HOA Law Blog

Association Lien Services has been successfully collecting delinquent assessments, non-judicially, for over twenty years and has weathered a few economic downturns along the way. However, never before have we encountered such a perfect storm of economic turmoil. In the past, as now, when there has been a burst in the real estate bubble (and there have been two others in the past 20+ years), we have seen many owners let their properties go back to their lenders (or in some cases to their associations) because they were not worth what they paid for them. We are also seeing some owners that want to keep their homes, as they believe that they will eventually rise in value.

The “perfect storm” is the unprecedented sub-prime crisis coupled with a stock market collapse, accompanied by a significant increase in unemployment. Several commentators have reported that we would see different waves of foreclosures, and that is exactly what ALS has been experiencing. Starting in September of 2008, ALS experienced the first wave of the “sub-prime” owner defaults, assessment delinquencies and resulting lender foreclosures.

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Never in more than 20 years has ALS experienced a time when assessment collection has been as complicated and difficult as it is today. Many boards of directors are unsure as to what to do when an owner is not paying their association or the senior lien holder/lender is not prepared to foreclose. David Swedelson and Tracy Neal have prepared an article setting out the analysis that is required to assist boards in making what is truly a difficult decision. Follow this link to read this article, and feel free to share this with your board of directors and/or other managers.

This economic downturn and the significant increase in the number of delinquent homeowners are impacting all community associations. To be sure, some are facing more delinquencies than others. But even the most affluent communities have homeowners that bought their homes at the height of the market with adjustable rate loans that they now cannot refinance, and they are losing their properties. They are also not paying their assessments.

The website HOALeader.com (created to provide support and information to board members and other HOA leaders) recently conducted a survey of HOA leaders on how they were dealing with the problem. Comments from HOA leaders regarding their fears and feelings of helplessness on how this is impacting their communities is interesting; they show that owners are concerned as to how their neighbors’ foreclosures are going to impact the amount of assessments they pay. Follow this link to read the article.