Real Estate Journal Online

A new assessment by a Florida homeowner’s association could result in mass foreclosures by the HOA – even though many homeowners in the neighborhood own their houses outright and live on a fixed income[1]. The controversial decision by the HOA to levy a $6,000 assessment on the Inlet House Condominium owners has left many homeowners outraged and refusing to pay anything at all, even though the HOA itself maintains that the only way to deal with a rat infestation and sewage problem is to pay the fees and then – literally – use the fees to pay the piper. Residents maintain that the HOA is just trying to “force people out the door” by levying “unnecessary and unaffordable assessments.”

Whether the assessments are justified or not, they are just one example of a growing trend of HOAs in trouble. According to a survey conducted last year by the Community Association Institute, more than half of HOAs nationwide face “serious financial problems” and 65 percent of HOAs have delinquency rates higher than 5 percent (in 2005 only 19 percent had delinquencies of this measure). Rising foreclosure volumes and vacant homes are contributing to this problem, and when the HOA funds fall short, existing homeowners are left with no choice but to make up the difference. And, in some cases, if homeowners are unable to do so, the HOA board may opt to foreclose.

HOAs get a bad rap most of the time. No one really likes being told what to do with their own house – even if that is part and parcel of what they signed up for when they moved into a community with an HOA and its associated covenants. But is now really the right time to levy huge assessments and foreclose? Will that even help matters when so many neighborhoods have such high foreclosure rates anyway?

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