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If you thought HOAs were bad now, just wait
Friday, Oct. 28, 2011 | 2 a.m.
J. Patrick Coolican
Sun Archives
- Las Vegas woman pleads guilty in alleged HOA scheme (10-21-2011)
- Las Vegas man pleads guilty in HOA fraud scheme (9-6-2011)
- Southern Highlands HOA sued again over assessment liens (10-11-2011)
- Southern Highlands HOA sued over liens on foreclosed homes (9-23-2011)
- Senator wrote HOA bills while working for HOA (4-3-2011)
- Las Vegas HOA collection agencies sue critics (3-21-2011)
- Class-action suit filed over HOA debt-collection practices (6-13-2011)
Who needs caffeine when you’ve got today’s topic: homeowners associations!
Yes, your blood pressure is spiking at the sight of the dreaded acronym, HOA. They told you that you can’t paint your garage door pink. They take a slice of your paycheck every month and you’re not sure what they spend it on.
Now we learn some are dirty. In the news recently: HOA boards corrupted by political hacks, who then steered construction defect lawsuits to juiced-in law firms. The feds are securing new guilty pleas all the time.
But the HOA crisis I want to address here, though a far more worrisome, is a few years away.
It goes like this: Everything in Las Vegas that was new five or 10 years ago — your community pool, the roof on your condo building, the street in front of your home — will soon be middle-aged and require maintenance or replacement. And HOAs aren’t equipped — financially or otherwise — to deal with it.
“Stuff falls apart. It’s inevitable. And I know we’re not prepared for it.”
That’s Evan McKenzie, lawyer and political scientist at the University of Illinois at Chicago and the foremost expert on HOAs. He wrote the book on them, aptly titled, “Privatopia.”
Let’s quickly review the history here because most of you are from someplace else and have the same question I have when it comes to HOAs: Why do we need them?
HOAs, or under our statutes “common interest communities,” are a dominant governing paradigm for two reasons, and both are intertwined with the growth of the Sun Belt — a phenomenon that saw millions of Americans move South and West, many of them to escape the high taxes of the Northeast and Midwest.
First, an HOA allows municipal government to push responsibilities on to these private entities. And, if the city doesn’t have to build or maintain the neighborhood park, that means lower taxes. Of course, we still want the park and we want it maintained, so we still have to pay for it. But the HOA is probably cheaper than the cost of more robust local governments with their pension-gobbling public employees.
Second, the HOA acts as a cheap code enforcer so the neighborhood doesn’t go to seed. In older communities like where many of you come from, neighbors give subtle clues to neighbors. “Hey there, really lettin’ your lawn go aren’t ya, Ernie?”
But here, we’re afraid the neighbor might be a freak fugitive from Omaha, so we don’t want to make eye contact, let alone tell him to mow the lawn. So to preserve neighborhoods and their value, we have to give someone the power to be the local bad rent-a-cop: Get the car off the blocks and off the front lawn or it’s a $50 charge.
So, HOAs.
There are disadvantages, however: “When things were going well, HOAs were already in trouble,” McKenzie says.
“The reason is because the whole institution is premised on a faulty assumption: That owners can do all the things expected of them —to run the association and essentially operate a corporation. It relies on them having more time, money and loyalty than they actually have,” he says.
You can see this in the abysmal voter participation rates for HOA board elections, and in the minor and major scandals that erupt all the time. And that was during the good times.
The real estate crash has created massive new challenges: To begin with, neighborhood blight that follows a spate of foreclosures.
Then there’s money.
“If they’re not paying their mortgages, you know they stopped paying the HOA before that,” McKenzie says.
HOAs can recover some of the money owed them, up to nine months of dues and attorney fees plus collection costs, according to officials in the office of the state’s Ombudsman for Owners in Common-Interest Communities and Condominium Hotels. But many owners owe more than nine months of dues, thereby leaving a deficit for the HOA.
