Unmet expectations and a tight economy

We're wrestling with these questions right now and I hope your thread stays up a while, because all of us need to exchange ideas on how to cut the budget and collect delinquencies.

Regarding the budget - we're working on it now and have changed lawn services companies. Happily, they've done work for other organizations which we've seen and like, so hopefully things will go well in that regard.

We're still trying to get residents to provide email addresses so we save money on printing and postage. Right now, it goes to all the residents (owner-occupant, tenant) as well as off-site owners, but I'm considering suggesting that we give the tenants a quarterly flyer with basic information, such as the start and end dates of the swimming pool season and limit the newsletter (with the minutes and budget reports) to the homeowners only.

We had begun thinking about sending some of our delinquent accounts to another law firm that might give us more "bang' for the buck, but that got pushed aside because other things popped up. We have begun looking at this again, especially since we don't have to make a decision about retaining the current one until next spring. I would like to keep him for most of our other work, but I also think we need a firm with more resources.

As for maintaining the unit, there are a few people we've had to discuss exterior problems with - mostly falling down fences and the occassional cardboard in the storm down window, but that hasn't been a big issue.

Now as far as the "I can't afford the fees" statement, we've told people over and over they can work out payment plans with the management company. Our most recent newsletter also published the website and toll free number of the Indiana Foreclosure Prevention Network, and we encouraged people near the brink to call to see if they can get help - and begin bringing their accounts current. Now, it's up to them - if they do nothing, we have no choice but to pursue them and unfortunately, some many have to decide if they can still afford the house. I don't want to see anyone lose their home, but our situation is getting dire and we may have to accept the fact that some folks are going to get lost.

From time to time our homeowners complain about fees - I haven't heard a lot of that lately because we have been able to make some long delayed improvements (the 2006 hailstorm brought us new roofs and some siding, thanks to our insurance, so that turned out to be a blessing in disguise). We also repaved a street last year and parking lots off another street this year. Sadly, our delinquencies have gone way up and despite what two of my fellow board members say, I fear we have no choice but to stick a significant fee increase for next year. This will come with lots and lots of information to the homeowners explaining the hard reality of things - if they want lots of services for little costs, they need to convince their neighbors to pay their fair share.

I think it makes perfect sense. My gut feeling is that you should do everything you can to work with owners. One can take the position that "they shouldn't have bought what they can't afford." But it isn't always that simple. And even if it were, it wouldn't solve the problem.

Quite honestly, I think one of the government's actions needs to be to force many of the ARMs to be fixed at some reasonable rate. The problem is I don't know what should be considered reasonable. But from what I keep reading that would help a lot. I keep reading about people who are squeezed when the ARM starts moving up. And many of the people simply can not refinance now.

I think it is a hard situation. And I am no sure that it is always best to foreclose. If houses are not selling, then it would seem preferable to have an owner in the home over foreclosing for lack of dues. And if you foreclose you still don't get the dues since most of the value is in the loan.

So because I intend to live here until I croak; I can stop paying my assessment and just pay my mortgage. Sure the BOD can stop me from using the pool but due to health issues I can't use it anyway. And while the HOA can lien me, I don't really have to worry about it, I can just let my kids worry about it after I'm gone.

Glen - the fallacy to your plan is that the HOA can choose to foreclose the lien. Will require lawsuit, but certainly do-able.

Glen is using a reductio ad adusrdum (reduced to the absurd)argument in an effort to show a fallacy in my post. It is a legitimate form of logic and argument.

Of course, the problem comes with the notion of reasonableness. Neighborliness does not mean ignoring a deliberate failure to pay assessments (rather than a short term problem with personal finances). Nor does it mean allowing unpaid assessments to become excessive.

I do agree that, as part of policy governance, there needs to be a defined, written and published collection policy.

Equally, I believe that a critical function of a board is the ability to make exceptions to policies and bend rules as circumstances dictate. Otherwise, boards become robotic automatons, exercising no judgment.

At some point, even a reasonable neighbor would say that a lien must be acted upon. But I also believe that, despite a collection policy, it is unwise to foreclose on a property if there is a reasonable expectation that the unpaid assessments will be paid once the debtor returns to financial health.

Indeed they are - and that's why our community has no choice, but to make an effort to collect. Mostly, we've used liens and lawsuits because once upon a time, everyone ran towards bankrutpcy court. When the rules changed in 2005, we didn't see so much of that, but then we began seeing all of the mortgage company foreclosures. As you know, when the mortgage company moves in first, there's very little that can be done because they'll get their money before anyone, so all you can do is hope the house gets sold quickly to someone who will be responsible and pay.

In the meantime, you have to run after the bank to pay the fees that began accumulating when it took over the home (and some of you know how difficult THAT is). And now, there seems to be a reduction in the number of mortgage companies foreclosing on people because they already have too many homes they can't sell.

I understand what George is saying about being a servant leader and ultimately a good board member recognizes it's not all about him or her - you have to do your best to make decisions that will benefit everyone. Sometimes those decisions won't be popular and sometimes you may be wrong, so the best you can do is get as much information as you can, consider all options, make your decision and run with it. If you do notice an error, stop and change course as soon as you can, admit when you're wrong and keep going.

Nonetheless, the bills still have to be paid and we've told our homeowners it's not fair for everyone else to dig deeper and pay when others don't. I'm more willing to work with people who will at least come forward and explain their situation, but I'm not a psychic - if you don't tell me what's what and still don't pay, I will assume you're a deadbeat and go on from there. If I, as a board member don't do my job, I could be sued for breach of duty or something - and I'm not going to be the one left without a chair when the music stops.

Kirk, in most cases the HOA is not going to recover the missed assessments. That is not the point of foreclosing. The point is to get the deadbeats out and someone responsible in who will pay.

The bylaws may NOT allow the board to be "philanthropic" or even sympathetic during these difficult times. If the rules say the board "may" file leins or foreclose, then it has the option. Otherwise, if there is a hard, lock-step procedure, then it has no choice than to carry out its own rules.

Tough call.

But in 5 years, what will the then-current board think of the decisions made by the now-current board?

First and foremost is the continuity of the corporation. That's the board's main job. Financial protection of the Association is the main responsiblity.

You are entitled to your opinion, George, as long as you do it kindly.