HOAleader.com - Tip of the Week - April 1, 2016
Published: Fri, 04/01/16
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How to Prevent a Takeover and Quick Death of Your HOA
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That headline sounds ominous, but sadly, it describes an actual possibility in many states. In this week’s tip, we talk about how it happens and how to prevent it.
An Arizona community association has been taken over by investors, according to the ABC15 News Phoenix report, and it’s not the first time this has happened in the state. In early March, the city’s Jamestown Condominiums became the target of an investment group. Eventually, it acquired 80 percent of the units in the community and began sending notice to the remaining owners that the association was being terminated and they had to vacate.
The Arizona Condo Act permits this. If 80 percent of the members agree, an association can be terminated. The Jamestown investors comprised the 80 percent. The remaining owners must sell at a fair market value set by an appraiser. In this case, reports ABC 15 News, the appraiser was hired by the investor-run group, according to the termination agreement filed with the county. The non-investor owners claim that their payoff amounts leave them nothing after their mortgages are repaid. The investors’ and other newly vacated units in the former Jamestown condos are reportedly being rented as apartments now.
Why would investors pursue a community association termination? They don’t have to follow meddlesome HOA rules, of course.
“If a community association dissolves, owners don’t have the same restrictions that they would otherwise have had,” says Nathaniel Abbate Jr., a partner at Makower Abbate & Associates PLLC in Farmington Hills, Mich., who represents associations. “They also don’t have the danger that someone wills step in and set up new restrictions, like lease restrictions. That’s still a pretty hot topic in HOAs because the Federal Housing Administration requires a certain amount of owner-occupied units before they’ll underwrite a loan. That makes it very difficult to get a mortgage in communities with many renters unless you have owner financing.”
Owners who’ve been frustrated by what seem to be excessive rules may not think termination is such a bad thing. Abbate plays devil’s advocate: “There will be more renters, and many believe property values go down when communities have more renters,” he argues. “The FHA imposes restrictions on communities with a high percentage of renters because it does feel that renters don’t take as good care of the property as owners do.”
Get details on how you can make your HOA very unattractive to potential takeover artists in our new article: http://www.hoaleader.com/members/1345.cfm
Best regards,
Matt Humphrey
President
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Webinar on Demand:
Collect More, and Collect It More Easily: Best Practices for Condo/HOA Debt Collection
Did you miss this session yesterday? If so, you missed a great presentation! Watch the recorded webinar now, and make sure your entire board does the same. You'll get a thorough overview of the collections process, including your board can best work with its team of professionals, including your management company, attorney and accountant to maximize what you collect and spend less to do it.
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Warning: Your State May Let Investors Take Over and Kill Your HOA
You may have heard that during the recession, investors were buying residential property in bulk. Turns out, some are now using their leverage to shut down existing HOAs under state laws that permit such tactics.
Click here to read full article:
http://www.hoaleader.com/members/Warning-Your-State-May-Let-Investors-Take-Over-Kill-Your-HOA.cfm
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Your HOA Should Be in the Movies! Promoting It Through Video
In this week's tip, we talk about a small trend, but one that's growing: HOAs creating a video to showcase their community.
Is it a smart idea? Or does it go beyond the scope of an association's mission?
Click here to read full article:
http://www.hoaleader.com/public/Your-HOA-Should-Be-in-Movies-Promoting-It-Through-Video.cfm
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Should You Promote Your Community with a Video?
Their numbers are still small, but a growing number of communities are opting to create a video to showcase their community.
Smart idea? Or does it go beyond the scope of an association's mission? Here's some insight.
Click here to read full article:
http://www.hoaleader.com/members/Should-You-Promote-Your-Community-with-Video.cfm
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How to Pay for this HOA Upgrade: Reserves or Operating Fund?
An HOAleader.com reader asks: "Our Arizona HOA has an updated reserve study that's funded at 110 percent. Among the amenities are several lot lots, which are covered in the reserve study. We have a tot lot that has six pieces of equipment that need to be replaced, and we elect to replace three of these pieces with new playground equipment, add three pieces of fitness equipment, and put an awning over the area.
Click here to read full article:
http://www.hoaleader.com/members/How-Pay-for-this-HOA-Upgrade-Reserves-or-Operating-Fund.cfm
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More on HOAs and Tax-Exempt Status
Last month, we explained an Internal Revenue Status ruling denying an under-24 unit condo association tax-exempt status. We also provided a primer on what community associations need to know about federal fax filing rules.
Here, we offer additional detail on tax-exempt status issues that apply to a rare handful of HOAs.
Click here to read full article:
http://www.hoaleader.com/members/More-on-HOAs-Tax-Exempt-Status.cfm
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