With higher insurance costs, higher maintenance expenses and another round of burdensome regulatory requirements coming down from the Legislature, I'm seeing more and more HOAs in financial conditions that are downright scary.
This is especially an issue for HOAs governing older communities with significant deferred maintenance.
There are different types of HOAs. For many upscale single family detached communities, HOA fees are nominal and simply cover covenant enforcement, managing a few greenbelts and perhaps a community pool.
For townhomes and condos, though, HOAs can have responsibility for structural insurance, garages, roof and exterior maintenance and significant common areas (which is often the difference between an HOA that's $60 - $80 per month and one that might be $400 or more).
There's a large HOA community in Littleton which just had its master insurance coverage dropped because this complex (built in the 1970s) has a large number of Federal Pacific electric panels, a brand that was sued out of existence in the 1980s.
Individual panel replacements are $4,000 or more, and this HOA will either have to find a new carrier (at significantly higher rates) or impose a special assessment and force panel replacements down on the individual owners in order to have an insurable complex.
There's another older townhome community in North Denver where 30% of the units are currently delinquent on HOA dues and the HOA is considering bankruptcy. To remain solvent with the large number of delinquencies, this HOA would have to raise dues from $350 to nearly $600 per month.
Either of those scenarios would be devastating to community residents and would likely freeze sales activity for some time, resulting in significant price declines.
Very few people want to volunteer to be on an HOA board. I was president of an HOA for over a decade and I can tell you it's a thankless job.
But just because you're prone to ignore it doesn't mean it isn't important. If you own a condo or townhome and your dues have been rising, find out why. Attend a board meeting, read meeting minutes or talk to the community manager.
The financial and governing condition of your HOA can have a huge impact on the soundness of your community - get involved!
