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Most often, people losing their properties to foreclosure failed to pay their homeowners association dues. Association dues are essential for keeping neighbourhoods safe and conducive to living.
Also, failure to pay association dues by some members forced their neighbours to spend more to pay for basic services in their neighbourhoods, such as garbage collection, insurance payment and snow clearing.
Some homeowners’ association board members deal with this budget short-fall caused by the foreclosure crisis by looking for cheaper insurance and postponing repairs and maintenance in their neighbourhoods.
It is likely that some homeowners associations will deplete their reserve accounts that they are supposed to use for major repair projects.
The increasing number of foreclosure homes has also affected home developers who control homeowners associations until housing projects have been completed. Home developers fund an association’s reserves until the project’s completion to keep dues low to attract homebuyers.
However, unpaid association dues have forced home developers to provide more funds to maintain an association’s reserve account. It is expected that when the crisis is over, homeowners associations will be faced with large deferred maintenance costs with low reserves to be used.
Pia Trigiani, head of Virginia’s New Common Interest Community Board, explains that board members usually allocate 4 percent of association funds for unpaid dues. However, with the increasing amount of unpaid dues, board members have been allocating up 10 percent of association funds, Trigiani adds.
Because of the instability of their finances brought about by foreclosures, some homeowners associations were not able to provide their financial disclosures on time to homebuyers which are required by law.
Under Virginia’s law, sellers or real estate agents are required to give potential homebuyers a financial disclosure report from the neighbourhood’s homeowners associations. Homebuyers have the option to study the financial report for three days and to cancel the deal if the association’s financial status failed to satisfy them.
HUD Fair Housing Equal Opportunity