And although HOAs are required to give a summary report of their financial reserves, that’s all that’s required.
“If they’re not meeting those reserves, it’s the association’s responsibility to ensure they meet the reserve. That’s an internal … issue,” says Sharon Jackson, compliance supervisor for the ombudsman. In other words, that’s your problem.
Ombudsman officials say they don’t know how many HOAs don’t have the required reserves, but say most aren’t at 100 percent, which makes sense given the recession and all the people unable to pay their monthly fees.
So in addition to zombie banks, we now have zombie HOAs.
And here’s where it gets ugly. Many of our valley’s developments are like the monorail in “The Simpsons”: thrown up quickly and cheaply and not exactly built to last. The maintenance bills are coming due. And if there’s not enough money in reserve, you’ll get a huge bill — and I mean huge — from your HOA to replace the roof of your condo building or repair your road.
That day is coming.
Apparently there was some confusion between myself and state officials as to what an HOA can collect on unpaid HOA fees. The $1,950 cap is for collection costs only. The HOA can also collect nine months of dues. I've changed the column to reflect that. In any case, the problem remains: HOAs often can't fully recoup what they are owed.
Discussion: 13 comments so far…
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Coolican it is bad now, but wait if the legislatures make it easier for someone not to pay their assessments as it almost happened at the last legislative session. The HOA I live in is well run and financially strong but could change if laws change preventing a strong collection process ensuring my neighbors are paying as well and not costing me any money to collect their delinquency.
But you are right about some HOA's are struggling and it is true that the HOA offers things for less then the city can. Some people don't care for them and some people love them to ensure neighbors maintain their property as you said who knows who your neighbor is today.
For one I like them if well run and that means voting, going to meetings and staying involved to insure good people are at the helm and if not work to vote them off. This is an elected democracy similar to government. I see cities poorly ran so for the people that say HOA's run poorly all levels of government can run poorly.
For one I think many HOA's are well ran in this town and in better positions than you might elude in this article. That does not mean that the state will legislate down to the local level and change the financial health of a HOA with their big government legislating instead of allowing the community to decide freely.
Las Vegas is one place that seems to have a problem about growing old.
Folks who live within communities that are subject to HOAs have a certain lifestyle choice, and the conditions serve them.
It is a fact that you also have chosen to give up certain liberties and freedoms that you would otherwise enjoy outside of a HOA community.
With the massive boom growth, and housing projects literally built as fast as possible without strict permit code enforcement, many, if not most of these tracts of communities will suffer massive problems as time goes by and they AGE. Shabby workmanship, products not built to code (some lacked proper inspections during the building process), and coupled with mass insolvency, money for upkeep is indeed questionable and problematic.
Clark County does NOT need to continue building thousands of homes that cannot be SUSTAINED with our water supply and other utilities. A building moratorium should be enacted, where previously built sites are literally recyled, utilizing sustainable materials, conservation devices, and green power cogeneration.
Common sense should prevail with our County Planning Commissioners. We are in a DESERT! Plan and build accordingly. Strengthen what remains.
Happy Nevada Day!
Another poorly written article with several inaccuracies starting with the amount HOA's can recoup from foreclosures. Nine months is correct for single family homes but incorrect for condos, which can only recoup 6 months, plus collection fees. So when you deal with a collection agent like David Stone at NAS, the collection agent will keep his full fees and make the HOA take the biggest hit. However, some collection agencies such as Collections of America, are willing to work with the HOA's so they don't have as much bad debt to write off. Disclaimer: I have no interest in any collection agency but I am a multi-term Board member for the the oldest Master HOA in the state which contains over 1300 residences.
Being an older, more established HOA, we don't have the problems you cite in your article. We did 3 major capital improvement projects in the past 3 years, cut our dues, did no special assessment and until our new reserve study was just finalized, our reserve was 100% funded. It was only the costs to maintain the new capital improvements and some "misses" from the previous reserve study that brought us below 100%. By renegotiating our management deal and tweaking our budget we can increase our reserve contribution without a special assessment and possibly no monthly due increase. Although if a $8 per month increase in dues is needed to meet reserve funding, our dues would still be lower than when I took my seat on the board a few years ago.
