Tips for Buying Into A Viable and Effective HOA
Perhaps you have considered letting go of a large house and property – you’re tired of all the landscaping woes and you’re tired of all the outside maintenance a large property requires. You want a smaller property that’s administered by professionals; you want a quiet life in a managed condominium. But beware! K. Patrick McDonald of Southern California has been living in HOA-managed properties for 20 years. “I worked in emergency medicine for years, and I have found HOA management to be every bit as stressful. In fact, some folks are easier to deal with when they are bleeding.”
HOA-managed properties – when managed properly by a fair-minded board of directors – can be a wonderful place to live. A fiscally-sound HOA pays bills on time, has a list of to-do’s by order of importance, and maintains communication with the homeowners. Rules & Regulations and by-laws control what can and cannot be done (who wants vehicle maintenance going on across the street or rowdy parties invading your sleep at 2:00 a.m.?). Under a productive HOA, trashy yards and rude behavior are discouraged and can be dealt with swiftly and fairly.
But what about buying into a poorly managed or neglected HOA? It happened to me. After my recent divorce, I wanted to get away from the flush-the-rent-money-down-the-drain syndrome and into a property that I could own and subsequently sell at a profit. I was naive. I thought if there were problems with the property or the HOA, my realtor would tell me. Not so!
My HOA was nearly bankrupt and thousands of dollars in debt to contractors and plumbers. The HOA president had ruled virtually unchallenged for over 20 years. In addition, he was a lawyer who would threaten anyone who had the courage to stand up against him. The resident managers had been manipulated under his dictatorial thumb and were treating the property like apartments. Property insurance was in the throes of cancellation because of major deferred maintenance and two liability claims. Fire codes and the Fire Marshall’s reports and mandates had been ignored. Effective association meetings were non-existent. Association fees were being mixed with personal rental monies. It was a management and fiscal nightmare.
In order to save others from living through the nightmare I’ve had to endure, I have developed a checklist, including –
- Board Meeting minutes, Annual Meeting minutes – Read the last two years, see how the board and the homeowners work with each other (or against each other). Look for meeting items that keep getting pushed forward and never get resolved. And do meetings follow Roberts Rules of Order and are meetings conducted professionally? (www.robertsrules.com) Ask to sit in on their next board meeting – productive HOA’s has a board meeting every quarter.
- Financials – What do the HOA fees pay for? How are fees determined, by unit or by square footage? Does the association have reserves for major renovations and repairs? Look out for special assessments and increases in HOA fees over the last several years. Ask to see the financial reports for the last two years.
- Read the HOA’s Rules & Regulations and by-laws – Is there anything in them that you could not live with like allowances for pets, parking rules, restrictions on BBQ grills, restrictions on renovations, or rules on holiday decorations?
- Property management – Does the HOA handle property management themselves or do they have a licensed and insured property manager? Check the property manager’s rating via the BBB or their internet listing. Does the property manager manage other properties? Talk the residents at the other properties to determine the manager’s effectiveness, response to complaints, problem tenants.
- Communication – Does the HOA communicate with homeowners with a newsletter and with periodic letters or emails; does the HOA have a website? Ask to see the last few newsletters. Peruse their website.
- Check their insurance history – Have they paid two liability or injury claims in the last few years or is their history clear of litigation? Is the insurance policy on the common property up-to-date?
- Fire codes – Are they within the State’s fire codes? Are the extinguishers up-to-date? Do you see fire extinguishers and pull stations around the property?
- Check with the local PD regarding crime – Police Departments now have on-line data bases mapping crimes by type in their coverage areas.
You have decided to buy a house or condo in an HOA-managed community. You should also be willing to get involved. Go to meetings. Run for a board position. The board members are the people that are making decisions that impact your way of life – from where you can put your garbage cans and park your car to the number and size of pets you can have.
When I was starting to dig into the happenings of my HOA, I realized I needed to walk the walk – I ran for President and won. Being a board member has been a humbling experience, and I realized early on that all my opinions were not shared. On multiple occasions I’ve given in in the face of the majority of homeowners. And several times I have deferred to the other board members. It’s a democratic process.
The CAI – the Community Associations Institute – is a fabulous resource. The CAI “provides education, tools, and resources to people who govern and manage homeowners associations, condominiums and other planned communities. Our mission is to help you make your community a better—even preferred—place to call home.” Check out their website – www.caionline.org. For a sensible dose of reality, see http://www.adamen-inc.com/Vol.-10-No.-04-Myth-v.-Reality~101799~12525.htm – an excellent article about the myths and realities of condo ownership by Julie Adamen. Julie has been in the common interest development industry since 1987, forming Adamen, Inc. in 1997.