Foreclosures affecting HOA dues - any help?

Started by MaryH6 • 9 replies • 2026 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

MaryH6 (California)
Posts: 7

Posted:

We have just discovered that there are a significant number of foreclosures in our HOA. Our Board is considering a 20% increase in HOA dues AND a special assessment! (Given when our community opened, most people bought at the height of the "bubble" when they could get huge loans they may not have been really qualified for, and apparently some are now caught in the crisis.)

Does anybody know if any of the legislation being considered at the federal level or in CA to help homeowners through this crisis would benefit HOAs who are being seriously impacted by foreclosures in their community?

I am not on the Board, but am a concerned homeowner. I and other homeowners have already been proposing areas to reduce expenses, but it sounds like this may be beyond what we can cut to meet the budget.

Thanks for any suggestions.

BradP (Kansas)
Posts: 2,640

Posted:

Mary:

I don't know that there is any legislation that will help with this.

However, your post does bring to light the need for a healthy operating reserve to help your HOA through these times. Raising assessments may be inevitable, but I think your Board should take a serious look at slashing all unnecessary expenses and putting off unnecessary projects before they raise them.

I don't know if there is a rule of thumb but this is my personal belief, your budget should equal 90% of your potential assessments. That will take into account possible foreclosures and delinquents. I think every HOA should have an operating reserve equal to about 1/3 to 1/2 of their annual operating budget. But those are just my opinions.

MaryH6 (California)
Posts: 7

Posted:

Thank you. These are really good suggestions. We are such a new HOA, we haven't had the chance to build any reserves to speak of, but these are good guidelines to help us get there, once we get through this time.

HaroldS (Arizona)
Posts: 906

Posted:

A 20% dues increase AND a special assessment, could probably drive more owners to become delinquent and really tick off your dues paying members. You need to first eliminate all possible expenses, including the management company if necessary.

KirkW1 (Texas)
Posts: 1,665

Posted:

I would go so far as to ask if owners would be willing to mow the common areas to avoid a 20% hike. If need be, then allow the ones willing to mow to get some credit on the increase for doing so.

DonnaS4 (Florida)
Posts: 16

Posted:

Board Members and Property Managers,
How are you handling year end accounting entries for foreclosures? Our CPA has recommended that we move over $37,000 from the accounts payable and expenses as loss for foreclosures greater than six months due to the fact we most likely will never see much of this money. Of course, this shows a loss on the P&L for the of about $24,000. Any input would appreciated.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Donna,

During these trying times, it's not unusual for HOAs to have to write off some of the bad debts occuring because of foreclosures. My HOA is doing this about every month. Each delinquent account is tracked and those that are in foreclosure are tracked even more closely. After a number of months some are regarded are uncollectable and the delinquency is written off.

DonnaS4 (Florida)
Posts: 16

Posted:

I do realize we will have some loss that will need to be written off but the CPA is recommending all accounts over 6 months in arrears. Now we do have claims of lein filed on all these and the foreclosures are not even final yet. The foreclosure process here in FL is taking so long and meanwhile the association goes unpaid. With claim of lien aren't we guaranteed that some of the fees will be paid?

DanielH1 (California)
Posts: 482

Posted:

I am aware of no legislation.

I'm in California, too, and we've had good success using a good collection agency. The law gives the HOA the ability to file a lien against the home and, even if the owner no longer owns the home, pursue them into small claims or civil court (under a personal obligation case). The collection costs are also added to the debt by the collection agency so we rarely pay these out of pocket, either.

My HOA only writes off the debt if it is discharged in a bankruptcy.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Donna,

I would look to your attorney, not your CPA, for advice on which delinquencies to write off. There are many factors to consider, not just the length of the delinquency and 6 mos is really not that long.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here