Every HOA is different and although many in the newer developments may be reflected in your article and the Las Vegas Country Club Estates may be the exception rather than the rule, stereotyping of HOA's is as irresponsible as stereotyping of individuals. Bad HOA's are usually a result of bad HOA management and or bad people on HOA boards, such as the ones you referenced being charged criminally. This is a town of criminals, found every where from the police department to the pimps. Of course a percentage of them will make their way to the HOA business. It's the responsibility of the Homeowner to take part in their community, if they want their community to act responsibly.
One of the reasons I bought into The Strip condo I did was because of its HOA having a healthy "reserve" account. We have a portion of our monthly fees go into an account based upon what systems (i.e., HVAC, roof, pool) will need replacing at average intervals. I strongly advise all prospective buyers to look into the finances of the HOA before purchase. If they won't open the books now, they're not going to be cooperative once you're in.
Renting is becoming the best option. The appreciation isn't worth waiting for and it may take 10 years or more for the real estate purchased to reach the price at which it was purchased. Steve Wynn says he plans to expand into Macau along with Sheldon Adelson. The economy here will hold in place at best.
The non-HOA communities here in Vegas are all sold off to investors, filled with renters, and for the most part have turned into a completely trashed out area. Check out many of the subdivisions in Silverado Ranch for an example. What once was a nice area has turned into Sanford and Son.
HOAs in Las Vegas are a necessary evil, imo. Unless you plan to live like a pig and don't like to do things like mow the lawn and not park 6 cars in front of your neighbors' properties and never move them - then an HOA is definitely not for you. For the people that actually care about the value of their home and their subdivision, this is the only way you're going to protect your property value in this town.
Lastly, I do not buy into the premise of this article that homeowners are going to be slapped with huge bills for repairs down the road. That is a very short-sighted position. Mainly because, if someone doesn't pay the HOA bill, they will slap a lien on your property and can foreclose on it. And sorry, I don't see an HOA foreclosing on Grandma Moses or the family of 5 because she didn't pay the $2000 repair bill the HOA decided to send her because their reserves were too low to pay for it. Raise dues? Yes. Expect that to happen.
Under NRS Chapter 116 (NRS 116.3115(2)(b), NRS 116.31151(1)(b) and NRS 116.31152, to be precise) it is not necessary for Nevada HOAs to establish or maintain reserve funds equal to 100% of the replacement cost of all of their common elements. The amount of the required reserve fund is based only on an HOA's anticipated cost of replacements and repairs over the next five years, not on the total replacement cost over the next 30 or 40 years. The basic idea is that HOAs should have funds set aside in amounts that will make it unnecessary for them to scramble and charge special assessments when replacements or repairs of their common elements are required. This is as it should be. There are indeed some "zombie HOAs" in the Las Vegas valley, but a significant number of these are the HOAs directed and managed by brain-dead people who are overcharging, or have overcharged, their unit owners by requiring funding of reserves equal to 100% of the replacement cost of all common elements without regard to the date replacement or repair will be required.
I never heard of an HOA when I lived back East years ago. My home there was in a nice, established neighborhood and I don't recall an issue, ever, when a neighbor's home was unkempt. When I owned a home in Las Vegas, which fortunately I sold at the very beginning of the decline, the HOA regularly sent me notices about the front yard (I'm surprised it didn't send spies to the back), despite the fact that I had a fine gardening service (which maintains my current home) that didn't miss a thing. But the HOA, "Cut that cactus back," etc. It even sent me a notice when I had a small patch of bare ground in front (the rest was "desert landscaping") that was being prepared for a small pond. Once, a representive even came to my door and harangued me for a few seconds before I called 311 and he scampered away like a scared squirrel.
