Getting Sqeezed by Your HOA To Pay For Others?

Here is an email from a reader outlining an all-too-common scenario in today’s economy: 

“I have a story to share with you and looking for you advice what we can do.

We have a HOA with 48 houses. Each house has own water meter. DWP collects meter readings, send bulk bill to HOA. HOA billing each house for their actual water use in addition to HOA dues and, after collecting, paying to DWP. Recently we have a 5 homeowners stop paying for their HOA dues and their water usage. As result HOA has a budget gap. All neighbors got a letter from board that we all have to pay delinquent payments for those 5 home owners in the amount of $235 and if we will not pay we will get a late fee. They are telling us to pay for delinquent homeowners water use and HOA debt. Like someone is asking to pay for their credit card debt.

 This looks silly. Why we have to pay some other people living debt? Plus it is a continuing situation. In the next 6 months HOA will have another gap in the budget because of those none paying homeowners and they will tell as to pay again. What we can do in this case? I appreciate your advice.”

I wish I could say there is something the owners having to carry the load can do, something simple and clean. But I do not have a miracle solution. There are groups that have tried to tighten up collection rights in the past few years so that associations could collect more easily, such as asking for a priority lien over the bank when a bank delays foreclosure, forcing the bank to pay part of the delinquencies for a foreclosed property.

The efforts have been largely futile because the sympathy lies in protecting the individual to a certain degree, and making sure due process is satisfied. Now, with the foreclosure moratoriums, loan modification programs and bank backlog, the problem is worse than ever for associations to collect from delinquent owners and those who have abandoned the property.

If the association is unable to collect from the owner of the debt, then someone has to pay and who would that be? The association – which is comprised of course of the owners. The anticipated shortfall  and write off losses due to nonpayers is becoming a budget item on HOA an Condo budgets.

And the problem certainly could get worse as long as the economy an housing market is depressed. People are having trouble catching up once they get behind.

Tightening up the collection efforts and educating the homeowners who do not pay – such as letting them know the association can come after them even if the bank forecloses, can help. Check out the whole list of Primers on Assessments and Collection on my website in the webstore.

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2 Responses to Getting Sqeezed by Your HOA To Pay For Others?
  1. R.C. Lohr
    November 16, 2010 | 2:48 am

    After a new roof was put on our condo, we had rain that leaked down through the attic onto our dining room ceiling. The roofer came out and repaired the roof. Another rain, another leak. This time if left a 1/4″ by 15″ crack in our ceiling. A new roofing company was called and repaired the roof and told us that it was done incorrectly by the initial roofer. We have not had a problem since. Our association told us that we are responsible for repairing our ceiling. One of the members told us that he was the only member of the board that voted to repair our ceiling, but was told by the other board members that “it might open the door to other owners to complain about the same thing.” Now What? Thank You

    • Beth Grimm
      November 22, 2010 | 6:47 pm

      It sounds like the association was not negligent. It arranged for a new roof, and called in another roofer when there was a leak. It is not a breach of duty if the association board reacts appropriately to reports of leaks. If the governing documents make owners responsible for ceilings or the ceilings are defined as part of the unit (the definitions of “unit” and “common area” and maintenance responsibilities as defined in the documents come into play) , then it probably is the owner’s responsibility to make the repair. And it is correct that if the board opens up the door to interior repairs for one owner, it could be a real can of worms. If the documents say the association is responsible for ceiling repairs or the board was negligent, that would be different.