Some Washington area homeowner groups struggling financially

By Derek Kravitz
Washington Post Staff Writer
Saturday, November 21, 2009

As planned communities have grown in Washington's outer suburbs, some of their homeowners associations have evolved from groups that handle mundane tasks such as collecting trash and scolding the owners of unkempt lawns into quasi-governments that control multimillion-dollar budgets with little outside scrutiny.

And some are now struggling with debts and foreclosures.

Loudoun County alone has more than 160 homeowners associations, and unofficial industry estimates show the number of homeowners groups has doubled in the past decade. An industry group estimates that nearly 500,000 people in the Washington area -- and 60 million nationally -- live in subdivisions or condominiums governed to some extent by community associations.

One community facing criticism from residents concerned about finances is the 2,155-house Lansdowne on the Potomac development in an affluent area of Loudoun near Leesburg. At Lansdowne, a converted historic barn houses a 30,000-square-foot community center with an indoor pool and workout facility. The required homeowners dues, which can reach $294 a month, include the cost of high-speed cable, Internet and phone service.

Lansdowne collects $7 million each year in dues from homeowners, half of which pays for the cable and phone service.

Since the community's governing board was turned over by developers to resident control about three years ago, Lansdowne has faced at least one significant expense. Repairs to the indoor pool, which was closed temporarily because of mold, cost more than $2.5 million, according to internal financial documents obtained by The Washington Post. Homeowners took out a $1 million loan to help offset the costs, the documents show.

And the Lansdowne association is involved in a years-long lawsuit with a handful of residents who wanted to start at-home day-care centers but were told they couldn't by community officials, according to documents filed in Loudoun County Circuit Court.

"We've had a lot of issues here and things that don't seem to be going away," said Robin Crabtree, a Lansdowne resident who ran unsuccessfully for the HOA board. "Regardless of what happened, we are dealing with millions of dollars here."

Some say they are struggling to keep up with the monthly fees.

"It's a little exorbitant, and it does get tough," said Sarah Quinn, 28, who lives in a county-subsidized home in Lansdowne and pays nearly $267 a month in dues. At a comparable-size community in Loudoun's South Riding, which does not include the cable and phone service, the monthly cost is about $70.

Attorneys for the association, the Chadwick, Washington firm, declined to comment about costs or pending litigation.

Association president and Leesburg lawyer John C. Whitbeck Jr., who was reelected Wednesday to the homeowners board, directed all questions to the attorneys. But at a candidate forum, which a Post reporter attended, Whitbeck defended the association's record and said he was working to get Lansdowne "back on track."

'A bit frugal'

At Lake Ridge, a 7,600-home community in foreclosure-plagued eastern Prince William County made up largely of military retirees, residents pay about $90 a quarter in dues, the main source of the community's $5 million annual budget. Last year, the homeowners group lost $20,000 a month because of delinquent fees related to about 200 foreclosures, according to its management. Fees were increased by 10 percent over the past two years to maintain aging facilities.

Residents say they have not spent money on extravagances. They point to their children's playground, a wood-and-rubber "tot lot" built 20 years ago on half an acre, and the community's five outdoor pools.

"Our residents are a bit frugal," said Ron Pereira, a retired accountant and general manager of the Lake Ridge homeowners association. "The feeling here is that we have to build a sense of community, but we don't have to build the new community center or indoor pool until we get out of this current climate."

Older communities that have learned to watch their costs might be faring better, said Pia Trigiani, a community association lawyer and partner at MercerTrigiani in Alexandria. But newer associations that emphasize amenities and charge high dues face bigger headaches, she said.

"The misunderstanding that often occurs is that people think these are democracies," Trigiani said. "They are not democracies. They are republics. So when you buy into a developing community, you accept some risk."

Robert M. Diamond, a partner at the law firm ReedSmith and former president of the Washington-based Community Associations Institute, a nonprofit homeowners trade group, said that adding to the money crunch are responsibilities many associations have taken on in the past decade. Those functions, including the maintenance of private roads and lighting, trash removal and security patrols, used to be managed solely by local governments.

"There's no doubt that over the years, localities are pushing the developers to privatize a lot of these services," Diamond said.

Oversight agencies

To meet the growing questions and concerns, states have created agencies that deal with problems stemming from homeowners and condominium associations. Established in July 2008, Virginia's Office of the Common Interest Community Ombudsman reviews complaints by homeowners groups, condominium associations, timeshare owners and co-ops. The one-person office received 322 formal complaints through October, along with 2,600 e-mails and calls. Of the formal complaints filed, nearly 93 percent have been closed with little or no action taken.

"When you get such a vast array of people calling about so many different issues in and around their homes, oftentimes they are just frustrated and freely admit they want a sounding board," said Heather Gillespie, the state's common interest community ombudsman.

Maryland does not have a state agency to watch over associations, but in Montgomery County, the Commission on Common Ownership Communities provides similar services. Elsewhere in Maryland, homeowners must file complaints with the state attorney general's office. In the District, the Department of Housing and Community Development's Housing Regulation Administration provides assistance but does not respond to everyday queries and problems.

Virginia is expected to formally adopt guidelines allowing homeowners to appeal decisions by their associations within the next year, Gillespie said. Until then, Gillespie is ground zero for HOA complaints in Virginia. "Before us, there was nothing to help all of these folks," she said.

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