Viewing Both Sides of the Foreclosure Debate–Homeowner vs. Association

This week Daniel Vasquez, condo and HOA reporter for the Miami Herald and Sun-Sentinel, wrote an excellent article reviewing both sides of a foreclosure dispute in a South Florida homeowner’s association.  You can read the entire article here.

The article is about a gentleman who bought his home in Boca Greens in 1999, but due to financial problems in 2006 stopped paying his HOA assessments.  Of course, the issue was eventually sent to the association’s attorneys, and four years later the owner owed nearly $11,000 in assessments, and had cost the association $8000 in legal fees.  The case went to mediation–but while the homeowner was willing to pay his back maintenance (again, after 4 years of letting his neighbors carry him) he felt that the legal fees were unreasonable and refused to pay them, and so the association was forced to foreclose on his home.  The gist of the homeowner’s argument was that the foreclosure was personal, and that, essentially, he should not be responsible for the cost of collecting his debt.

Most of us are at least somewhat sympathetic to homeowners who have fallen on bad times and are having problems keeping up with their debts.  But the entire structure of a condo or HOA assumes that there is common property that must be maintained by the neighborhood at large–that is, everyone who lives in the neighborhood.  Landscaping must be maintained, sidewalks repaired, gatehouses staffed and streets cleaned of debris.  The associations finances must be maintained by an accountant or a management company, taxes must be filed and lawsuits defended.  There is a significant amount of work that goes into maintaining any property, whether you own it alone or with others.

Now, the owner chose not to pay his share of the maintenance, and the association was forced to send that debt to an attorney to collect (it is, after all, a legal, contractual obligation).  Does it really surprise anyone that it costs $8000 for an attorney to pursue a debt for four years?  The work includes collection letters, negotiation with the owner, filing of liens, foreclosure actions and court costs.  Who exactly does the owner think is going to pay those fees?  If the association waives them entirely, it is the neighborhood at large that must foot the bill–$8000 split among everyone who actually paid their maintenance while the owner chose to put that amount in his pocket and fight his obligations.

Let me present an analogy that I often use in speeches.  Let’s assume that you and your best friend buy a car together.  You agree that the car needs to be maintained, and that you will share the costs.

Time goes by.  The fuel injectors get fouled, or maybe the compressor stops running properly–a trip to a mechanic costs money.  But your friend decides not to pay, because he doesn’t have the funds.  So you go ahead and pay to maintain the vehicle that you still must allow your friend to use.  You are covering all of the obligations.  Eventually, those obligations become significant enough that you have no choice but to file a legal action against your friend to get him to pay–otherwise, you are going to lose the car entirely.  While all of this is going on you continue to pay to maintain the car–pay for gas, for tune-ups, pay for the idiot who slammed his SUV door into the paint in a parking lot.  But still, your friend refuses to help for the expenses.  So, in the face of mounting bills, you’re forced to go to an attorney.  You file a lawsuit against your friend (who, by now, is probably not much of a friend anymore), but he still doesn’t pay.  Then several years later, after thousands of dollars in legal bills that you’ve paid, and after going to mediation, your friend finally agrees to pay his nut–but only if you’ll pay the legal fees you racked up trying to get him to live up to his obligations.

Does that sound fair to anyone? Would you be willing to eat thousands of dollars in fees that you were forced to spend because your “friend” refused to help maintain a common purchase?  Would you feel any shame at foreclosing on his ownership interest in the car, seeing how you’ve been maintaining it yourself for years?

The situation in a HOA or condo is only marginally dissimilar.  Sure, an owner has exclusive use of his own property, but he still uses and benefits from the common elements that his neighbors are paying for.  He still drives through the property and uses the gatehouse.  His property value is still buoyed by the landscaping of the common areas.  His neighbors have found a way to make their responsibilities fit within their personal budgets, but not this one owner.  What should be the solution, if not foreclosure?  Are you comfortable carrying neighbors who are simply unwilling or unable to contribute to the common maintenance that is part and parcel of every shared ownership community?

There are a number of HOA haters out in the blogosphere who feel that HOAs are an evil construct that should be outlawed–that no one should be burdened by fees outside of their homes.  But I can tell you from meetings with hundreds of other homeowners that the vast majority enjoy their homes in planned communities exactly because of those common elements.  They appreciate driving into a beautiful, well-manicured community where the areas outside their homes are kept as well as their own property.  That’s exactly why they bought into a HOA.  Should those homeowners be held hostage by a neighbor who either didn’t realize, or simply ignored, that buying his deed-restricted property would come with obligations?  Let’s remember that condos and HOAs are still in the vast minority of developments nationwide.  Homeowners everywhere have a choice to avoid shared ownership communities if they so choose.  So why should we be sympathetic to those who attempt to ignore or game the system?

Like I said at the beginning, it’s human nature to feel badly for people who fall on hard times, and we all sympathize with their plight.  But by the same token, all people are required to live up to their financial responsibilities.  If you buy a car, you must make payments, or you lose the car.  If you buy a home with debt, and you don’t pay that debt, you lose that home as well.

If you buy a home in an HOA, you are choosing a home that is automatically tied into an agreement to maintain common elements that directly benefit your lifestyle.  If you are not interested in those amenities, in that maintenance, then buy elsewhere.  But if you make the choice to be burdened by financial obligations to your neighbors, perhaps it’s understandable when, after ignoring those responsibilities for years, your neighbors choose to take your home to compensate them for the thousands of dollars that they’ve been carrying, to their families’ own financial detriment.  That, honestly, is a completely fair outcome.

If you obligate yourself to an HOA or condo lifestyle, make sure that you can live up to those financial obligations.  If you can’t, you should make a different lifestyle choice.  But don’t be surprised when your debts, and your inability or unwillingness to pay has severe consequences.  Those consequences would be identical in any other situation.

Admittedly, this is my opinion on the subject, and there are those who would disagree.  But, as a condo homeowner who does pay his maintenance, every single time, I have trouble understanding why homeowners must suffer financially at the hands of those who simply won’t live up to their obligations to support their community.

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2 Responses to Viewing Both Sides of the Foreclosure Debate–Homeowner vs. Association

  1. hoavault says:

    A very fair, well-thought-out article although I wish that there was a little more argument for the homeowner’s point of view. (1) If a homeowner can’t pay the regular assessments, how is he supposed to pay regular assessments plus late fees plus interest? (2) Choosing a provider (such as a collection agency) but forcing somebody else (a homeowner) to pay the bill is fundamentally unfair: the homeowner should have a choice to shop around for things that he pays for, not be stuck with an expensive, subpar service chosen by somebody else who doesn’t have to pay; (3) A homeowner might suffer a setback through no fault of his own (e.g. a job loss) and his inability to pay isn’t a moral defect but just an unpredictable event. He wants to live up to his obligation but he can’t. Then, the “circle of debt” quickly builds up to the point where it is unaffordable to pay back, even with a new job; (4) Several well-heeled homeowners may use their money to “spike” HOA fees to force non-payment and foreclosure on their less-wealthy, unpopular, undesirable neighbors. The majority might abuse the minority. (5) Losing one’s home AND being chased into court for debts is excessive. The punishment doesn’t fit the crime.

  2. All fair points, although I do find 4 extremely unlikely–I’ve never heard of it happening, at least. Thanks for contributing!

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