Home ownership requires personal responsibility and if a neighbor isn't being so, my belief is that if someone in that area is offended, that person should handle it.
Oh, yes, I stopped paying HOA dues early on and the organization put a lien on my home, for which I took it court, on my own nickel. We won.
I know there are other components, common areas, etc., but there must be a better way to handle them than these organizations.
HOA's allow for the possibility of numerous financial abuses regardless of where they are. From Condo commandos in Florida (Seniors who vote for major system upgrades while the majority of owners are gone during the summer), to overpriced snow removal companies in the Northeast (while in VA), weatherizing a Mountaintop Condo Tower in Banner Elk NC where the winter winds where rushing through the halls at 60MPH, etc.... A Single Family Home on a Public Street without a Club House or Pool HOA is your best bet. Hire an ASHI certified inspector, do an Energy Audit and know that 2-4% of the homes price must be set aside every year for current and future maintenance.
If you are financially unable to do this then Renting is by far your best option. If the home is poorly built - Do not buy it, let the investors take the risk. In any market loosing population, if you must Buy, purchase only in the best school district available.
Many of the HOA's serve an excellent purpose but they should be required to have their headquarters in the state they are receiving funds. In many HOA's the property managers are not on site and rely on the neighbors to report all infractions. There are certain issues such as loud music that will not be addressed by the HOA unless the disturbed residents follow the offenders and report where they live or who they are visiting. For the most part HOA's seem to reactive instead of proactive.
I love renting. While I've profited on the four homes I've owned (even the one I sold here, albeit minimally), I never bought a house for "investment," always believing unequivocally in Polly Adler's line, "A house is not a home." I do still own a summer place in New England (30 years).
My landlord's responsible, gets things done (he has a home warranty), pays the gardner, the pool service, etc. As I plan to stay here, my only concern on this level is that he'll sell the house, but that's not a bad trade-off as the lease precludes sale without the buyer agreeing to comply with the lease.
Would I buy another property in Las Vegas? I don't think so, for any number of reasons, the least of which is "buying at the low" or "the deterioration of the market." I just no longer have the stomach for dealing with the normal upkeep, service firms, etc. Besides that, from what I've read, the financial institutions don't make it particularly easy to buy a property out of foreclosure.
Let me get this straight -- HOAs are created so people can manage their own affairs and government will stay out of it. Now, HOAs are being investigated and goverment is getting involved at the request of homeowners. So, which is it -- government involvement or no government involvement? Can't have it both ways.
HOAs do not work unless you have committed people who understand planning (such as how is the roof going to get fixed) and resource allocation. HOAs will not work if you allow the pests of the world to take over running your world. And HOAs will not work unless a neighborhood is, in fact, designed for stable occupation and greatly reduced absentee landlors who do not live in the community.
The American Dream of owning ones home died a long time ago and HOA's are just one more nail in the coffin!
You never truly own a home today if someone else can tell you what you can and cannot do in or with it, how it must look, or where you can park.
You never truly own a home today if someone can take it away from you because you did not pay taxes to some local government, or monthly dues or fines to your HOA.
You never truly "own" anything if anyone else can take it from you or influence how you use it.
The only thing you do own is a perpetual debt.
I am a board member of a large association and our finances have been able to survive these troubled times where we have been able to do all needed repairs and renovations to keep the property in good conditions and improving upon its looks from what the builder gave us.
I originally moved to my neighborhood due to the area and all the parks that come to find are all HOA owned. I did not know what a HOA was when I moved in. I got envolved to bring my operations background when I attended my first meetings and had some concerns. I find it fulfilling to help out in the community and try to make it a better place. Since than the HOA has increased services and property maintenances, decrease dues and staying financially stable. While we have had a few increases over the years it is still more than 15% less than what it was when I moved into my home in 2004. We post our monthly balance sheets on our website, meeting minutes and more. I know my fellow board members constantly meet with fellow residents and use the feedback to make decisions.
