One of the trends in condo living that I’m seeing is the rise in delinquent homeowners association (HOA) dues. This has become more of an issue over the past three years, as foreclosures and short sales result in HOA members stop paying dues.
The result of HOA delinquencies, unfortunately, is that the HOA financial reserves can become deficient and unable to keep up with operating costs or building repairs. This is particularly important in older buildings that, say, will need a new roof in the next year, or will require extensive elevator repairs. If the HOA reserves will barely cover the basic operating expenses outlined in the budget, it’s likely that residents will have to vote on and execute a special assessment for a large expense, thus increasing costs unexpectedly.
Additionally, HOA members sometimes end up deciding to cover another unit’s dues. Something like $450/mo split among 25 units doesn’t seem like much. But if it has to be done for several months—or for more than one unit—the bills can start adding up. Either way, delinquent HOA dues can potentially create out-of-pocket costs.
If you’re considering a condo purchase in a particular building, review the financials—budget and reserve amounts—as well as HOA meeting minutes. Those documents will give you a sense for whether the association is operating in the red, black or somewhere in between. The meeting minutes typically will give you insight into impending problems. And have your agent check out the property for foreclosure activity (preforeclosure and otherwise), which is information that’s been available for a while.