By: Roy Helsing

Question: I am looking to buy my first home, a condo pretty soon. I am already in contract. I love the community and the neighborhood is safe as well. However, the thing that bothers me is that there is an exceptionally high percentage of delinquencies in this community.

I was looking to get more insights on how this can affect my purchase. From what I have researched, I understand that the HOA dues can go up to compensate for the homes that are not paying for it. Also there is a chance that the price of the property would go down. Are there any concerns regarding this?

High delinquency rates are always a problem in any Homeowners Association (HOA). HOA’s are not-for-profit mutual benefit corporations (for the most part) and while required to collect enough money to properly run and maintain the association, they are prohibited from collecting money for which there is no known use. Therefore, when homeowners stop paying assessments (or in this economy perhaps simply can’t pay) the association does not have enough money to survive without eventually raising assessments on everyone else.

To some extent California law helps minimize the impact because it allows for a very quick process to lien homes or otherwise collect past due assessments – or in a worst case, sell the home and get an owner who can pay.

Even with those protections, however, an association with a high delinquency rate is problematic. Lenders always ask for the delinquency rate and are reluctant to loan on mortgages in communities which have a high delinquency rate. This makes it difficult to replace the owners that are not paying and can lead to many abandoned properties. In the meantime the association is struggling to properly maintain the community and pay its bills, and in extreme cases that can cause the property to look unkempt. In any case, the combination of these issues very often results in a depression of property values.

Articles are for advertising and general information by The Helsing Group, Inc. They are not intended to provide legal advice, but rather reflect our opinions as Community Association managers and Consultants. Readers should not act on issues raised in our newsletters or websites without consulting legal counsel.

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The Helsing Group, Inc.

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