Condo associations feel the heat as fees rise, values sink

  • Article by: MARY JANE SMETANKA , Star Tribune
  • Updated: December 12, 2011 - 10:19 AM

Economic distress is giving rise to a hostile environment in communities that supposedly rely on cooperation.

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Nicole Battles is president of the Tralee Terrace Townhouse Association in Coon Rapids. Window requirements and rental policies were huge issues there.

Photo: Courtney Perry, Star Tribune

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The carefree living advertised by townhouse and condo developments isn't so relaxed these days, with tensions between some homeowners and their associations reaching a fever pitch.

Empty units, foreclosures and residents who are frustrated that association dues are increasing even as home values sag have put associations and the residents they serve at loggerheads. In Hopkins, residents have sued the state's largest homeowners association, charging mismanagement. In Eden Prairie, a man fought his association for the right to have birdhouses. Some cash-strapped homeowners have simply stopped paying their association dues.

Add the emotion connected to home -- the sanctuary, the castle, the biggest investment most people ever make -- and confrontations can get serious. Some associations have hired off-duty police to provide security at meetings or sought restraining orders to keep residents away from board members.

"It has become very heated," said Daniel Greenstein, a Minneapolis lawyer who works both for residents and associations. "More and more homeowners are deciding to fight the association regardless of merit or cause or personal cost, because it becomes an emotional thing for them."

For some owners, problems are compounded because they didn't take the time to go over the documents.

"A lot of people bought these units at a high price and didn't understand that monthly rates could be raised significantly. ... They didn't understand how an association works and didn't review documents that are long and hard to read and understand," Greenstein said.

'He was just mad'

Retired Hennepin County Judge Allen Oleisky works part time as a mediator, trying to settle disagreements before they go to trial. He's had cases where a woman had 17 cats in a condo and where people tried to paint houses or build fences against association rules. A man with an assessment for new windows didn't like the association-dictated design and fought until he ran up $25,000 in attorneys fees and other costs -- twice the cost of the windows.

"He was just mad," Oleisky said. "Some of these people hadn't read the association bylaws, wanted to make changes and -- boom! -- they run into problems."

In communities with associations, dues are collected from residents and used for common needs like lawn care and snow plowing. Depending on the association, the pooled money may also be used for expenses like roof, window and siding replacement, paving of parking lots or sidewalk replacement.

The flip side of the communal benefits is association control, which can be considerable. Rules may limit the color of blinds that can be seen from the street, how long garbage cans sit by the curb, when Christmas lights can go up and must come down and whether residents can have a deck or pets -- and if so, what kind and how much they can weigh.

Problems mounted

How strictly such rules are enforced depends on the association. At Tralee Terrace townhouses in Coon Rapids, the three-person association board rewrote bylaws for the 23 units because the 1980s documents were vague and problems were mounting.

"Homeowners weren't paying for normal upkeep, repairs became much more expensive and then there were disputes about who was responsible for that," said Nicole Battles, the association president. "If there's just a few people who aren't maintaining their property and we have to spend association reserves on it, that's money that we can't spend on a new parking lot or siding."

Windows became a huge issue at Tralee, a development where some owners rented their units to people who left windows open in the rain, leading to rot. The old documents made the association responsible for windows but didn't take into account owner neglect. That changed in the new bylaws, which were approved by residents because they included carrots like allowing pets. Rentals will be prohibited in the future, except to family members for up to a year.

Battles was elected to the board after she became upset about a special assessment for roof repair that did not go to a resident vote. Now the association is sapping its reserves partly because one owner owes $12,000 in association fees. The association pursued foreclosure, but the owner lives out of the country.

"We have an attorney," Battles said. "It's a huge burden."

Making choices

Tralee Terrace isn't the only one having problems with dues, attorney Fred Krietzman said.

"It's indicative of what homeowners are going through," he said. "They are making choices: 'Who am I paying this month? Am I paying my mortgage, my association or my light bill?' Association dues might be lower on that list."

What homeowners don't realize, he said, is that associations can place a lien and foreclose on a property that owes dues. While that's become increasingly rare as banks have become more attentive about foreclosed properties, some associations have managed to get ownership of properties that were behind on their dues.

If some properties don't pay their dues, associations have to dip into reserves or raise dues for everyone.

"Some people think board members are out to get them," Krietzman said. "They forget that board members are volunteers who pay the same dues and are just trying to keep everything working well."

Near bankruptcy

Patrick Burns, an attorney who works mostly with homeowners, thinks association rules that bar rentals may backfire, leading to distressed sales that can bring down the value of other units. He has seen associations that are near bankruptcy.

"You've got associations that can't do routine maintenance," he said. "Folks are cash-strapped. You raise somebody's dues $100 a month, that's like raising someone's taxes."

At Meadow Creek Condominiums in Hopkins, which has more than 530 units, a group of residents has filed suit charging the association board with mismanagement and violations of its own rules. Board leaders dispute those charges, saying the association is on sound financial footing.

Bert Schmidt is one of the residents who has challenged association priorities and management. He bought his unit in 2007 and says it is now worth about half what he paid for it.

"If we had walked away, we could have bought something before we left and allowed this to go into foreclosure," he said. "I'm over 50 years old, and I don't want to go through all that.

"So are you going to fight to protect your property or roll over? ... Selling and moving is not really a viable option. I'm essentially trapped."

Mary Jane Smetanka • 612-673-7380

Twitter: @smetan

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