Condominiums appeal to many homebuyers. Younger people may gravitate toward them because condos could be less expensive than a house; others simply enjoy that they aren’t entirely responsible for the repairs and upkeep associated with the property’s exterior. The latter comes at a cost that will materialize through a Homeowners’ Association’s (HOA) monthly dues and special assessments.
When you look at a condo, the HOA fees are usually included in the listing, and your real estate agent should also be knowledgeable about them. This is important because these dues are generally paid monthly, and you must budget for them. A board of directors or officers use the HOA fees to pay for the common areas such as the upkeep to hallways, mailrooms, and even pools and tennis courts. Additionally, the monthly dues will also be used to pay for insurance and landscaping. These are continuous and recurring expenses necessary to maintain the property and its value.
One of the challenges associated with HOA dues is that they will likely increase over time. Previously, we pointed out that you must budget your HOA dues into your planned monthly payments. If you have a fixed loan, your mortgage payments will be the same until it is paid off. This is not the case with HOA dues; when they increase, it can feel like your overall mortgage payment is going up even though the money is going to two different places.
Whereas your monthly HOA dues will usually increase incrementally or yearly, the charges for special assessments can be more drastic (and it can even be required that a one-time lump sum payment is to be made). For instance, the wood on everyone’s back decks could rot, the foundation needs urgent repairs, or the roof may need to be replaced. Depending on the issue and your HOA’s bylaws, the HOA may hold a meeting to vote on how these repairs will get paid, especially if the accumulated total of the HOA dues falls significantly short of affording such needed repairs. These assessments could ultimately be in the thousands of dollars.
Getting Backed Into a Corner Financially
Consider the young person just starting their career and buying a condo. The purchase could have resulted from saving over an extended period to make the down payment. As they are rebuilding their savings and making regular payments toward their HOA dues and mortgage, they face a special assessment larger than they can afford. Some people may be forced to take home equity loans (if they have built up equity in their condo), and others may borrow it in other ways, though we are not suggesting that this is what you need to do.
Although you will receive and be able to review and ultimately accept the bylaws before owning the property, they do not supersede state and federal laws, the plat map (a survey map at scale)
that identifies how the land is divided, and any articles of incorporation. However, special assessments are mainly internal, and your governing documents should outline any penalties for late or non-payments. In extreme circumstances, this could materialize through additional fees, liens on your property, or even foreclosure.
Get in Touch with a Real Estate Attorney
Great real estate attorneys will be sure you have the opportunity to review the governing documents before the sale, so you can understand what you are accepting and the type of community you are joining. In the event that you are beyond that stage and now facing a special assessment, you could meet with the officers of the HOA to possibly work out a payment plan. You can also contact an attorney if you feel the officers are working outside their authority or the money they demand needs to be revised. Regardless, we understand how powerless you may feel when you are forced to pay large sums of money unexpectedly.
Auricchio Law Offices has significant experience working with condominium associations, developing by-laws, reviewing contracts, and assisting with construction projects. Contact our offices for a free consultation for more information about how we can help you or your Homeowner’s Association.
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