As Foreclosures Skyrocket, So Might Homeowners Association Dues

It's no secret that foreclosures have hit epidemic proportions nationwide, including in Texas and Bexar County. Like other Americans, many residents of San Antonio's gated and restricted neighborhoods have fallen victim to the harsh times and reality of a nationwide recession. Foreclosures are way up in San Antonio, and it is not uncommon to find several foreclosed/bank-owned homes in some of our City's larger communities. But these vacancies have bigger implications upon communities subject to homeowners associations and mandatory assessments -- financial implications!

Many HOA bylaws or restrictions do not require banks coming into ownership of properties to HOA dues -- even where the dues are mandatory for other owners of properties in a given neighborhood. Other times, banks simply ignore notices and decline to pay HOA assessments. The obvious results can be disasterous for a community association whose financial viability was determined based upon the assumption that all owners of all lots in a community would contribute to the HOA revenues. When a significant enough number of lots within a community don't pay their fair share, the burdens of maintaining the neighborhood fall upon fewer shoulders. In turn, the burden that each of the paying homeowners has to bear could rise dramatically. Think of it like the baby-boomers becoming eligible for medicare -- there was a point where there were far fewer contributers to the system than there were beneficiaries.

Most Homeowners Association By-Laws and restrictions and covenants authorize HOAs to make additional assessments to ensure that costs are covered. These assessments, by necessity, fall upon those individual homeowners who have not been foreclosed upon. Practically speaking, the foreclosure spike may force many HOAs to increase dues and assessments against their paying members. So, while some homeowners fall into foreclosure, or simply "walk away" from a home in which they maintain equity, it may not be rare for their former neighbors to get stuck with part of the price tag.

This problem is not unique to San Antonio, or Texas. See the following article that appeared in "Gazette.net," an on-line Maryland newspaper:

At the Hillcrest townhouse development off McCain Drive in Frederick, five homeowners association board members have each ‘‘adopted” a foreclosed home, taking responsibility for mowing lawns, tearing down satellite dishes and cleaning up trash.

The association has no money to hire help to deal with maintenance on the five foreclosed homes in the 80-townhouse community, according to Steve Stoyke, association board member. ‘‘The grass was waist high and that brings down everybody’s property values,” Stoyke said. ‘‘So we mow the lawns and cut down old trees. We clear it up the best that we can ... Some of the neighbors see us taking care of the abandoned homes and now they are taking better care of their homes. It’s worked out good.”

The loss of association dues from residents unable to pay their mortgages has created a financial hardship for some homeowners associations. Dues typically allow associations to pay for services such as trash collection, snow removal and swimming pool maintenance.

At the Clearbrook subdivision off Ballenger Creek Pike in Frederick County, Property Management People has added staff to deal with the mounting number of foreclosures. ‘‘We’re trying to get the association protected the best that we can,” said Ed Thomas, chief executive officer of Property Management People of Frederick. ‘‘The best we can do is to get a lien against the homeowner to protect the homeowner’s association interest. Past-due assessments means less money to run the association ... So many people [are] just walking away from their homes...”

It’s a scenario playing out throughout the country, as a result of the nation’s mortgage crisis. ‘‘It’s a nationwide problem,” said Thomas, who lectures to groups on the foreclosure crisis. ‘‘It’s not isolated to Central Maryland ...”