Homeowners associations start to feel the pinch in hard times
“Lucky me,” says Barb Privat.
She’s the new president of the homeowners association for the Meadow Creek Crossing subdivision in Germantown, Wis., and the board might have to slap a lien on three of her neighbors.
This year, Meadow Creek’s annual fee rose $50 to $350, angering many of the owners of its 110 homes. Now, 2½ months after the payment deadline, three homeowners still haven’t paid.
“We’re trying to take a neighborly approach, but as it carries into next year, we’ll have to put liens on their houses,” Privat says. Two of the houses are for sale; if they do sell, the owners will have to clear the debt to the association before they can transfer title.
“We’ll get it sooner or later,” she says.
Homeowners associations aren’t immune from rising costs of homeownership, from foreclosure fallout to energy prices. Representing the owners of condos in a building or single-family houses in a development, the associations typically control budgets for routine landscaping and maintenance of common areas, plus have fiduciary responsibility for building reserves for capital improvements and repairs.
Nationally, associations are facing rising delinquency rates, says Frank Rathbun, vice president of communications for the Community Associations Institute, a Washington-area trade group for associations.
In the past, associations could assume that 3 percent to 7 percent of homeowners would be late with their fees. “Now, it’s up to 10 percent to 30 percent,” Rathbun says. “Especially condo associations, where a lot of investors bought during the good times and now have taken a beating, because they paid more than the homes are worth.”
Some subdivisions have little to do but mow their patch of common area, cover liability insurance, plant some flowers and sometimes pay for snowplowing, keeping the annual fee as low as $100.
That’s what residents of Germantown’s Lone Oaks pay, says association president Mary Cooper.
The fee has been the same for more than 12 years, and its built-up financial cushion is likely to cover the fuel surcharge added this year by the association’s longtime landscaper. The association decided long ago to require its 115 homeowners to maintain their own lampposts and mailboxes, adds Cooper, tamping down costs even more.
Residents of the Kettlefield subdivision in Genessee, Wis., aren’t as lucky.
Back in 2005, those homeowners paid about $130 a year, say residents. But this year, the annual fee zoomed to $685. Waukesha, Wis., developer Harmony Realty Inc. runs the association’s board, but company officials would not comment on the increase.
Harmony lists unpaid dues from at least one homeowner as a line item in its budget. Kettlefield residents aren’t the only ones stuck making up the difference when some neighbors blow off their fees, says Ed Corcoran, an attorney with Madison, Wis., law firm Murphy Desmond.
Most associations aren’t having trouble meeting their budgets, despite increasing delinquencies, because they simply raise the fees to cover the shortfall. Then the association boards have to decide whether they will put liens on the houses to collect the fees, Corcoran says. He usually advises them to do it, because at the very least, the lien ensures repayment when the property changes hands.
Hapless association boards might discover that they have a bigger maintenance bill than expected at the end of the summer, thanks to homeowners staying home and using common areas and facilities more than usual, predicts Ted Salgado, principal of Reserve Advisors Inc., a Milwaukee-based firm that provides financial consulting to associations.