As many of Ohio’s condominium and homeowner associations face many financial challenges, there has been one indirect source of relief: federal bailouts. The positive effect this generates has been noticed by many local communities, and now the press. The following is an excerpt of an article published in the Columbus Daily Reporter on 8/10/2009:
Homeowners Associations Indirectly Benefiting From Bank Bailouts, Insiders Say
Daily Reporter Staff Writer
Many banks and troubled homeowners have been helped by the federal government’s bank bailouts, but other beneficiaries of that assistance are homeowners and condominium associations.
During the peak of the housing crisis, which was coupled with the onset of the recession, homeowners associations started to see their revenues fall as some of their members, who perhaps lost their jobs, struggled financially and couldn’t afford to pay their association dues.
In severe cases, home mortgages would be foreclosed upon.
Homeowners associations themselves, in fact, can start foreclosure proceedings against a homeowner if that homeowner has fallen far behind on its dues or fees, which can range from a few dollars a month to hundreds of dollars a year depending on how much common space and amenities need to be maintained.
But following the bank bailouts, banks started working more with their borrowers to help them keep their homes and therefore they also can keep up with their association dues, said David Kaman, a partner at the law firm Kaman & Cusimano LLC, which has an office in Columbus and specializes in homeowners and condominium legal issues.
“We’ve seen a tremendous impact from the bank bailouts,” he said. “The biggest thing going on is the banks with bailout money. In mediation they sit down with the unit owner and work out new terms.”
He said the law greatly benefits homeowners associations in foreclosure cases. If a condominium is in foreclosure the bank pays past-due fees and must also pay any associated legal fees.
Dues and fees collected by homeowners and condominium associations are used to pay for the upkeep of common areas, ponds and even community pools in some cases. For condominiums, maintenance of the buildings themselves is paid for by the dues.
Typically, if a homeowner starts to fall behind on dues payments, the homeowners associations – many of which are operated by property management companies – will send a collection letter to the delinquent homeowner.
“Usually they’ll owe from $1,000 to $3,000, which isn’t much when compared to losing your home,” said Kaman.
If that fails to resolve the issue, a letter is sent threatening to put a tax lien against the home or condominium.
For several years many homeowners or condo owners would take out home equity loans to pay off the balance owed, but as banks cut back on those loans some owners were put in difficult situations.
“When they get the letter, most people pay. We see a lot come in at the lien stage, too,” said Kaman.
In a worst-case scenario the association files a foreclosure against the owner.
“We do, by statute, have that power. We have filed hundreds of those,” said Kaman.
He said the biggest mistake homeowners associations make is to wait for the bank to take action instead of taking action themselves.
“They might be losing tens of thousands of dollars in those cases. As a result the other owners have to pay the dues,” Kaman said. “We get hired by some associations and find that they have $30,000 or $40,000 worth of outstanding fees. It got that high because the board was not taking aggressive action.”
While many homeowners or condo associations are run by property management companies, others are run by volunteer boards of directors composed of members.
Homeowners falling behind on their association payments are only hurting their neighbors, he said, especially if it’s not a large development.
“If you have a 40-unit complex and four people are not paying, the other 36 have to cough up the money,” said Kaman. “We take the ‘pay or lose your home’ attitude. That owner is hurting his neighbors.”