I have to agree with Justme and some other comments on here that there are a lot of well ran HOA's and when you have 3,000 there will also be some not so well run. There are also others that are struggling do to high foreclosures in the neighborhood at no fault of the board or management. I do caution anyone that wants to generalize as a few bad apples does not mean you should cut down the apple tree. Bad apples can be removed by the homeowners without sacrificing the tree.
You can question your HOA. You are the homeowners! Keep your Property Management company on year to year contracts. Keep them on a short leash. They will run over you if you dont go to the meeting and question them. Repeatedly ask them them when their contract is up. Let them know who runs your neighborhood! It really isnt that difficult if you just get out of your chair and take some action. It is your neighborhood, make your own rules or try to abide by the generic rules the city gave them.
They are just the hired help, nothing more.
Homeowner apathy is a huge problem. There are 400+ houses in my HOA and we are having a hard time filling an empty seat on the board. If you don't like what your HOA is doing, run for the board and change things!
So, Murryburns, who do you think should pay for the common area if you aren't chipping in? Doesn't a well-kept common area only add to the value of YOUR home as well as the others in the community? So glad to hear you beat the system but not paying anything isn't fair to your neighbors who DO help pay to maintain the community.
azsk8fan: That's a more than reasonable question. I've not got an equally reasonable or, for that matter logical response. However, I can say this, I lived in a rather upscale area of West LA which was not a development and every home was well maintained. Granted they were expensive homes by Vegas standards, but they were maintained either by the homeowners or outside companies. On the East Coast, I lived in a neighborhood where there was no home less than 50 years old -- all well-maintained, no common areas.
I didn't "beat the system." The home I owned here was well maintained by a gardener (same one who does the home I rent). I believe I have enough common sense and taste not to modify a home I own in a manner that would not fit the look and feel of the neighborhood. What I will not do, however, is accept the whim and whimsey and for that matter taste of some group that isn't contributing to the maintenance of my home. I would have been alright to pay a share for the "common areas." However, it was another issue that caused me to respond in such a manner.
The common areas are lovely and do enhance the neighborhood. It's the intrusiveness of some HOAs that disturbing.
Frankly, I didn't expect an "attack" here and I find the statement "beat the system" pejorative and non-responsive to the intellectual argument. I don't mean to offend and if that is the way you interpret this, my apologies.
HOA's for Single Family residences have a different responsibility from an HOA that covers a Condo or Townhome Association. In a single family area if a home gets a roof leak, it's the individual homeowner that pay to have it repaired. In a Condo development the HOA repairs the roof from the monthly fees charged.
Many articles written about HOA's fail to understand the difference...mostly because they are simple Journalism graduates...Meaning they often times don't have a clue about the real world, but they own a printing press and a lot of ink.
I bought a house with an HOA, never again. Just more of your money down the drain so people can tell you what to do with your property, then again not like any of you have actual property but I digress.
The houses here won't last, that's what happens when you build with the absolute cheapest materials coupled with cheap labor.
You get what you pay for, actually now a days you don't even get what you paid for. You get hustled!
Oh, and of course the fact that none of you will ever actually own your home... Ever.
TheSerfAttack: That's true today. However, the homes that I bought, I owned clear (the first allowed me to do this). Second, I own the homes I bought now. Third, what you state with regard to ownership is as close to absolutely true as it can be today.
There is no HOA where I live, though the houses are generally good and in the Summerlin area. When I moved here a decade ago I heard for the first time about HOAs and decided it was a complication I did not want to deal with. We do have some problems, mostly with houses that are rented out, but it is a price worth accepting as an alternative. The Code Enforcement people from the city do an adequate job of keeping things orderly and they do respond to complaints such as illegally parked or stored cars and other unsightly nuisances. Paying for a committee to tell me how to run my own property and is just adding another layer of government.
