“Inexperienced” Was The Kindest Way To Describe Us…
About a dozen years ago, friends and I became accidental developers in Nicaragua. Although we’d all been living, traveling, doing business, and investing in property all around the world for a long time at that point, this was our first experience buying a piece of raw land and developing it for retail sale.
“Inexperienced” was probably the kindest way you could have described us. We had so little idea what we were doing that we didn’t think to establish a formal HOA until we were a couple of years into sales. What a mess, not only for us, of course, but for our lot owners, as well. How do you get a few dozen people to agree on the particulars of things like maintenance and security…not to mention budgets for landscaping and pool cleaning…after the fact? Yikes.
Don’t make our mistake from the other side. Don’t buy into a development or a building or any multi-ownership situation without confirming, first, that there is a formal, organized, and well-documented system for the shared management issues and expenses.
Caribbean Correspondent Don Ellers writes this morning with other good advice for your HOA-related due diligence:
“Homeowner’s Associations are political entities. Typically, the executive board is elected and changes over every year or two. But you want to confirm this.
“Speak with owners who have already spent money and time as part of the development to get their opinion of how the HOA has been managed. Pay attention to complaints, as they are part of the situation you would be buying into. You’d like to know in advance, for example, if maintenance has suffered…if work that was promised has stopped…or if dues are continually increasing.
“Also try to get a read on how much weight the board members carry. Sometimes, they become fixtures, meaning there can be little chance of them leaving office and little opportunity for a new regime. Ask specifically how often the board’s executives turn over.
“If you’re buying into the second or third phase of a project, you should be able to get a good read on how reliable and accountable the HOA management board is. Have they kept their word when it comes to finishing work and maintaining the property? If you’re buying into the first phase of a development or into a pre-construction deal, on the other hand,” Don cautions, “you may have to operate on faith.”
Ask about deferred maintenance and extraordinary expenses. When we bought our apartment in Paris five years ago, we knew enough to ask about the HOA (it’s called the building syndic in French). We were given the relevant documents, the name and contact details of the syndic management group, and the schedule of annual fees.
However, no one told us about the ongoing work to restore the façade and interior courtyard of our 17th-century building. During our first year as owners, we were presented with two- and three-inch-thick dossiers (the French like documentation) detailing the work…and the cost, which was broken into shares according to the percentage of the building each owner occupied. Our share was tens of thousands of unexpected euro.
Furthermore, though I read French and we were given full documentation of the syndic we were buying into in Paris, I have to admit, I didn’t invest the time in wading through the volumes of French legalese.
As a result, at first, everything was a mystery and a surprise. Would we be attending the regular syndic meeting that evening, a neighbor would ask.
What syndic meeting?
Had we cast our votes for the new syndic board members?
There was an election?
Did we plan to participate in the annual street party the owners organized each June?
Uh, well…yes, of course, we’d like to. But what does that entail, exactly?
Our transition as new residents would have been greatly eased had I taken the time to read the documents or if we had engaged someone else to translate them for us.
An HOA (syndic, building co-op, etc.) comes with cultural and legal distinctions. Don’t assume you know what you’re buying into with your purchase in Panama because you already belong to an HOA in Nicaragua.
In fact, don’t assume anything. Don’t assume that the fees you’re quoted when you buy are the fees forever, for example. What allowance is made in the HOA docs for increasing the regular fees over time? And what irregular fees might you also be liable for?
Likewise, don’t assume that those fees cover all the things you might expect them to cover. Maybe they cover all groundswork…or maybe they take care of landscaping around the pool only, for example.
Maybe the developer is responsible for taking care of all roads…or maybe the HOA must maintain certain roads, either using regular annual fees or through now-and-then calls for additional fees.
Finally, don’t forget the administration. How will you pay your fees? Here in Panama, our building fee was quoted as part of our monthly rent…but we must pay it separately and to a different entity. We write one check for the rent each month…and a second check, that must be delivered by hand, to the building management group.