Why Homeowner Associations Get Into Trouble
As a homeowner association attorney, I have concluded that the following are the most common causes of
trouble for homeowner associations:
- Inadequate assessments and reserves over a long
period of time.
- Delinquencies leading to a loss of revenue.
- The developer leaves the association with an inadequate budget. Usually, expenses have been materially
under estimated resulting in the accumulation of inadequate or no reserves.
- The developer failed to pay its assessments during the marketing phase which goes unnoticed by its
hand-picked management company. By the time the association becomes controlled by the buyers, it has
inadequate or no reserves.
- Construction defects are not adequately addressed resulting
in higher than estimated repairs and maintenance.
- Prior boards have made a poor choice of hiring
contractors resulting in wasted money.
- Prior boards have failed to get legal advice before making important decisions leading to costly errors.
- Prior boards have made poor choices in hiring management companies who have provided poor advice to the
board resulting in expensive mistakes.
- Prior boards have made costly errors in purchasing insurance coverage for the association which has
resulted in not maximizing coverage.
- Prior boards have deferred maintenance work which has resulted in more expensive, unnecessary repairs.
- Poor management decisions have resulted in the loss of existing insurance coverage and the need to
acquire replacement insurance coverage from a second or third tier company at substantially higher premiums.
- Poor decisions have resulted in the association paying expenses that should have been paid by an owner or owners.
Do any of these points apply to your association? If so, let us assist you in developing a plan to turn things around.