Yesterday we wrote about how in Texas, there’s been a bit of a spree of homeowner’s associations (HOAs) foreclosing on people’s houses over just a few hundred in late dues, then selling the house to themselves and turning it around for a juicy profit. And now, the other side of the story. Robert is an HOA board member in Texas and while his association does sometimes foreclose in order to collect, there’s more to the situation than meets the eye. Here’s his take:
Your article on Texas Homeowner’s Associations (HOAs) foreclosing spree left out a lot of details and made all HOAs look like money grubbing scumbags. While that may be true of a few HOAs, it is far from the case in all of them. Let me start by saying I’m on the board of my HOA in Houston, TX. I’m now in my second term, having beaten an incumbent to get on the board.
First, there are more than one type of HOA here in Texas. Most people, including legislators and judges lump them all together. My particular on is actually a condo association, although it more like town homes than condos. We have to charge maintenance fees. This is not just to line the pockets of the board members, who serve without pay. Further, our fees/dues are the same as everyone else’s. We don’t get a break because we are on the board. The fees cover:
* Building Insurance
* Household trash pickup
* Litter pickup (some owners are real litterbugs)
* Building maintenance
* Foundation repairs
* Parking lot repairs
* Pool and tennis court maintenance
* Common lighting (including electricity)
* Roof repairs
* Gutter cleaning (separate account from building maintenance)
* and more items I forget.
When someone doesn’t pay their dues, the rest of us have to pick up everything above. Is the fair to us?
While we have issued fines, there is always a warning letter first. Second, the rules and by-laws limit the fine amounts and how often we can fine. Fines are actually very rare, and usually only for owners that won’t talk with us and be reasonable. And there have been case were the owner came to us, explained the situation, and the fine was waived.
As to why HOAs foreclose, we do it because it’s about the only weapon we have to force compliance. A group of us can’t just go over and say “pay up” with baseball bats. We can’t garnish wages (at least not in Texas). We’ve tried credit reporting but that didn’t work out. We’ve tried suing the owner, but they’ve usually taken off and collecting the judgment is not cost effective. What else can we legally do but foreclose? Please, tell me! We would love more ideas in lieu of foreclosing.
However, foreclosure is risky. If the property also has a mortgage, here in Texas, the mortgage company can take the property, at any time, after we foreclose without have to pay us anything. We lose the back payments we are owed (everyone else has to chip in to cover the loss) plus any legal expenses we incurred. This has already happened more often than I can count. Further, the mortgage companies know this, and will wait to foreclose until they have a buyer lined up. The do this to avoid paying the maintenance fees/dues, and it’s perfectly legal.
Further, because of the bank can take the property at any time, actually getting someone to bid on the property is quite rare, which means the HOA usually takes possession. Then we have to find a good renter willing to a month to month lease and leave on 30 days notice. We HATE foreclosing!
In an effort to avoid foreclosing, if the owner will enter into a payment plan, we’ll stop the foreclosing. Unfortunately, the defaults on the payment plans are around 60% of the top of my head. We really do try to avoid the foreclosing, but the owners force our hand.
Are all HOAs like mine? No. But neither are they all as bad as you make out. As Bruce Schneier once said “…if it’s in the news, don’t worry about it. By definition, ‘news’ means that it hardly happens.”