With foreclosures on the rise I have been thinking a lot lately about home owners associations and possible shortfalls. Well, sounds like it is starting to take its toll. I noticed this week in the AJC that George Nowack, real estate attorney and managing partner of Atlanta-based Weissman Nowack Curry & Wilco was interviewed on the subject. Weissman Nowack Curry & Wilco represent a large number of Home Owners Associations and Property Managers in Georgia.
According to the article, "compared with last year, Nowack's firm has sent out about 20 percent more warning letters for past-due debts of at least $300". This is affecting most all home owners that have active associations. There is no discrimination here; it affects small and large communities, any price range, condominiums, town house communities and single family houses. If you have foreclosures in your community this more than likely will affect you.
About the only recourse the association has with delinquent owners is to put a lien on the property. Not a bad solution except for in the case of a foreclosure and then all bets are off. In the case of a foreclosure the association then has to go after the former owner for garnishment of wages. Nine times out of ten this does not happen as it is too costly and too time consuming.
So how does this affect home owners? With less dues being paid the associations over time end up having short falls and need to make sure that they budget and cut back on expenses accordingly. If the associations are not properly managed they could end up with large debts and ultimately hurt the community. Other than cutting back about the only other recourse will be to attempt to increase dues for the following year. So be on the look out for increases in 2008.
What can you do as a home owner? About the only thing is to get involved in your home owners association. Attend meetings and encourage others to do the same. Speak out and question decisions that you may not agree on. Make sure your association is managed properly and that they have a fidelity bond if funds are being managed. A fidelity bond is a form of protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.
As a potential buyer looking in a community that has a home owners association, make sure that you request a copy of the associations budget and balance sheet. Inquire into delinquencies and read the by-laws. You want to make sure that the association is managed properly and are not going in the red. Do your research. It may seem like a good deal but home values could be affected even more so in the long run. Ultimately make sure you are comfortable with your decision.