Durham NC Mayor Admits Risk In Buying Into An HOA

guest blog by Deborah Goonan 

Last fall I blogged about several unfinished housing developments, and effects on HOA members. One of these subdivisions, Stone Hill Estates, has been involved in litigation over unfinished roads and stormwater systems for almost a decade. Last year, a Judge ordered the City of Durham, NC, to contribute to completion costs.

(link to previous blog here)

Fast forward about 7 months later, and Stone Hills Estates HOA and neighboring Ravenstone HOA residents are still living with unfinished roads and stormwater systems. The city of Durham’s latest proposal is to contribute a mere 10% of construction costs to complete infrastructure in the two subdivisions, and then assess 750 lot owners approximately $5000 each over the next eight years. While a 10% contribution might technically fulfill the court’s order, it hardly seems reasonable and fair given the estimated $1.6 million price tag.

Homeowners, supported by Public Works Director Robert Joyner, point out that the City of Durham erred with inadequate controls over the inspection process and the release of securities prior to completion of the subdivisions. It was the City that issued certificates of occupancy. Joyner also points out that ten years ago, the city could have added a 1-inch coat of blacktop paving to prevent degradation of roads that has resulted after a decade of neglect of the unfinished project. Therefore, homeowners argue, it is unfair to expect them to bear 90% of the total cost of completion.

But the Mayor’s response, as reported in the Herald Sun:

After the public comment period Mayor Bill Bell said the city needs to rethink the proposal.

“I can’t support what’s being presented to us from the staff … We need to find another way to deal with this,” Bell said.

However, Bell also said homeowners took a risk when they bought property in the area.

“I think property owners there bear a certain amount of responsibility, I think the city bears a certain amount of responsibility,” Bell said. “The question is how do we share that?”

No decision has been made on the assessments as the City Council referred it back to the administration and the City Manager’s office.

Aha! Finally, a local government leader goes on record admitting that, when buying into an HOA, the consumer is taking on substantial financial risk. When a developer walks away from the subdivision, the cost of completion of common areas is either dumped on the homeowners (or lot owners), or the corresponding loss in property values is deducted from their equity. Either way, consumers lose.

Even though HOA homeowners pay essentially equivalent property taxes, they cannot expect to receive equivalent services to non-HOA homeowners. The local government expects HOA owners to bear the brunt of the cost of constructing and maintaining infrastructure.

Now, ask yourself why these critical facts are not fully disclosed prior to transfer of title to a new owner.

And consider this: Does it truly make sense to divide up our roads and storm water systems into hundreds of thousands of private communities? After all, in reality, roads are necessary to provide public access to these communities, and storm water drainage diverts water many miles downstream, affecting neighboring public and private communities along the way.

How can we realistically parse financial responsibilities for major infrastructure to each individual HOA, especially when, through economies of scale, those costs can be spread out over all residents of a municipality or county?

Why should property owners in HOAs have to risk their financial security, simply to own a home? Our government leaders seem to have lost sight of the fact that Developers and fellow investors are supposed to bear those risk — not consumers.

(link to article about irate homeowners in Durham NC)



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Ward Lucas is a longtime investigative journalist and television news anchor. He has won more than 70 national and regional awards for Excellence in Journalism, Creative Writing and community involvement. His new book, "Neighbors At War: the Creepy Case Against Your Homeowners Association," is now available for purchase. In it, he discusses the American homeowners association movement, from its racist origins, to its transformation into a lucrative money machine for the nation's legal industry. From scams to outright violence to foreclosures and neighborhood collapses across the country, the reader will find this book enormously compelling and a necessary read for every homeowner. Knowledge is self-defense. No homeowner contemplating life in an HOA should neglect reading this book. No HOA board officer should overlook this examination of the pitfalls in HOA management. And no lawyer representing either side in an HOA dispute should gloss over what homeowners are saying or believing about the lawsuit industry.

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