Flee multi family housing?


D

dumbstruck

It looks like owning a condo means sharing unpaid debts of many
deadbeat neighbors, and I suppose even renting one may reflect the
cost of that in time. Get-tough measures used in the past to protect
"good neighbors" are being derided or outlawed according to
http://finance.yahoo.com/news/Neighbor-vs-neighbor-as-apf-344592220.html
so I wonder if any multifamily kind of housing with common fees will
be safe as assessments pile up unpaid.

What are the hidden pitfalls or cheap alternatives? Maybe if an
apartment complex is owned as a whole instead of in pieces, a resident
can firewall themselves from most of the costs of others who don't
keep up.
 
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M

Mark Freeland

It looks like owning a condo means sharing unpaid debts of many
deadbeat neighbors, and I suppose even renting one may reflect the
cost of that in time. Get-tough measures used in the past to protect
"good neighbors" are being derided or outlawed according to
http://finance.yahoo.com/news/Neighbor-vs-neighbor-as-apf-344592220.html
so I wonder if any multifamily kind of housing with common fees will
be safe as assessments pile up unpaid.
In regard to protection against "deadbeat neighbors", co-ops offer a
couple of significant advantages. One is that they can screen
applicants to significantly increase the likelihood that the owner will
(a) be financially capable of paying assessments, and (b) not have a
history of shirking debts.

What the article you cited fails to say about foreclosures is that in a
condo (at least in NY), the bank holding a unit's mortgage has first
claim on foreclosure proceeds. So foreclosure is often pointless for a
condo board. In contrast, a co-op board has first claim on foreclosure
proceeds, so the co-op is more likely to have this real alternative to
recoup unpaid assessments.

http://www.nytimes.com/2009/02/08/realestate/08COV.html
(NYTimes: The Downside for Condos in a Downturn)
 
E

Elle

It looks like owning a condo means sharing unpaid debts of many
deadbeat neighbors, and I suppose even renting one may reflect the
cost of that in time. Get-tough measures used in the past to protect
"good neighbors" are being derided or outlawed according tohttp://finance.yahoo.com/news/Neighbor-vs-neighbor-as-apf-344592220.html
so I wonder if any multifamily kind of housing with common fees will
be safe as assessments pile up unpaid.
The usual practice is for an Association to place a lien on the home
of those who are delinquent, all per set terms. The association's
governing documents set the terms for placing such a lien and further
collecting assessments owed. The lien is meaningful. When the home is
sold, the lien must be paid off. In my experience the assessments do
not necessarily pile up.
What are the hidden pitfalls or cheap alternatives?
If one has not great wealth, then one may buy into a slum without a
HOA, start a volunteer neighborhood movement (with no governing
documents and hence no legal force for doing so), form neighborhood
watch groups, and turn the neighborhood around.

Alternatively those buying into a HOA should know that 30% delinquency
rates are pretty common and learn to live with this reality. Though
again, it is not like the past due assessments are never collected.
Those buying into a HOA should understand that volunteers are still
needed to run the Association (administering budgets, overseeing
contractors, and so on). But unlike volunteers in a non-HOA
neighborhood, the HOA has much support in law.

Anyone who is a capitalist should love the HOA. It has made possible
highly profitable land development throughout the United States.
Profitable to both the developer and home buyers alike.

My understanding is that HOA communities preserve property values
better than non-HOA communities. For the greater part, I would call
the HOA, "a terrible system but I cannot think of a better one." From
time immemorial people have fought being governed. Today's HOA
dissidents are fairly uneducated folks who do not understand that
'pitching in' together, and generally being bound to do so by some law
and some government, ensures the most harmony in communities. Even so,
HOA dissidents who do feel treated unfairly can and do bring a legal
claim in the courts. Sometimes they win. When they do, they might
recognize that it is the very system of laws many of them profane that
ensures their rights are protected.
 
D

dumbstruck

The usual practice is for an Association to place a lien on the home
of those who are delinquent, all per set terms. The association's
governing documents set the terms for placing such a lien and further
collecting assessments owed. The lien is meaningful. When the home is
sold, the lien must be paid off. In my experience the assessments do
not necessarily pile up.
The problem is that fair-play has gone out the window. Populist laws
have been recently passed and are being devised to limit what condo
associations can collect under foreclosures, bankruptcies, etc. Some
of this is on a state level, but such state law changes are being
pushed at a national level by activist groups.

