Like A Good Neighbor...Who's There?

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If you live in a homeowners association – condo or single-family – chances are you have a very badly behaved new neighbor. Your neighbor doesn’t pay association fees – just because it doesn’t want to. Your neighbor doesn’t think it has any responsibility to the unit or house it bought, never mind to you.

Your new neighbor? A bank.

When association member homeowners go into foreclosure, they usually quit paying their fees first. Who picks up the tab? Yup. Other members. Then, if the homes slides into official foreclosure, it gets taken over by a lender. But the lender isn’t any better: most of them don’t pay fees, either.

The Community Associations Institutes (CAI) recently released a survey about the travails facing associations:

• 45% face “serious” problems because the housing downturn
• 9% face “severe” financial consequences due to the downturn
• 5% or more of all units are vacant at 25% of communities
• 65% of associations have at least 5% of members delinquent on fees – up from 19% in 2005
• 30% of associations have a delinquency rate of more than 10%

Associations don’t have to take this lying down. Real estate columnist Lew Sichelman reports that street-smart Florida associations are getting courts to declare that bank-owned units in arrears on fees are actually abandoned. That perked up the banks.

Here’s who else should get involved: the Federal Housing Authority, Fannie Mae and Freddie Mac. They have been tweaking lending rules for condos up, down and sideways, always keeping lenders off balance. The proportion of owner-occupied units, for example, has moved up and down, but is always subject to appeal.

Seeing the secondary lenders want to micromanage, why don’t they micromanage the banks to pay the dues for their mothballed units? Not doing so effectively forces other association members to pay taxes twice. If the banks don’t like it, we have a suggestion: pay for it out of your marketing budget. Consider it community relations – you know, being a good neighbor.

Image courtesy of Morguefile contributor jdurham.