How do you turn a $130 home owner association fee into $541 fee? This was a painful lesson that I wished I could have avoided. Reviewing the events since I bought this property in 2004, I can not tell if I would have been able to foresee the Home Owner Association, HOA, issues.
Let me give you the answer to the question - How do you turn a $130 home owner association fee into $541 fee?
First, do not inform the real estate investor that there is a home owner association at the property closing. I am not sure this is legal. The contractor was still building some homes in this development.
After the closing, the property was rented with out any issues.
Second, outsource the management of the HOA. When the builder completed his project, it outsourced the management of the Home Owner Association to a management company. This probably happened approximately 2 years after I closed on my property.
Third, place a lien on the property controlled by the Home Owner Association. After my last tenant moved out of this property in August, we decided to remodel it. On one of our visits, we found a letter from a lawyer in the mailbox. The letter stated that the HOA had put a lien on the property. In order to clear the lien, I would need to pay the lawyers fee and the HOA fees of $541.
The breakdown of the fees are as follows
a. $310 in association fees. $130 unpaid association fee and $200.00 in late fees. According to their records, they have charged $20.00 late fee for a period of 10 months.
b. $225 lawyers fee
c. $6 filing fee
The key ingredient for turning $130 into $541 is NOT to inform the owner of the property of what is going on.
When I confronted the Home Owner Association Management, they stated that a monthly invoice had been sent to the rental property. Is this statement true? I do not know. The tenant never informed me a HOA letter. However, I can say with assurance that for last three months, there were no letters from the association.
What do you do if you are faced with situation? Do you pay the fees or you fight the association in court? In this case, I chose to pay the fees. The second option was tempting. However, the lawyer fees and court fees would greatly exceed the penalty fee from the association. I would have won the battle but lost the war.
Home Owner Associations do provide a number of important benefits, for instance, landscaping and maintenance of the common areas, some provide access to a pool, and their rules help enhance the property values.. However, it is the horror stories that give them a bad name. I hope that by sharing this story other real estate investors will benefit from it.
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