I may have the terminology wrong, but am personally aware of new legal
arrangements that are making debts by condo dwellers increasingly
uncollectable even by lien. This is starting a non-virtuous cycle of
increasing the burden on condo associations, requiring unaffordable
fees or assessments that by their size in turn drag more owners into
trouble.
 
E

Elle

The problem is that fair-play has gone out the window.
You are entitled to your opinion.
Populist laws
have been recently passed and are being devised to limit what condo
associations can collect under foreclosures, bankruptcies, etc. Some
of this is on a state level, but such state law changes are being
pushed at a national level by activist groups.

I may have the terminology wrong, but am personally aware of new legal
arrangements that are making debts by condo dwellers increasingly
uncollectable even by lien.
Do you have an example? A link to an article or something?

Liens as a legal mechanism for collecting debt owed are not going to
go away. If they did, economies would stop functioning. Association
covenants, which typically explicitly allow the use of liens and
foreclosure to collect assessments, have long had the force of law.

What I have noticed, all at the state level but in many states indeed,
is the development of specific legislation targeting HOAs so they are
run more rigorously. But by-and-large the legislation does not seem to
me to be intended to do away with HOAs. It is more to compel its
volunteer directors to get with it. I think many volunteer directors
are woefully inept at understanding their obligations. At times a
member suing the Board is arguably appropriate. To me the more
honorable and useful response is either (1) to get on the Board one's
self; or (2) once one realizes HOA life is not for him or her, move.
 
D

dumbstruck

Do you have an example? A link to an article or something?

Liens as a legal mechanism for collecting debt owed are not going to
go away. If they did, economies would stop functioning. Association
covenants, which typically explicitly allow the use of liens and
foreclosure to collect assessments, have long had the force of law.
There are new caps that prevent you adding certain large amounts to a
lien. The whole chain of responsibility is being raided in the spirit
of Robin Hood leveling (or for political correctness, like you cannot
prevent neighbors electric cars from pirating your electricity) The
links I have at hand would be too revealing of my privacy and I'm not
inclined to rediscover more general ones that I have seen. It is
enough that you have been warned what to look for. This looks hard to
escape.
 
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E

Elle

There are new caps that prevent you adding certain large amounts to a
lien.
I suppose some state legislatures may have some proposals under
consideration to deal with people being upside-down with their
mortgages and in heavy debt to whomever. But even the first link you
provided seems to lean heavily in favor of preserving HOAs' right to
collect assessments.

Where I am (with a HOA), it has been a history lesson on land
development, capitalism, militia extremists, etc. The anti-HOA crowd
seems to argue they want less government regulation and more freedom.
But this is confusing, since this crowd is thus also trying to take
away people's right to contract to form neighborhoods with certain
standards. To me their reasoning does not add up.

On the third hand I have been overheard to say lately, "I do not want
to live in a HOA again." Which means, as noted earlier, either one has
a lot of money to buy where neighbors can afford to take care of the
exterior of their homes, or a low income neighborhood where how the
exterior of homes is kept up is more a roll of the dice.

Here is an interesting, perhaps related point: I see on the net that
HOA members suing directors often must do so as shareholders suing in
a "derivative action." HOA members are seen in the same light as
stockholders who sue corporate directors. "Derivative actions" have
certain requirements. It tends to make frivolous suits harder.

If you're interested, a review of the evolution of HOA legislation in
California may be worthwhile. I think California is ahead of everyone
else. See especially California's 1985 Davis-Stirling Act.

Otherwise, I am happy to agree to disagree on the direction HOAs seem
to be going.
 
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D

dumbstruck

I suppose some state legislatures may have some proposals under
consideration to deal with people being upside-down with their
mortgages and in heavy debt to whomever. But even the first link you
provided seems to lean heavily in favor of preserving HOAs' right to
collect assessments.
I framed this as a condo issue in original post. Laws have already
been passed and the impact is just starting to hit condo managers, as
their late collectables start to turn into never-collectables. Condo
assoc budgets already at breaking point will need more fees and
assessments, which will break the ability of fixed incomers to pay,
and reinforce the cycle just as the article said.

I am not concerned with separate unit HOA, because it is a smaller
step for them to switch their investment into non HOA equivilents. And
Coops are statistically a drop in the bucket. I'm talking about the
huge ocean of multifamily shoebox condos such as line the coast of
Florida or various inland cities and provide needed affordability over
individual houses, yet a step above mass rentals. They may be covering
for their departed neighbors, and new buyers may not pick up the bill
like before. Even hotels are migrating toward the condo ownership
mode, so attention is needed to see who picks up uncollected bills and
what unexpected person it gets passed on to.
 

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