Posted on 08/24/2008 9:10:34 AM PDT by Kokojmudd
ARIZONA DAILY STAR A Northwest Side homeowners association discovered its old community-management company was quietly making money off the area's home sales during the housing boom without the HOA board's knowledge.
Now, after hammering out a contract with a new management company, the board wants other associations to look at their own contracts so they know who is paid when homes are sold in their communities.
At issue is a fee collected — from the buyer or the seller — to cover the cost of the state-mandated transfer of homeowners association documents to a home's new owner. In other words, it's a fee largely for copying HOA documents and giving them to the new owner.
The problem is, sometimes a community management company charges hundreds of dollars in "document fees," "transfer fees" or "disclosure fees," without the knowledge of the homeowners association on whose behalf it is working.
The document transfer, or disclosure, must take place on every home resale within a homeowners association so the buyer of a home knows that the community has covenants, codes and restrictions and that the home meets all HOA requirements, said Linda Lang, CEO of the Arizona Association of Community Managers.
Because of that, there will be related fees on just about every home that's sold within a managed community, she said.
Bill Schirmer, treasurer of the North Ranch Community Association north of West Linda Vista Boulevard between North Shannon and North Thornydale roads, discovered last year that the community's now-defunct management company had been charging $200 in transfer fees to buyers or sellers over a four-year period.
Because that period included the housing boom in which 180 of the community's 718 homes changed hands, Schirmer estimates the management company took in about $36,000 in transfer fees without the HOA board's knowledge.
"This is a source of money that the associations have the right to receive under the law, that is being skimmed off without the boards knowing anything about it," Schirmer said.
List of services North Ranch's previous management company laid out a list of tasks it would perform for the board in exchange for a set rate, Schirmer said. Among those tasks was the handling of document transfers at no additional cost to the board, he said.
But the board didn't know that meant the company was still charging buyers hundreds of dollars and keeping that money, he said.
State law says, "The association may charge the member a reasonable fee to compensate the association for the costs incurred" in putting together the document packet and making sure it lands in the new resident's hands. The way Schirmer sees it, the management company already is being paid for the services it performs for the association.
"Why should they get the money from the new owner, through the escrow agent, for something that they're maintaining and getting paid to do by us?" he asked. Phil Farris is a former North Ranch resident who first brought the issue to Schirmer's attention. Farris, 68, moved a mile or so east of North Ranch about four years ago.
"When we got to the point where we were closing, I noticed the charge for the document fee," Farris said. "It was twice what I had anticipated."
The mix-up — charging $150 instead of $75 Farris was expecting — was because the house had almost sold before, and the management company charged for both the actual sale and the near sale.
"My Realtor said it's one of those little things management companies do to improve their profits," he said.
Fees are common: Lang, of the Arizona Association of Community Managers, said the fees are very common because "somebody's got to do the work."
Community-management companies need to be compensated for the man-hours they expend on phone calls, occasional inspections to make sure homes are in HOA compliance and photocopying and delivering paperwork, she said.
"Since it's a state law (that certain documents be passed along to the new homeowner), the work has to be done, so whoever does the work has to be liable for it and get paid for it," Lang said.
The contract between an HOA and its management company determines who collects the fee and who keeps it, Lang said. And that varies widely between communities.
In North Ranch's case, the board reviewed contracts from about a half-dozen new management companies and found them all to be vague on how transfer fees are handled. In the end, North Ranch contracted with Arizona Homeowners Management Experts — the only company that agreed to share the document fees, Schirmer said. Now, the transfer fee for North Ranch is $215, of which the HOA board keeps $185.
"The fee belongs to the association, not the management company," Schirmer said.
By keeping such a large chunk of the fee, the association can pay bills without raising its monthly fees, he said.
Source of revenue: Chris Centuori, operations manager for the new management company, said the housing boom created a situation where management companies weren't charging the full value for their services because they had another revenue stream from the document fees — plentiful when houses were selling.
"Now, with slow resales, it's causing problems for companies that relied on the transfer fees," he said. It's making his company — which currently manages two communities, with two more set to begin within a month — a little more competitive now, Centuori said. Before it was difficult to compete with others who lowballed their management fees knowing they could make it up elsewhere, Centuori said.
Losing out on transfer fees would require management companies to charge higher management fees to the communities they represent, said Ken Bade, president of Lewis Management Resources Inc.
Lewis Management handles association matters for about 150 communities in Tucson and has no connection to North Ranch.
Charging transfer fees to a home buyer or seller keeps overall management fees down, which in turn will hold down monthly homeowners association fees, he said.
The Third Reich lives.
This is a common practice to keep management fees to the HOA lower by bringing in revenue from buyers via document/transfer fees.
BOO, EFFING, HOO!!
Kinda like trying to tax your way out of debt.
Not only do they charge an average of $150.00 for the copies of by-laws and current budget...they will only have them prepared in less than 5 working days if you cough up another fifty bucks!
Furthermore....now there is an additional charge to the buyer...usually $50.00 just to edit the address to reflect the new owner’s name.
We’re talking about Maryland here.....btw.
Never never never will we submit to an HOA here. She can just go back to San Jose if she wants to live like that.
My blood boils when I read these HOA nightmare stories.
The problem is, people make lots of money in the inflated market of the city, and then go out to the country and buy it out and then impose their will. The cancer of NYC is spreading out into New York State, and families who have been there for several generations can't afford to stay, as the cost of living skyrockets.
These fees can be charged over and over when properties fall out of escrow.
As so many have noticed, everybody has their hand out when money or property is exchanged.
Really, these documents are public record anyway, so why is there a “fee” in the first place? Sure, some nominal expenses are incurred but then I already pay taxes to pay the wages of the employees in the first place.
Too, with modern digital computers and e-mail, inexpensive storage media - and home personal printers, etc., just what is the justification for charging several hundred dollars “per copy”?
My particular state (Iowa) is interesting because “title insurance” is technically illegal. This quirk arises because of a lawsuit some years ago, the reason escapes me.
It should be pointed out that title insurance PROTECTS THE LENDER, NOT THE BUYER. Never mind that the buyer has to pay this. You can buy your own title insurance but nobody is going to tell you that.
Most everything I have read and understand admonishes people to never buy real estate or enter a contract without a personal attorney retained by you to look over the documents - there are many - and they are all written up by other attornies! One wonders, what is the percentage of sub-prime nonsense loans that were entered into with an attorney representing the borrower?
Still, homebuyers in Iowa still have to purchase title insurance, document fees, recorder fees, survey fees, and others I’m sure.
If you stop and think about it, everyone already belongs to a “homeowners association” - it’s called your City, County, State, etc. Taxes are assessed, city ordinance requires that the lawn gets mowed and with broad boundaries certain standards of maintenance and upkeep are enforced.
HOAs are just yet an additional layer of taxation, beaurarcracy and red tape yet unaccountable, it’s an end run around civic government. From what little I have read on covenant agreements they aren’t really enforceable anyway.
homeowners association
The Third Reich lives.”
I will never live where there are CCR’s and a HOA. Hitler could have learned a thing or two from some of them.
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