Associations Suffer as Homeowners Do
With Residents in Foreclosure or Not Paying Dues, Groups Face Hard Choices

By Kristen Mack
Washington Post Staff Writer
Sunday, October 5, 2008

Shirley McCoy stopped paying her homeowners association fee six months ago.

She figured she was doing the job the association should be -- filing complaints against neighbors who violated the rules, cutting the lawn of the foreclosed house next door and picking up litter in common areas -- so why bother paying dues?

"They think everyone has to be subjected to the way they are used to living," she said of her less-than-tidy neighbors. "It doesn't look good when you are trying to maintain your property and you look across the street and there's trash out front, the screen door is falling off, and the shutter is off the hinges. That's devaluing our property."

She doesn't think she is adding to the problem by not contributing her share. It's her pocketbook protest until things turn around. "I'm pretty sure I'm not the only one who isn't paying it," McCoy said.

She's right. Ten percent of her neighbors in the Dale City subdivision are delinquent on dues, according to Carlos Labiosa, the resident manager of the neighborhood association.

That means the Barksdale HOA has to give up amenities it can no longer afford, including its private security patrol. It also scaled back on landscaping and chose not to repair aging playground equipment.

"They didn't have much to give up," Labiosa said. "There's only so much you can cut. And what good would it do to raise fees if they can't pay it?"

Barksdale is one of the nation's roughly 300,000 community associations, many of which are yet another casualty of the housing downturn. They are strapped for cash as residents enter foreclosure or choose not to pay their association fees in an effort to hold on to their homes. Struggling homeowners know they can get away with not paying, because it will take awhile before the association catches up to them.

Like local governments, homeowner and condominium associations have to choose between increasing fees or reducing services.

Some are holding off on pool upgrades and clubhouse renovations, limiting insurance coverage and renegotiating contracts for fewer services at a lower fee. One Prince William subdivision opened its pool to the public, offering memberships so it can keep the pool from going dry.

In some cases there's little left to cut, so HOAs are covering only the essentials, such as trash pickup and snow removal.

More than providing services, associations are designed to protect property values and provide amenities many homeowners can't afford on their own, including pools, tennis courts and clubhouses, according to Frank Rathbun, a spokesman for the Alexandria-based Community Associations Institute.

The mortgage crisis is striking at the core of associations' mission: providing residents a shared sense of community and enhanced quality of life.

Yet some homeowners, struggling to pay their mortgages, don't see the point in paying their fair share to maintain their neighbors' curb appeal.

Nearly 8,000 homes are in various stages of foreclosure in Prince William. Most of the foreclosures are clustered on the county's eastern side, in Woodbridge and Dumfries and around Manassas.

Lake Ridge Parks & Recreation Association, a homeowners group with nearly 8,000 members, is losing $20,000 a month because of delinquent fees related to foreclosures. That amounts to $240,000 of its annual $4 million budget.

Lake Ridge has had 200 foreclosures in the past year, according to Ron Pereira, the association's general manager.

Pereira and his staff first noticed the onslaught in 2006. They began checking the newspaper every day to track foreclosure listings, because every other site, including the county's, was always a few months behind.

"As soon as we saw the number of foreclosures in the paper, we became realistic. We set ourselves a realistic budget last year," Pereira said. "It helped us to confront the situation right away instead of sticking our heads in the sand."

The 35-year-old community increased fees 5 percent last year. It expects to do the same this year.

"It's creating a financial problem for many associations," Rathbun said. "There are a lot of alternatives, but none of them are going to be popular among homeowners. They can raise assessments to make up for the loss, charge a special assessment or borrow money from a lender or bank. Or they can tighten their belts."

Shelly Ahluwalia was promised a swimming pool at her Occoquan area subdivision when she bought her townhouse eight years ago.

The concrete was poured this year, but the pool sits empty, except for a few inches of murky rainwater. Yet she and the other homeowners at the Glen Oaks townhouses were charged a $150 special assessment for the unfinished pool.

"There's nothing we can do," Ahluwalia said. "We don't question it. We just pay the bill."

Many HOA fees are paid quarterly, which means homeowners occasionally are gone before an association realizes dues are delinquent. But association boards have become more aggressive about turning over unpaid debts to their lawyers for collection.

In most cases, banks aren't paying homeowners association fees when they foreclose on a property. In the rare instances in which they do, associations say, it's only once a home is sold.

Back in Barksdale, a community of 185 townhouses, cutting the security contract saved $30,000 a year. Five years ago, when residents felt flush with cash, they spent $25,000 on playground equipment. Now that it needs repairs -- only one of the four swings is fully functional, and the picnic table is missing a bench on one side -- they have to hold off.

This is the first time the association has had to scale back.

Some residents of the modest townhouses -- built in the early 1970s with brick facades, shutters and a patch of grass that counts as a yard -- are on fixed incomes. Every fourth house or so has a for sale or foreclosure sign.

Shauntay D. Haskins said she is embarrassed by Barksdale. She's seen a "dramatic decrease" in the neighborhood since she bought her home in 1993.

At the entrance she is greeted by teenagers hanging out on the corner, who she fears are selling drugs. She refers to the other end as "the bottoms." Trash piles up in common areas, and one abandoned home has a dangling gutter and moldy phone books on the porch. But she diligently pays her dues to maintain the upkeep of the subdivision.

"Why should we have to give up anything?" she asked. "I pay my homeowners fees every three months. I shouldn't have to lose out."