Dateline: Portland, OR – This weeks’ round-up of HOA horror stories includes the case of a 22 unit, single-building condominium in the Portland area that was forced to levy a special assessment to pay for exterior building renovations after 37 years of under-funding its reserve account.
While it is true that many HOAs end up having to levy special assessments for one reason or another, it isn’t often that you hear about one that levies an assessment of $97,727 per unit (plus interest and bank charges).
That’s right folks…..$2.15 million (plus interest and bank charges) which was basically used to pay for replacing the exterior siding and windows (not sure about the exterior doors) on a single building!
I use the term “basically” very deliberately because there was the usual 15% or so skim that ended up in the pockets of various vendors and consultants other than the contractor who actually did the work. But then that’s almost a given in such situations, kind of like the tribute paid to a mob boss for the “privilege” of being allowed to operate your pizza shop on a street corner in his neighborhood.
When you circulate in the world of the HOA Detective you hear a lot about HOAs levying special assessments or having to defer major repair and renovation projects because they can’t get an assessment approved. Sometimes you wonder how much truth there is to some of these claims due to the outlandish numbers involved but in this instance yours truly can say with absolute certainty that this particular HOA, which shall remain nameless to protect the innocent, did in fact levy a special assessment of $97,727 (plus interest and bank charges) against each and every one of the 22 units in the building.
The board of directors was thoughtful enough to arrange a bank loan so that those owners who simply didn’t have the means to break out the checkbook and stroke out a check for $100K would have the option of making a series of 240 monthly installments. However, it is worth noting that the memorandum issued by the board to inform the owners of the special assessment did include a comment encouraging the owners to “pay the assessment in a lump sum if at all possible,” no doubt to avoid all of those interest and bank charges.
Back in our parent’s day a series of 240 monthly “installments” that resulted in a lien against your home was referred to as a 20-year mortgage! Surprising to the HOA Detective was the fact that more than half of the 22 owners did in fact ink out a fat check for the entire hundred large (that’s gangster-talk for $100,000) because a year after the assessment was levied the outstanding balance of the bank loan had been reduced to $786,000 from $2.15 million.
Other News From the Front-line….In another breaking story, one prospective home buyer was recently forewarned of an impending special assessment that had been levied by the HOA in which she was planning to buy a condominium. The lucky buyer learned about the special levy only after ordering a CRC Report®.
CRC’s due diligence examination revealed that a special assessment had been approved by the board of directors but had not been announced to the membership-at-large. In short, the only way that someone who was not a board member would have known about the special assessment was if they had attended the board meeting in February 2017 at which the special assessment resolution was approved.
Upon learning about the approved special assessment CRC’s examiners encouraged the buyer to exercise her legal right to be provided with all of the details about the special assessment, which lit a fire under the management company’s behind, and in turn resulted in the special assessment being formally announced to the entire membership within days of the CRC Report® team getting involved.
And that’s why we say, “Because You Are Buying More Than a Home!”