Home Owner Associations Pulse
HOA Pulse is website for Home Owner Associations. It has an excellent newsletter and is also a social media site for with focused discussions for topics related to homeowner association management.
Cohousing at 30+ years with communities aging and growing in size is facing new issues. In larger communities, relationship complexities increase geometrically. The original never-written-down-understandings drift and disappear with each new wave of members. Because cohousing isn’t the financial risk or the oxymoron it was in the 1990s, more people are moving in expecting it to be the “happy condo,” the one early cohousing communities feared they would become.
Larger populations and facilities require more organization. It is no longer possible to get everyone in the room and “work it out.” Or to just spread the word to maintain clear understandings. Or to contribute another $50 to make up a shortfall or spend a few hours putting up new siding. Major facilities require expert advice, large financial expenditures, and long term planning.
The March issue of the HOA Pulse newsletter issue contains an excellent discussion of what causes problems between the community and a resident. (Or as they say the “board” and “individual homeowners.” Some translation is necessary.) It is most often that the resident was totally unaware of community agreements or unaware that they were expected to be followed.
This article explains that the major cause of conflict in condominiums comes from a resident not understanding community agreements. And then gives a list of things potential buyers should do to understand the homeowner agreements and financial stability of the community. By extension, these are things communities should ensure they know. Many communities have good processes for orienting new members to cohousing, but not to the nitty-gritty. Buyers can easily assume they “know it all” after an orientation that doesn’t even touch on these issues.
Excerpts of the recommendations of things to do before buying, for example:
> • Reserve study – Ask for a copy of the reserve study. The reserve fund pays for major repairs and replacement of common building systems. What is the percent funded? Are there any special assessments scheduled? Does the 30-year cash flow analysis indicate that the association has adequate funding? Are all significant components included in the reserve study? Although most reserve studies do not provide a list of significant components that are excluded, some do. If this is an older project (20-plus years old) and infrastructure components such as plumbing, electrical, and wastewater systems are not included (which is the norm), be aware that these components do have a limited life and a significant cost – probably the highest cost of all components. They are often excluded because they cannot be physically “observed” during a reserve study site visit, and are assumed to have a very long life cycle.
> • Financial statements and budget – Request a copy of the financial statements and budget. The operating fund pays for the upkeep of the property’s common areas, property management fees, and other salaries and expenses. See if the association has had to “borrow” from reserves to meet current operating costs. If so, that is a major red flag indicating inadequate operating assessments.
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Category: HOA Fees
Tags: Finance, Legal