From owners trashing properties and legal troubles, HOA property management can sometimes find themselves in scary situations. In this post, we are sharing some horror stories that really happened!
Ka-ching: Special assessment of $7,500 just 3 days after closing!
A newly married couple decided to purchase a Buckhead condominium as their first home. In the excitement of their plans, they failed to read the condominium board meeting minutes and notes about the $850,000 construction defect issue that needed to be repaired. Unfortunately, so did their realtor. If they had, they would have known that each owner was responsible for paying a $7,500 special assessment. It was noted extensively for months before this couple purchased, but they didn’t read the stack of documents related to their purchase that came from the closing attorney. So, they didn’t know about the assessment until the first board meeting — three days after they closed.
Tip: Read the board of directors meeting minutes to help uncover potential assessments or other issues. Be sure your realtor understands condominium law.
Say What? Owner must remove fence and koi pond that was never approved!
An avid gardener decided to install a new fence and decorative pond on his property in Sandy Springs, an investment that he believed would enhance his property value. He knew he belonged to an association but failed to get written approval on his project prior to starting the project. Of course, the work garnered the attention of several neighbors, one of whom sat on the HOA property management board and knew he had not submitted the required paperwork. It didn’t take long before the situation took a turn for the worse between the association and the owner who claimed the board had not approved other ACC projects in the community. A legal dispute ensued with the owner losing the case in court and having to remove the improvements to his property. He eventually sold the home, but not before leaving dead koi fish on the front steps of each of the board members’ homes.
Tip: Remember to read the covenants and ACC guidelines before starting any exterior modification to your property. Most associations require written approval by the board or ACC committee. You’ll be glad you did!
Surprise! Buying a rental property that you cannot rent!
Many communities are limited to the number of rental units that can be in the property. Once that threshold is crossed, no other owners can rent out their units until other units sell and a leasing permit becomes available. In this example, an owner in Atlanta put down $20,000 cash on a condo but didn’t read the CC&Rs. She closed escrow on a $100,000 unit that she planned to lease out. Unfortunately, the HOA property management board blocked her from doing this because of the rules in the CC&Rs. She hired an attorney to sue the association and the management company, but the case was rejected. Unfortunately for her, she lost the unit to foreclosure about 12 months later.
Tip: Read CC&Rs to understand restrictions such as this one. A simple request to the board or management company would have uncovered the problem, and this woman could have terminated her purchase contract and saved $20,000!
Pool, clubhouse, common facilities foreclosed upon!
In a Gwinnett county subdivision, the developer built the residential units on one lot and the clubhouse, pool, and common areas on another lot. The pool/clubhouse lot had a separate loan that went into default, and an investor group bought that lot/pool/clubhouse at foreclosure. As a result, they started selling pool memberships to community members in the adjacent neighborhoods. At a July 4th pool party where drinking took place, neighbors from the different “factions” began arguing over the issue and soon, a major fight broke out. Before long, a number of other men and women joined in the brawl with several people getting injured. The local police arrived on the scene and arrested 15 people for drunk and disorderly conduct. In addition, several beer bottles were broken during the fight and glass shards landed in the pool. The HOA had to drain the water, vacuum the bottom, and refill the pool at great expense. They ultimately charged this back to the owners who caused the damage, but they declined to pay and hired an attorney to help them fight the case. The matter is still in legal negotiations.
Tip: Read the community governing documents, which would’ve revealed the recorded map, plat, or plan for the community. Determine if the HOA owns the amenities.
The Moral of the Story
Keep in mind that many of these situations could have been avoided if the owner had just done proper due diligence. Living in an HOA doesn’t have to be a scary situation. Owners should always review the HOA property management documents, financial statements, reserve studies, and CC&Rs prior to purchase (and after!) to avoid their own HOA horror story.