Sunday, August 29, 2010

HOA groups in Arizona cutting services, raising fees

HOA groups in Arizona cutting services, raising fees

With no contingency plans and little help available from cash-strapped cities and towns, homeowners associations are likely to face money problems for years to come, market analysts said.

"Associations are not designed to have 38 percent delinquencies, or even 20 percent," said Amanda Shaw, president of HOA management firm Associated Asset Management of Phoenix. "They're designed to have a 2 percent to 5 percent delinquency. They are designed to be successful."


The economy as a whole is designed to be successful, always growing. But that collides with the business cycle, which has its natural downturns. And when leverage and speculation run rampant, those downturns can get awfully long and nasty as we're now experiencing. There are no carve outs or exceptions for HOAs.


Communisty Associations Institute said...

"There are no carve outs or exceptions for HOAs."

There should be, because HOAs are Too Important To Fail (tm).

The problem is that state legislatures have not given HOA Boards of Directors enough power to preserve property values.

Anonymous said...

As stressful economic times force associations to cut members services, raise fees, drain and close pools and take other cost cutting measures, are associations' primary service providers (management and law firms) cutting the fees they charge their clients while directing those clients to initiate more enforcement and aggressive collection actions which, in-fact, benefit association managers and lawyers?


Anonymous said...

From the story:

So far this year, Johnson Ranch is on pace to see about 1,500 homes change hands because of foreclosure or short sale, up from 1,058 transactions in 2009. Campbell said the HOA has turned that "churn" into a source of revenue.

The association recently introduced a new fee that is assessed every time a home is sold. The $174 fee, known as a "working-capital fee," is charged to both buyer and seller, which means the association gets almost $350 for every turnover.

Campbell said the fee has kept Johnson Ranch's HOA financially viable.

Contrast with Tom Skiba's comment in the "Private Transfer Fee Covenants" thread (emphasis added):

We are taking a look at this as you would expect and may have some concerns. Where permitted by state law, associations frequently use such fees at transfer to fund reserves or other capital contributions, which strengthens the communities financial position and where the benefits accrue to all the homeowners within the community.

Of greater concern is the emerging trend for developers to incorporate a transfer fee in their initial deed that runs with the land in perpetuity. Thus, every time a home is sold the developer or their assigns would receive a (in some case substantial) payment. Of course this is starting to spawn a secondary market where these rights are packaged, sold, and arbitraged.

Seems to me that this is a much bigger concern than a generally much smaller fee specifically targetted to reserves.

The Communisty Associations Institute is not opposed to transfer fees that "that runs with the land in perpetuity." Their only "concern" is when the CAI does not get their cut.

Coming soon: HOA rules that require homeowners to have all income checks directly deposited to the HOA's account. What's left over after assessments, fines, and fees will be doled out to the homeowner as needed. Since the primary concern is keeping HOAs financially viable, without regard to the rights and well-being of individual homeowners, the HOA adhesion contract can and should be unilaterally amended to garnish 100% of all homeowners' incomes.