Sunday, December 28, 2008

THE DEMISE OF HOA's

The recession is raising another issue that has caught many homeowners off guard.  A lot of newer Home Owners Associations (HOA) are running out of money and essential services are being cut.

Many developers and builders who opened communities within the last 5 years have been having trouble selling enough homes and lots to allow them to remove themselves from being the primary managers of the HOA's. 

Some of the builders have gone out of business and the homeowners are taking over their HOA only to find that the money is gone and community debts are at the breaking point.  Some HOA's are attempting to assess their members one time fees of $750 and up just to keep the street lights on and the sewer and water bills paid.  The community centers in some developments are now shuttered and there is little hope that they will ever be reopened.

Homeowners associations have become ubiquitous in recent decades, as local governments have sought to limit the impact of population growth on the demand for municipal services.  Development standards have evolved to the point where developers are required to include large parks and open spaces in each new community - recreational amenities once provided almost exclusively by the public sector.  Cities and local government liked them because they didn't have to maintain certain areas.

The bottom line is that if you are selling into a development that had been closed to you until recently, this should raise a red flag.  You may be doing your customer a disservice if the HOA is on its last legs.  Be sure to find out some basic facts before you build in these communities.  You could end up being the defendant in a lawsuit if you told your customer about the new clubhouse that is to be built soon or that the HOA is on solid footing.

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