Homeowners Associations: What you need to know

Homeowners Associations: What you need to know

Posted on: July 3, 2012

HOA-Foreclosure-homeowners-association-bankruptcyAn HOA or Homeowner Association is a legal entity created to manage and maintain the common areas of a community. Typically these “common areas” consist of things like pools, clubhouses, landscaping, parks, streets and roads.

Most homeowner associations are incorporated, and are subject to state statutes that govern non-profit corporations and homeowner associations. State oversight of homeowner associations is minimal, and mainly takes the form of laws which are inconsistent from state to state. Some states, such as Florida and California, have a large body of homeowner association law, and some states, such as Massachusetts, have virtually no homeowner association law.

Since government regulation of homeowner associations is minimal, it is crucial for foreign investors to educate themselves on the HOA’s in their desired investment regions.

Common pitfalls

• Yearly increases in HOA dues
• Poor project management
• Lack of routine maintenance
• Lack of communication
• Unjustifiable administration costs
• Lack of sufficient reserve funds

What to look and ask for

In 2011, it was typical for homeowners associations to have 50 per cent bad debt, meaning unpaid dues from current or past tenants. If you aren’t aware of the current situation, you can get stuck paying the lien and back taxes on the property.
Ask for details from all homeowner associations you may deal with when you purchase a Florida investment property. Keep in mind there may be more than one HOA responsible for your community. It is not uncommon for multiple HOA’s governing one condominium complex so do thorough research on all of them.

If you have the opportunity to physically visit the potential investment property, pay attention to the condition of the grounds and the units themselves. HOA’s may document maintenance that is never completed. There should be some form of on-going maintenance by the HOA companies If you work with a third party like MSR Americas when purchasing a foreign investment property, their team in Orlando makes sure they go and see the property for themselves.

There is always an upside and downside to everything. Homeowners associations are meant to serve the community and the tenants that occupy those communities and in most cases they do. The idea is to be aware of all the aspects so you can be an educated buyer asking the right questions and receiving the right information.

If you would like more information about homeowner associations in Florida, please contact us. MSR Holdings inc. has extensive experience buying investment properties and we would be glad to help you through the process.

(Photo Via: Fleysher)