Friday, November 9, 2007

Harassment of Owners Association

Raise your hand if you have ever owned property under the CC&R's of a homeowners' association (HOA). Please don't ask me what that stands CC&R's for: something, covenants and restrictions--emphasis on "restrictions." Keep your hand up if your experience was all positive. That's what I thought.

Every rental we have owned, except for one, belonged to an HOA. Some of these associations charged very little each month ($29) and just maintain the common property. This is the current situation with our house in Texas. Other HOA's charge much more (upwards of $100), but have communities with pools, tennis courts, walking trails, etc. (like the home we own in California).

I will admit something that may be a bit embarrassing--we actually prefer to buy rentals in areas regulated by an HOA and enforced by a management company. I know what you're thinking, "Are you insane?" Well, yes, I am, but let's stick to the topic. When we started buying rentals, resale value was just as important as rental value to us. We also wanted to attract tenants with all the amenities. We knew that an HOA would enforce the rules that would help the neighborhoods keep their value. So, if my neighbors decided to paint their house yellow or purple, they would not be allowed to do it. If they wanted to place a blue tarp over the side yard for a dog run, no can do. If they let their front lawn die, they would be fined.

That being said, I firmly believe that HOA's and the management companies that enforce the CC&R's are a huge PAIN in the behind. We have received numerous notices about the most benign situations. My all-time favorite is the ole "didn't take the trash cans back from the curb after trash day in a timely manner." Let's stop to think about that one for just a second. The little inspector drives from house to house, furiously writing down the littlest infraction. He or she then proceeds to the office, writes the letter or marks the postcard, and mails it. At least one to three days lapse until we receive it. Hello! Do they think for a minute that the trash can is still at the curb by the time the notice is acknowledged? Is this what they spend our HOA fees on?

(This is why the most experienced investors who I have talked to avoid buying in an HOA. Plus it reduces cash flow. After all, they reason, if the community is new or almost new, and we aren't holding it for 30 years, there isn't much reason to worry about the neighborhood going downhill anytime soon. If it's older and kept up nicely, then it didn't need an HOA in the first place. Plus, that's what the chamber of commerce is for in some areas. As far as attracting tenants with the pool, it may have helped us rent the house faster, but the rent still had to be competitive.)

So, I get the notice and call the tenant or e-mail the PM. You see, I have to because at least one of the HOA's we belong to requires that you complete a form, no matter what, and fax it immediately to the management company, or face the threat of a lien on your title.

Ring, ring.
Tenant: "Hello?"
Me: "Hi, this is Carol. Well, it seems that the HOA has yet another complaint. Apparently, the trash cans are still at the curb."
Tenant: "Ah, okaaaay. Today is trash day. Where should the trash cans be?
Me: "No, not today's trash day. Let me look at the notice and see what day they were talking about. Oh, yes, I see here. It was two weeks ago."
Tenant: "I took them up the day after trash pick-up that week. Ah, sorry."

Then there's the dreaded landscaping: "weeds in the planter, grass is yellow."

Ring, ring.
Tenant: "Hello?" (I'm really surprised they answer the phone when I pop up on caller ID.)
Me: "Hi, this is Carol again. Well, it seems that the HOA says you have weeds in the planter. Is the gardener I'm paying for coming every two weeks like he's supposed to?"
Tenant: "Yes, he is and I really like him. I don't have weeds in the planter, and everyone's grass on the block is yellow. It's January!"
Me: "Right. OK. The notice says they were out there two days ago and there were weeds. Are you sure?"
Tenant: "I am now standing in the front yard and can't find one weed. Wait, let me get the magnifying glass. (Long pause.) Oh, yes, I found a weed seed sprouting in the planter under the hose."
Me: "Could you please pull it so I can report back that the problem has been remedied?"
Tenant: "Yeah, right."

And we can never overlook the "dead tree in the front yard." Mind you, the tree is about three feet tall and one and a half inches in diameter. You can't even see it over the weed whacker protector.

Ring, ring.
Ring, ring.
Ring, ring.
Ring, ring.