@LV_Tom. Excellent point. Additionally, most people commenting in here don't understand the difference. I went to my Master Association Meeting the other night and I don't believer the community manager understood the difference.
I recently received a notice from my HOA about "weeds in the landscaping". The photo on the notice was so small and of such poor quality that about the only thing I could determine is that it is the side of the house where my A/C unit sits. Try as I may, I did not find one single weed in the landscaping rocks on that side. Now I will probably get fined for failing to remove unwanted imaginary plants.
@meuresault - where did you locate this information? I have checked out the NRS as you noted and did not see anything in reference to "anticipated costs over the next 5 years, etc." I would be very interested in where you came upon this information.
On the lighter side, last year I received a letter from my HOA asking me (under threat of fine) to remove the "rock from rock landscaping", with a picture of the front of the house's rock landscaping. I'm assuming they meant "weeds". Never mind that it had just been gone over by the regularly scheduled gardener/landscaper who does most of the neighborhood (and he is their recommended choice). For fun I sent a copy of the photo and letter back and asked them to please circle the rock they did not like. :)
Everyone seems to have a WAR story about their HOA. I have found that the section 8s are the problem. They rent, destroy and move on. They have no investment and could care less about the community. True, reserve accounts need to be funded. As everyone knows, taking the HOA's funds and investing those funds in a Money Market, CD's etc. at one time could and would have kept up with inflation, not now, so now those funds need to be funded. When people walk away without paying, banks foreclose, people refuse to pay, it cost all the owners. Usually the HOA tries to keep the area and homes looking neat and clean. Not for any other reason than trying to protect the owners investment. All I can say is (GET INVOLVED) and make sure you have a good Management Company.
That reminds me on what happened to a condo I use to live in, the Millstream Townhomes. They were built in 1986 and needed roof repairs in 2006. HOA fees were at $80 a month, then they wanted to pay for the roofing with a big fate fees of $200 a month. The used cheap labor, which made for leaky roofs & Air Conditioners spraying water throughout the attics. HOA prices stayed high while the actually homeowners wanted to start a class action suit on their own HOA & the cheap illegal alien roofers.
I don't know where Coolican lives at,but I work for a property management company and an HOA. I'm the guy that has to confront people and tell them your lawn is overgrown, you can't work on your car in the street (common area), your kids can't graffiti the property, your dogs can't crap all over the place while running wild. I'm the guy who has to tell people you can't park in a space that doesn't belong to you, but belongs to your neighbor (because they pay for it). I am the guy that has to tell supposed "adults" to stop throwing your trash all over the friggin' place likes it's an OWS protest. I am the "necessary evil" that tries to bring some civilization to a bunch of people who want to live like they're in some kind of third world cesspool ( but with a maid and butler). In short, people in my business are trying to make places liveable for people. But, in Las Vegas that's beginning to be a lost cause, because I do agree with Coolican on this: When the money runs, it's going to get ugly.
Murryburns, when I said 'beat the system' I was referring to your earlier post wherein you stated you stopped paying HOA dues, fought the lien they put on your home and won. If that's not considered beating the system I don't know what would be. I don't like that some of my HOA dues are going towards the maintenance of a public pool that I wouldn't dream of using - in my mind public pools are nothing more than gigantic public toilets - BUT the pool was here before me - I knew it and made a conscious decision to buy in spite of it - and so I pay...and in the future I would imagine I'll have to pay and pay and pay as the damn thing erodes and the pool equipment breaks down and needs to be replaced - it's the nature of the beast. I'd LOVE to stop paying my HOA dues but I feel compelled to contribute to the maintenance of the part of the community I DO enjoy - that being the rest of the common areas and the parks. No offense meant and no offense taken.
Let's see... people don't want government code enforcement or park maintenance because it would cost too much, but the residents aren't properly funding the HOAs. Sounds like the same old saw, Americans want everything but don't want to pay for it. Shameful.