Reference you wanting copies of all financial records no problem $5 a page so far I have 21 cases of records at % a page that must be something like 1-2 million dollars

KirkW1 (Texas)
Posts: 1,665

Posted:

So where does this knowledge of what happens in bankruptcy come from? I somehow doubt that they appoint an overseer with an extravagant salary.

The whole thing is that your organization must do some combination of cutting costs and/or raising income. You should cut the expenses to the core and raise the dues to make up some difference.

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