Avoid buying in HOA neighborhoods (2014)
I&#x27;ve been president of my condo board for several years now, for a Condo corporation in Canada for a high-rise building. I&#x27;m seeing lots of comments around residential HOAs which might be a different story.<p>From what I&#x27;ve observed from only one board, talking with various property managers, industry reading, and reading legal case summaries, I do believe there is a lot of variability in different areas and corporations. Which to a degree makes sense, these are basically small businesses government by a board of random strangers with no special qualifications and are managing $125 million in assets or more. In my building we need to find 5 boards members out of ~150 units. Sure, you hire a property management company and a property manager to do day to day operations, but ultimately the board is responsible for all financial and strategic decisions. It&#x27;s especially tricky because many of those decisions are going to be based off of imperfect and limited information.<p>Having done this for several years, I do believe many don&#x27;t understand their requirements by purchasing a property government by a condo or HOA, and the notion that it&#x27;s their own property they should be able to do what they want. I certainly did not understand my obligations when I bought my unit compared to several years on the board. With freehold it might be a different story, but in a highrise shared structure I think it&#x27;s clear that we need some sort of contract that outlines the requirements, and that contract to be enforceable to the property owner.<p>One of our lawyers explained it to me once in a way that really resonated. The Condominium Act (The legislation in Ontario that governs condos) is designed as consumer protection law. But it&#x27;s not consumer protection law in the sense of a consumer vs the corporation, it&#x27;s consumer protection law as a protection from having to bear costs created by your neighbors. So there are lots of rules in place on how you get a board, how you pass rules, how you manage disputes through tribunals or the courts, what types of liabilities the board can take, what types of expenses go to an individual unit owner (IE damage), with the ultimate outcome meant to protect owners from costs created by their neighbors. So the example of someone losing their job and not wanting to pay the maintenance fee&#x27;s, well the structure of the contractor is everyone pays their share, if you don&#x27;t, it means a neighbor would have to. Who would want to take on liabilities of shared spaces if their neighbors might be insolvent and the remaining are left holding the expenses. And yes, part of this bears the requirement to manage a community and disputes that may arise.<p>Are their bad boards... definitely, there are plenty to go around. Are there ways for boards to create lots of hidden debt which will impact the owner... absolutely, I&#x27;d suspect mostly by deferring or not understand required maintenance, not paying attention to poor vendor performance and maintenance practices, and in some cases not understanding the differences in bids and picking the lowest bid from someone clearly going to cut corners. It&#x27;s also happened to us once where all bids were so high that we couldn&#x27;t understand, so we split up the project and rebid for 50% of the cost... other boards may have just accepted it. Are there board members who join to take advantage of the corporation to break the rules or take advantage of the decision making power, I&#x27;m sure there are plenty of example as well.<p>But on average I would expect most people join the boards in a good faith effort to protect their own investments and the common interest of all owners.<p>If living by this set of community rules isn&#x27;t for you, then don&#x27;t buy into a condo or HOA. But if you want the advantages of what a HOA&#x2F;Condo provides, understand the risks, sometimes don&#x27;t mind volunteering the work yourself (join the board), then a condo or HOA might be for you.<p>And try and give those random strangers some credit, and understand that they&#x27;re probably making the best decisions they can on the information they have available to them (doesn&#x27;t mean be hands off or not to ask questions, just make a good faith effort). They might also be tackling significant problems, like a health crisis, or having to lobby the government to prevent a 39% increase in utility rates by reclassifying the common elements from residential to commercial utility rates.