HUDSON: MORE INSTANCES OF HOA PROBLEMS

Homeowners associations could stand a little more oversight — here’s an example

The Colorado Statesman

Thirty years ago Prospector’s Point was constructed as a condo development a few blocks east of Federal Boulevard, roughly between 84th and 88th Avenues. It’s a topnotch location affording easy access to both I-25 and U.S. 36. Sited atop one of the highest points in Adams County, panoramic sightlines to the Northwest include Long’s Peak and the foothills, while to the south is a magnificent view of downtown Denver’s skyscrapers, snuggled deep in the Platte River valley. Four hundred individual units comprise the homeowners association. Nearly a hundred of these were added about 15 years ago. Units in these three story buildings are accessed along walkways attached to the front of each floor. It’s an arrangement familiar to anyone who has spent nights in a cheap motel.

For the first twenty years Prospector’s Point maintained its common areas, parking lots and building exteriors with a modest monthly fee. Apparently there was a clique among the owners who dominated the board while their neighbors were satisfied that the project remained clean and cared for. Rumors have emerged recently alleging these boards frequently hired ne’er-do-well sons–in-law to perform handyman work and steered maintenance contracts (painting, mowing, plowing, etc.) to friends and relatives. One former president confided to me that, “…a lot of money disappeared over the years.” But it wasn’t until 2000 that it became apparent just how much preventive maintenance had been deferred.

The city of Westminster had adopted a rental code and began to inspect the property as more and more of the units were being sublet. In that same year the brick veneer on the end of a building collapsed onto the lawn. Holly Clayton, the rental building inspector for the city began to flag safety concerns during her visits. And, up until the economic contraction of 2008, the HOA board was reasonably responsive to her concerns. In order to cope with these increasing repair orders, HOA fees commenced a steady climb to their current level of $208/month. Constructed before similar projects included clubhouses, swimming pools and gyms, Prospector’s Point offers only a pair of tennis courts and a tiny playground. During the past four years the HOA has run through four different management companies.

This past April, Chris Crigler, owner of CAP Management, was awarded the contract to manage the complex. Renters occupied 60 percent of the units and 28 percent of owners were in arrears on their HOA fees. The most basic maintenance tasks were being delayed so that the board could play ‘little Dutch boy’ rushing from one crisis to the next. In the meantime, correcting immediate threats to health and safety had grown to $6 million — half of this required to prevent walkways ripping away from the buildings. Stairwells were rusting out, the parking lots are potholed and buildings are subject to multiple structural leaks. Engineers have developed a lengthy list of items that demand more than temporary fixes. One of the possible funding mechanisms would be a special assessment. Simple math shows that this would amount to an average of $15,000/unit. This estimate caught the attention of residents.

Although dues should generate nearly a million dollars in annual revenue, just $350,000 is held in the Prospector’s Point reserve account. When the HOA board asked CAP Management whether it could develop alternative plans to rescue the Association, Crigler formed a spin-off consulting team named HOA Rescue to develop these for a $20,000 fee. While it probably made sense to clearly separate these tasks, the fact that the same owner operates both companies raises the suspicion of a conflict of interest. Nonetheless, Crigler has attempted to identify a solution that would prove affordable for owners. A bank loan may be possible if the HOA can reduce its delinquent accounts to fewer than 10 percent of total units. Amortizing that loan will then demand a $100/month increase in dues. Unpalatable to be sure, but perhaps manageable.

Two public meetings were held at Northglenn High School last month to explain the nature of the challenges and the options for resolving them that face the HOA. Perhaps 400 residents showed up for the first and at least 300 for the second discussion. This was genuine town hall democracy. The angry, the aggrieved, the paranoid and the rationally glum all got their say. But the elephant in the room was the 90-day compliance order issued by the city of Westminster. It didn’t really matter whether past boards had awarded themselves covered garages, or that the newer buildings had won a defects lawsuit against their developer for deficiencies in their buildings. The creation of a special improvement district that could levy taxes on homeowners was floated. Some wanted to know whether it was possible to sell off the entire development in order to buy out property owners. (What are the chances of 400 owners agreeing on that strategy?) Others speculated that Westminster was maliciously intent on condemning their buildings so that it could evict tenants in favor of a shopping mall.

A handful of renters and owners apparently pay a special assessment rider on their homeowner policies. These riders often require an ‘act of God’ (flood, fire, tornado or imminent collapse) before you can collect, but I’m going to make sure I pay that extra $20 a year if I ever return to condo life. These lucky owners weren’t terribly keen on the loan proposal unless it qualified under their existing policies. Still others suggested suing the city for having permitted such crappy buildings in the first place. Even government, however, is protected by the statute of limitations, and these buildings likely conformed at the time to existing construction codes. There was no apparent silver bullet, even for the brick veneers currently roped off with danger signs at the ends of each building. Further sewer, plumbing and electrical problems may loom over the horizon according to engineers. It is easy to complain about an overweening government that regulates us all to death; but if you lived at Prospector’s Point you just might appreciate a little more rigorous oversight.

Clayton claims she remains optimistic. “We aren’t in the business of condemning properties. We will continue to work with the HOA to restore Prospector’s Point to the premiere neighborhood it has been and can be again,” she says. Achieve that and the residents can stop attending board meetings again — or maybe that wouldn’t be such a smart idea?

Miller Hudson is a public affairs consultant. He resides in a house in Denver.