HOA Nut House

By Karen Jonas, correspondent

As the number of foreclosed homes rises, people who pay homeowners association fees could see their rates increase because of their neighbors' inability to pay.

Although most homeowner associations should have saved money for troubled economic times, there is a possibility that some may have to raise fees to cover large numbers of foreclosed homes, according to Andrew Schlegel, vice president of finance for Merit, a company that manages homeowner associations throughout California.

"If there are 1,000 homeowners and 100 of those homes are in foreclosure, then that's a 10 percent revenue loss," Schlegel said.

If homeowners are delinquent with their association dues for an extended period of time, the association may be able to file liens upon the home and could even force the homeowner into foreclosure. If people do not pay dues for 12 months or are in debt to their homeowner association for $1,800, the association can file a lien against the house.

"Each (association) has a delinquency or collection policy," said Schlegel. "The management does its best, but you can't make people pay."

One of the biggest problems for homeowner associations are people who pay their mortgage but are not paying association membership dues.

"If they're paying the mortgage but not paying dues, that's a problem," said Schlegel. "It's not fair for the other homeowners."

Schlegel said homeowner associations should have ways of coping with less cash flow and usually would not have to resort to raising fees for members. The association should be able to figure in its budgeting process that not all of the homeowners will be paying their dues.

Bill Velto, managing broker of Tarbell Realtors in Upland, said that since homeowner associations are required to have reserves, he did not believe that rates would increase because of foreclosures.

There could be fee increases, but these would probably be from the increase in the cost of living. For example, a homeowner association might pay more for landscaping because of rising fuel prices, Velto said.

"Cost-of-living adjustments are sometimes already factored in," Velto said.

Another problem which Inland Empire communities face are the eyesores of dead landscaping and overgrown weeds that are a signature of foreclosed homes.

People who cannot pay their mortgage are unlikely to maintain their landscaping.

Unfortunately, homeowner associations cannot care for dead landscaping or maintenance of private property, which means that little can be done about the brown grass until a new owner buys the property.

"Associations have no jurisdiction over foreclosed homes," said Marie Stone, director of marketing for Merit. "It is private property."

If there are major health or fire hazards with a home going through foreclosure, such as mosquitoes breeding in a stagnant pool or an abundance of dead weeds, the the homeowner association can try to get the bank to maintain the property.

There can be restrictions because homes are private property, but the bank will normally pay fees once the home is sold, Schlegel said.

Homeowner associations should be able to weather the wave of foreclosures, but they will be better off once more people are paying their mortgages.

"It's better for (the associations) to have people who can pay the bills," Schlegel said.

karen.jonas@inlandnewspapers.com

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