#HOA #SpecialAssessment #HOAfees #FinancialHardship #PropertyOwnership
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What Happens if You Can’t Pay HOA “Special Assessment”?
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If you find yourself unable to pay a Homeowners Association (HOA) “special assessment,” don’t panic. While it’s important to address the situation promptly, there are steps you can take to navigate through this challenging financial obstacle. Let’s explore some options and potential outcomes.
## Understanding HOA Special Assessments
Before delving into your options, let’s clarify what a special assessment is. An HOA special assessment is an additional fee charged to homeowners in a community for unexpected expenses that exceed the association’s reserve funds. This could include emergency repairs, legal fees, or any situation where the operating budget doesn’t cover the expenses.
### Reasons for Special Assessments
Here are a few examples of situations that may lead to an HOA special assessment:
– Roof Replacement
– Building Repairs
– Legal Expenses
– Natural Disasters
## What Happens if You Can’t Pay?
If you find yourself unable to pay the HOA special assessment, here are some steps you can take to address the situation:
### Communicate with the HOA
First and foremost, reach out to the HOA and communicate your financial hardship. Explain your circumstances and inquire about any potential payment plans or alternative arrangements that may be available.
### Seek Financial Assistance
Consider seeking financial assistance from a bank or credit union to cover the special assessment. Loan options or lines of credit may offer a solution to help you fulfill the payment obligation.
### Review Insurance Coverage
Check if your homeowner’s insurance policy provides coverage for the type of expense that led to the special assessment. While the HOA’s insurance may cover common areas and building structures, individual homeowner policies may differ in coverage.
### Understand Potential Consequences
If you are unable to pay the special assessment, it’s important to understand the potential consequences. These may include late fees, interest charges, and even a potential lien on your property.
## Exploring Solutions
Now that we’ve covered potential consequences and initial steps to take, let’s explore some additional solutions to address the situation effectively.
### Negotiate a Payment Plan
Work with the HOA to negotiate a feasible payment plan for the special assessment. Many HOAs are willing to work with homeowners to establish a manageable payment schedule, allowing you to fulfill the obligation in smaller installments.
### Utilize Emergency Funds
If you have an emergency fund or savings account, consider utilizing those resources to cover the special assessment. While it’s not ideal to deplete your savings, it may provide temporary relief in this situation.
### Seek Legal Advice
If you believe the special assessment is unjust or if you are experiencing significant financial distress, it may be helpful to seek legal advice. An attorney can review the situation and provide guidance on potential legal remedies or options available to you.
### Explore Community Resources
Don’t hesitate to explore community resources or financial assistance programs that may be available to homeowners facing financial hardships. Local organizations or government agencies may offer support in challenging times.
### Review HOA Policies
Review your HOA’s governing documents and policies to understand your rights and obligations related to special assessments. It’s essential to have a clear understanding of the rules and procedures that apply in this situation.
## Conclusion
In conclusion, facing an HOA special assessment amidst financial hardship can be a stressful experience. However, by taking proactive steps and exploring available options, you can navigate through this challenging situation. Communicate with the HOA, consider alternative payment arrangements, and seek the advice of professionals if needed. Remember, your well-being and financial stability are essential priorities, and there are resources available to assist you in addressing the HOA special assessment effectively.
Contact the HOA and tell them you don’t have the money right now. See if you can work something out on different terms
If you’re in default with the HOA, they can attach a lien or foreclose on your home
See if you can get a delay on payment from your HOA, a home equity line of credit (HELOC) would be something to consider if you need to borrow money to cover the costs.
I’ve dealt with issues like this where HOA fees are raised, or the reserves have run dry and the HOA must assess additional fees based on unit sizes due to the fact that the original HOA, or the management of it– was going bankrupt.
This is often seen in the condo market, where builders will create the the HOA LLC structure, the bylaws, the business plan, and then hand it off to the elected HOA members after 12 months post sale of all units.
In this example, the builders, in order to create attractive sticker prices on the condos, sold the buyers of a condo a scam. It’s that simple. The fees people were quoted when buying the unit were not realistic, and the builder knew it.
Then a year, or two, or three, or four goes by… and the building has to undergo maintenance, which buildings do over time.
The HOA has no choice but to raise HOA fees, which is completely legal– there really is no way around it.
In 2010-2012 many cities that overbuilt condos all across the nation, had buildings where their condo HOA had actually gone past the point of no return.
Whether it was the builder exit scam, or simple mismanagement of the HOA reserve by the members– which also happens… in this situation:
The lights go off in the hallways. The cleaning crew for common areas is let go. Trash is no longer collected, the list goes on and on. These buildings- HOA bankruptcy, went dark. Abandoned and sold at auction in bankruptcy… the condo owners could recoup some of their losses.
Long story short, it’s not uncommon to see HOA’s being raised… but even more now with inflation. People cost more, maintenance costs more, and the HOA has to have a healthy reserve.
If you cannot afford to pay the HOA, you should look to put your home on the market because an extra $300 a month is borderline bankruptcy. You’re too close to the edge.
If you don’t pay the new fees, the account is placed into arrears. You’ll have privaledges likely taken away, such as a pool pass or gym key.
