Just recently I was contacted by a friend of mine who had suffered a divorce and the subsequent foreclosure of their home during the past few years. He was asking me about a problem he was having with the home owners association where the foreclosed home was located.
It seems that my friend and his ex-wife owed the home owners association a couple of thousand dollars in unpaid association dues. My friend thought that since the home had been foreclosed on he had no further obligation where the homeowners association was concerned. Further, his ex-wife had gotten the home in the divorce, and it was she who had failed to pay the association dues in question.
My friend was inclined to ignore the relentless demand for payment from the association, until he received notice that they would take him to court and garnish his wages. Even that did not bother him much, because he had recently been laid off, so he figured they "could not get blood out of a turnip". Oh, but my friend was wrong. Homeowners associations are one of the few, if not the only entity besides the IRS who indeed have the power to make a turnip bleed.
I informed my friend that not only can they come after him and his ex-wife for those unpaid association dues, but it did not even matter that the home had been foreclosed on. The by-laws in virtually all association agreements includes a personal lien for unpaid association dues or any special assessments deemed necessary by the board members of the association. In fact, if you don't want to pay up because you died, the association may even have the right to go after your heirs for the money. Most buyers do not realize when they purchase their home or condominium, that they are giving the association a lien on the property and a personal lien as well, that can reach to your children or anyone assigned to be your personal representative, i.e. anyone who has a legal interest in the property.
And to boot, there is little to nothing you can do about it. When you sign your papers to purchase your property, you also sign documents giving these powers to the community association. This is a form of private residential government that has as much or more authority that virtually any other governing entity. They can foreclose if you don't pay the dues you owe. They can go to court, get a judgement against you and garnish your wages, or they can sue your adult children if necessary to enforce their right to your money.
Association boards are made up of other members of your community, some of whom may have nothing better to do than patrol the community looking for potential violations. If the community says you can't put a flower pot on your front porch, don't assume that they don't mean it. If they say you can't leave a water hose laying out in the grass, don't be surprised when you leave your hose out and someone comes along to take it away. These are actual events of which I have first hand knowledge.
And associations are supposed to keep adequate dues in reserves for maintenance of common areas, which all residents are responsible for. But most HOA's and COA's probably do not have enough dues in reserve to even keep up with regular maintenance without raising dues frequently. When an unexpected expense arises, such as a problem with a sewer line, all of the property owners may be hit with a special assessment. These assessments can run into the thousands of dollars for more serious problems, and they are like tax liens. You can't get out of paying them no matter what, once they are assessed against you and your property.
Budgeting is a notorious area for home owners associations, and many of them are subject to misappropriation of funds. My own mother lives in condo community with an association that discovered some very questionable expenses for accounting fees, thousands of dollars for "pine straw" purchases, thousands in water bills to "water the grass" along with several thousand dollars in unpaid property taxes, after the builder sold out and turned the association over the the owners. The owners were forced to increase the association dues by 20% their first year, and managed to negotiate a waiver from the county for the unpaid property taxes, which helped them avoid a special assessment that would have been very expensive for a small community that has less than two dozen residents.
What most buyers do not realize is that the home owners association is the equivalent of a private residential government. As such it has powers over the property owners within it's jurisdiction. These powers are spelled out in documents that are usually given to buyers when they place a property under contract to purchase. The documents contain quite a few pages, over 100 pages in most cases, and most home buyers do not want to spend time reading them, or may not understand fully what the document is saying.
But it's important to know that you are abdicating some pretty significant powers to your local home owners association when you sign those documents. You may even want your attorney to review them prior to your purchase, to tell you exactly what you can and cannot do to your new property. It may be possible to lose your property over a fence or a flower bed that you decided to install, though it was against the rules. Flagpoles are another problem. Owners have on occasion lost a big legal battle with an association for erecting a flagpole without permission.
If you plan to buy a home or condo that comes with a community association, be sure you understand what the rules are, and that you are OK with following those rules. Once you've signed those documents, and are in your new home, you won't have any choice in the matter. The association rules and what they say goes.
Donna S. Robinson is a real estate investor, author and investing coach located in Atlanta, GA. Follow her on twitter at donnaconsults. Her book, Basics Of Real Estate Investing" is now available on Amazon.com for Kindle readers.