January 09, 2009

By Jenny Wong
Copyright Jenny Wong

Imagine the following scenario:

"Awwww C'mon honey....what could possibly go wrong. It's a small HOA with just a few hundred square feet of common area at the entrance. The dues are only $100.00 per year. They have a few rules about fencing, roofing, and maintaining that small front entrance so it should be no big deal. It's not like those gated communities."

Famous last words - what could possibly go wrong? Good question. The answer is anything and everything. What could go wrong depends a lot upon the character of the Board of Director neighbors at the helm, every single neighbor that lives there, their friends, their visitors, and any and all people who tread upon those "few hundred square feet".

Mr. and Mrs. Joe Homeowner decide to go ahead and purchase. Sure enough, all is quiet on the western front entrance. Every now and then a young man mows the lawn, prunes the bushes, cuts the grass and whatever else you need to do to maintain a few hundred square feet of landscaping. $100.00 per homeowner per year seems to be covering MORE than enough.... and then some. The neighbors are friendly, there are a couple of homes where yard maintenance has a lot to be desired but the "good" thing is, the HOA Board of Director neighbors don't seem to be Dictator types and it surely isn't enough to get riled up over so they leave well enough alone. There are a few neighbors who aren't paying all of their mandatory maintenance dues but they are elderly, so they too, are left well enough alone. So be it. Let's all "love thy neighbor". That's the way we like it.

Suddenly, this perfect little utopic neighborhood has turned myopic. A flyer arrives on the doorstep. The first few lines of the flyer read .... "We regret to inform you that our legal fees are climbing to upwards of $50,000. This will impact each and every homeowner. If you can't pay, your home could be liened and even foreclosed on. Interest and legal fees may also accrue to collect this debt...."

You see. the HOA is deeply entrenched in litigation. The seller never said a word. Neither did the realtor. It doesn't matter. YOU, Joe Homeowners, are responsible. Sure you could try to sue the seller or the realtor for failure to disclose, or file a complaint with the Department of Real Estate. Ha, good luck. That's like chasing bad money with bad money and that's assuming you can afford the chase.

One lone homeowner decides to question the board on a few legalities such as whether or not the HOA is a valid one and requesting to see the recorded documents and the financial books and records. The homeowner is more than a little curious about how it can cost nearly $10,000 per year to maintain a few hundred square feet. Well, the HOA Board of Director neighbors are offended by what they perceive to be an "interrogation" by Joe Homeowner. They dig their heels in and won't give up the goods.

It's been down hill ever since. The lawyers step in and sniff out every conceivable other issue to dig up, using fear mongering tactics with the HOA Board that they better do this or they better do that. They plant the seed of fear in all the homeowners to immediately consult their own lawyers. Several years later and $50,000 later, nothing is settled, and they are preparing to have a trial. Yep, a trial. Over a few hundred square feet of common area.

The dirt in homeowner associations is much deeper than the pretty little Roses and Tulips on the surface. The grubworms that lurk beneath the surface of HOA laden housing can surface at any moment and begin their dirty work of eroding neighborhood spirit. In time, that may return. But some homeowners may never be able to recover from the erosion of their hard earned equity and life savings once it's all been depleted.

Isn't it enough that we live in such a litigious society, filled to the brim with litigation lovin' lawyers? Or that many homeowners are already struggling to make their mortgage, let alone their skyrocketing HOA dues? Why add to your financial risk by buying into any type of HOA laden housing that's a magnet for lawyers? Keep in mind, every single home in an HOA is collateral to those lawyers. Do your homework - no pun intended - flunking in this class of housing could leave you homeless.