“It’s Alive!”

The New Homeowners Association — a Burdened Creature, Tripping down Sequoia Lane, with a Knife in its Back

by Brian P. McLean, Leahy.ps

When it comes to homeowner associations, governments are struggling. Competing camps, conflicting policies, and the end result: a crippled creature chased into a burning clubhouse by owners carrying pitchforks and torches . Governments want to limit demand for municipal services, preferring to stack them instead on the shoulders of developers, and eventually associations and their owners. Desiring to increase consumer protection because of actual and perceived abuses by associations, governments simultaneously try to limit the ability of associations to collect assessments, kicking the feet of associations out from underneath them. It’s the unfunded mandate meets inability to tax. (Combine that with no reserve studies, and the amount of the unfunded mandate is difficult to ascertain until the need for the expense is immediate.)

There’s now an additional twist – developers abandoning their projects before completion, accelerating to owners the responsibility for paying for necessary services and amenities, leaving communities in financial distress with significant unplanned and unbudgeted financial responsibilities. This is the virtual knife in the back of newer homeowner associations. So – here’s your crippled creature now: burdened, tripping down Sequoia Lane, with a knife in its back.

It doesn’t have to be this way. Governments should provide essential services to all of its constituents. They ought to provide credits to those communities that are accepting the burden of providing essential services (e.g., water, sewer, and public parks). (Instead, in some communities, they increase the tax). Associations and their owners ought to accept that offering communities more than essential services will cost more – that’s both the advantage and disadvantage of living in an association.

The press can be a friendly torchbearer for angry mobs. Does the mob know it’s chasing itself?

Dec 23, 2008 — Forestweb

LOS ANGELES, December 23, 2008 (Forestweb) — As struggling residential developers in Arizona abandon their projects, more homeowners associations are finding themselves financially strapped, unable to make repairs or perform maintenance, The Arizona Republic reported Dec. 21. Developer abandonment will become a serious issue in 2009 for up to 200 of the more than 10,000 Arizona communities under homeowner association (HOA) control, industry experts say. Residents of these partially completed developments have seen their association fees rise while amenities and services are reduced or eliminated.

In some communities, homeowners have been unable to assume control of the HOA from the developers, who usually are among the HOA’s main debtors. HOA reform advocates say lawmakers should have created more safeguards to prevent the current situation. They say the system favors developers and treats homeowner rights as an afterthought.

Homeowners associations proliferated in recent years as local governments sought to limit the demand for municipal services. Developers are required to provide amenities once provided by the public sector, such as parks and open space.

The city of Gilbert requires all new residential development to be under HOA control. There, as in other cities, developers are required to finance and build the amenities before selling any homes.

But amenities can quickly turn into money pits in half-empty communities where the developer has gone out of business.

Reed Porter, president of T2 Homes in Gilbert, said municipalities would need to change their standards to allow incremental development, rather than having the developer incur huge debts by having to build the amenities in advance. In the future, banks will be unwilling to loan money up-front for amenities, Porter said.

The primary source of this article is The Arizona Republic, Phoenix, Ariz., on Dec. 21, 2008.

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