After your dues overdue get’s into the 1000’s the HOA would likely sell the debt to a collection agency. Which will show up on your credit report, and drop your FICO with a collection by up to 150 points.
Secondly, if the balance due gets large enough, they will sue you in Circuit Court. And they will win.
ADDED IN EDIT: After they sue you in circuit court, which they will, and they will prevail, they will then file a lien on the very condo/home you own.
This is why buying a property with high HOA fees is never a smart move. Renting is better than getting trapped into a community run multimillion dollar association taking your money and putting it to what they see as “good use”.
Part time job to make up the difference, cheaper in the long run.
You either pay it, figure out some kind of terms with the HOA, or sell the home to pay the assessment.
When I was shopping for my house, my realtor was working with another client to sell because they got hit with a $30k assessment for ah essential unplanned (and unbudgeted) sewer replacement at their complex.
Unfortunately the fact that your HOA were the victims of theft doesn’t change the reality that upkeep and maintenance need to be performed. FWIW it’s usually more expensive in the long run to defer maintenance so they are likely acting in the community’s best interests.
Why are they going after the HOA members for the money not the person or company that stole it?
Have the HOA exhausted all options to recover the loss from the actual thieves?
Was it a self managed condo association or did you hire a management company?
If it was a management company they should have been bonded and insured. Your condo association should have called the bond and filed a claim with their insurance. They should also be suing the management company and its employees for the theft. The cops won’t recover the money because it’s a civil matter, you need to sue them and take their homes cars and any other assets to make your HOA whole.
If it was a self managed board and someone embezzled the funds you should be going after them in court. Once your association has a lien they garnish wages, cease liquid assets, or attach it to any real property and foreclose to recover the loss.
I had an issue with a local HOA. Decided to get elected to the board. Was able to change some policy decisions. Just for info….every member of every HOA has a conflict of interest because you need to own a home to be on the board!
In most states the HOA can foreclose on your place for non-payment, If you cannot pay its time to sell your place and move, In todays real estate market it should sell quickly.
The other option is hire a lawyer and sue the HOA, the HOA board personally for allowing the thief and the management company officers but that will cost more than $2,400
I owned a condo. There were owners who never paid the HOA fees. The HOA fees accumulated and would be taken once the condo was sold. There was a lien put on the property.
Several older owners took this route. They did not have the cash to pay monthly and were okay with the money being taken after they died or sold the condo. The HOA could survive since the complex was very large.
You need to find out what your HOA does unpaid fees. They likely have a procedure. You are not the first to fall behind.
I’ve been on boards of HOAs before. Usually we’d do a hardship thing where we’d defer the special assessment a certain amount of months. Or we’d work out a different payment plan, but those usually attach interest charges to them.
Talk to whoever your board is. If they don’t suck they should be able to work something out, but there’s no way you can just walk away from it.
Sounds like your HOA did not carry appropriate insurance, or else the insurance would have paid for the theft. This is why owners need to pay attention to the management of their association.
The put a lien on your house. Either they’ll take the money when you eventually sell, or in extreme cases they can foreclose on your house….
Did the HOA follow all the legal requirements under your state’s laws to impose the special assessment?
They can put a lien or foreclose in certain states.
As already said, HOA can put a lien on the property and sue you in court (adding legal fees to your bill) technically, they can foreclose on your property but not for such a small amount.
Contact HOA and try to work something out. I am on HOA board and as long as the owner is in contact with us and offers something, we always accommodate especially for such small amounts (small in a context of entire HOA).
Wait… they stole your money, and are now charging you more money for it?
Does your HOA have D&O Insurance? I thought it was pretty common. D&O not only covers the Directors and Officers from homeowners suing them individually, but also embezzlement. If you have a have management company I would check with them. They could also be in the hook.
get a lawyer, maybe you can get an injunction against the hoa collecting fees until the police close the case?
Sell, and move to a more accommodating place, or state.
Hoa’s have become another leach on real estate, like brokers
Thank you for the reminder to never ever move into a HOA neighborhood.
Your HOA board should have proper insurance for this. It’s a Crime/fidelity bond. This protects them from stolen funds, manager included. If they dont, then hopefully they have a Directors and Officers policy(like malpractice for HOA Boards) you can sue for their negligence for not having proper coverage. I’ve insured exclusively condos and HOAs for 6 years. This should not be a special assessment.
In addition to the other advice here, I highly recommend you look at your HOAs CC&Rs (if you haven’t already) and verify its terms regarding special assessments. In my neighborhood they have to be exclusively for capital improvements and approved by 2/3 of the homeowners in a meeting specifically to address the assessment.
Don’t live in an HoA because the price of your uniform green grass and balcony ornamentation comes at the risk of the constant fallability of bad old people who have nothing else to do but complain and be power hungry and yell about a shed or a mis-aligned christmas wreath.
why hasn’t the hoa filed an insurance claim?
Call your homeowners insurance company – ask if you have “loss assessment” coverage. It usually doesn’t have a deductible.
– goes back to HOA Bylaws and state law governing them…some can do foreclosures for non payment of fees