Homeowners Associations in a bind

As the housing market fails to revive itself and homes remain vacant, homeowners associations are feeling the financial pinch. Homeowners are defaulting on their properties, leaving the association to pick up the bill said Eric Vifian of Bella Rose Homeowners Association in Sacramento.

“We’re upside down,” Vifian said about the homes in their association which were sold at their peak value and have since fallen to nearly half the price over the past few years.

“Most associations are not-for-profit organizations,” said Lisa, a manager at Wildwood Homeowners Association. “The money received from dues is put back into the community.”

Public records show that homeowners associations were first mandated in 1985 by the Davis-Stirling Act. The act requires that housing developments have homeowners associations to govern the community. This involves maintenance of roads, lighting, community pools, siding and landscaping in the neighborhood. The act also requires that certain regulations are met by the community and appropriate papers be filed according to California Civil Codes.

“If you are having trouble with paying dues, then you will be sent to collections and an attorney will contact you to make payment arrangements,” Lisa said. She said that the dues are not simply forgiven because homeowners are having a difficult time making their payments.

“People defaulting on their properties has put the association in terrible, terrible financial risk,” Vifian said. The association does not help homeowners with paying their dues because they don’t ask for help he said.

Vifian said that they offer homeowners a payment plan to ease their financial distress, but most of the time, they foreclose on their homes without seeking any sort of assistance from the association.

Lisa said that the bank-owned homes end up not paying the dues which causes financial strain on the association. The association can increase dues to the other homeowners to make up for the lost dues, but this is a rare case she said.

“The Davis-Stirling Act says do what you gotta do to make the association,” Lisa said.

“There is no help for the associations just like there is no assistance for homeowners,” said Vifian. He said that he fears for his job because the association is having trouble making its own bills.