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6 Signs Your HOA Might Be in Bad Shape

6-signs-your-hoa-might-be-in-bad-shape

Condominium living might not be for everyone, but there are definite perks to them, including affordability, desirable location, and access to amenities. They’re particularly well suited for those who like the idea of having someone else take care of many aspects of their property for them.

However, the state of your HOA can have a huge impact on your enjoyment of living. An HOA that’s run professionally can ensure that you’ll enjoy your home with minimal issues. On the other hand, an HOA that’s in bad shape can do quite the opposite.

So, how can you tell if your condo association is shady? While many times it’s not possible to tell until it’s too late, there are still some telltale signs that you may want to look out for that may signify that your HOA is in trouble.

1. The HOA Owns the Services Operating the Community

Ideally, all the service contracts for the community or building are with companies that have absolutely no affiliation with the board itself. If the HOA – or any board member on it – owns or has a stake in any one of the maintenance companies – such as the landscaping company, security company, engineering company, and so forth – this is a direct conflict of interest and even a sign of possible corruption or fraud.

2. A Board Member Holds Other Associated Paid Positions

Board members are typically owners who work on a voluntary basis. However, if any board member holds some sort of paid position within the association, this can open the floodgates for all sorts of problems, from constant complaints from owners to harassment and fraud.

3. The Community or Building is Self-Managed

A professionally-run condominium should have a reputable property management company appointed to run the community rather than allow it to be self-managed. While the latter may save owners in HOA dues, the types of problems that can arise are vast.

For starters, it’s highly possible that the appropriate insurance and property taxes are not being filed properly in a self-managed property. It’s also likely that there is no solid accounting measure put in place, which can put an association in financial duress at some point.

4. There Are Obvious Maintenance Issues

If you notice elevators out of service, unkempt landscaping, stains all along the hallway carpets, and overflowing garbage dumpsters, these may all be signs that the condominium is not being adequately managed, especially if these issues have been lingering for weeks or months – or longer – without being dealt with promptly.

Issues will always arise with these types of communities, but an HOA that is well run will know how to handle them in a time-efficient manner. Any obvious lack of maintenance often means there may be other issues lurking behind closed doors that you can’t see.

5. Reserves Are Low

Before a deal on a condo sale closes, you’ll have the opportunity to request documents from the HOA that you and your real estate agent can look over to ensure the community is financially sound. While there are plenty of things that these documents contain, you’ll want to pay particular attention to the financial statements, including the balance sheet, profit/loss statements, and reserves.

If those do not exist, or seem insufficient, that’s a really bad sign. This could potentially mean that there is not enough money to cover future expenses, such as a new building roof, new parking lot, new elevator, and so forth. If there’s not enough money in the pot, the funds will have to come from the owners, which means a big hike in your HOA dues at some point in the near future.

6. The Condo Fees Are Too Good To Be True

Low condo fees might be something you’re looking for, but be careful with advertised fees that seem too low to maintain the community. Of course, it’s possible that the fees have been able to stay low because the building is very well run, but it’s still important to check the reserve fund mentioned above, as well as the profit/loss statement to make sure there is no overspending involved.

If you’re buying a new condo from the builder, it’s important to keep in mind that some builders advertise low HOA fees just to attract buyers, only to raise them shortly after occupancy. Many times the initial budget that is set-up by the developer is inadequate to cover all maintenance issues.

Be sure to compare other similar properties and their HOA dues to get an idea of what an average is so you don’t end up unpleasantly surprised with a fee hike in the near future.

The Bottom Line

At the end of the day, it’s critical to thoroughly review all the documents that you are provided with to look for anything that may seem a little odd. Ask your board members for a copy of the most recent HOA meeting minutes to find out exactly what happens at these gatherings. If at least one or more of these signs are noticed, consider them red flags. If you haven’t bought yet, you may want to look elsewhere.