Question: I've moved three times in 10 years, thinking it would be more cost-effective to purchase a newer condo each time. With each condo came more rules, regulations and restrictions as well as higher fees.
When I bought my most recent condo, I was told the property was low maintenance and the monthly fees would cover just about everything. But this one, like all the others, is managed by a board of directors prone to runaway costs.
Every board has provided a potpourri of reasons why they had to impose special assessments or raise monthly fees; however, not one of these three associations would show me the books so I could see where this money was going. All I was allowed to see was a summary budget sheet that was nondescript and inconsequential.
I am now looking to buy a house but learned that it too is in a common-interest development with a homeowner association.
Given my experience with homeowner associations, I am seriously concerned about the affordability of this new house and wonder if I should look to buy outside of a deed-restricted community-development setting. Can you give me some pointers?
Answer: In deed-restricted community-type living, owners frequently have little control over costs. The regular budget items they are required to pay are increased by expenses uniquely associated with community living, many of which add nothing of the value to the home. These fees rarely decrease.
Outside deed-restricted community developments, homeowners can use their own innovative ideas to solve problems, often saving money and time. There is no management company or board between them and the contractor of their choice. Homeowners are unrestrained in making the best possible choices for themselves and at their own convenience.
Inside a deed-restricted community development, homeowners are obligated by law to share the costs of improvements but often lack input either as to the vendor selected or the actual costs of the project, having delegated that responsibility to the board. Unless boards specifically report on the decision-making process to the homeowner -- less likely the larger the complex -- the homeowner has little control over how the money is spent.
The Davis-Stirling Act says monthly fees in California can be raised as much as 20% per year without homeowner approval. In less than five years, the monthly dues paid by homeowners can more than double, with no vote of the homeowners required.
In California, boards can and do make expenditures without the consent of the homeowners, often delegating the choice of vendors to a management company, whose incentives for what vendor to select may include kickbacks from higher prices passed on to the association.
The trend over the last decade shows the bulk of homeowner monthly fees now goes toward paying attorneys and management and insurance companies, not for maintenance of common property.
Management contracts sometimes low-ball basic contract fees but add on tens of thousands of dollars in extras during the course of the year. Many vendors, including law firms, demand signed contracts before doing a job. Once the contract is signed, however, some reduce the quality of work contracted for while still getting paid the full amount. Across the nation, these practices cost homeowners millions of dollars annually.
Before buying, it is important to review the potential additional costs of ownership in deed-restricted communities beyond your regular budget.
Not all the cost items apply to every association homeowner, but the more that apply, the more expensive deed-restricted living becomes.
Among potential fees are master homeowner association monthly fees; sub-association monthly fees; Mello-Roos taxes; special assessments; fines; penalties; late fees; charges for association address lists, minutes and other documents mandated by law; attorney's fees; lien recording and lien removal fees; foreclosure fees and/or costs to prevent foreclosure; gifts to vendors; parties or celebrations given by the board; and document fees on sale or purchase.
Plus, if the association has a judgment against it, all homeowners may be ordered to pay it.
E-mail your queries to NoExit@mindspring.com.