Buying
a Condo Can Be Like Marrying on a Blind Date
Los Angeles, CA (PRWeb) April 10, 2007 -- The collapse of the sub-prime mortgage market is even putting a squeeze
on many condominium owners with conventional mortgages, according to one Los Angeles fraud specialist and business consultant.
"Condo owners are being hurt in a way that private home owners
are not," says Alex Kwechansky, CFS (http://alextalksbusiness.com).
"When
one condo owner in a ten-unit building suffers foreclosure because he can no longer carry his mortgage, he will likely stop
paying his homeowner fees. " says Kwechansky "Then all the other unit-owners are forced to make up the difference
in their homeowners fees."
That difference can be large if there
is a major repair that cannot wait.
It can also have
a great impact upon personal relationships among unit holders. "Some people will be able to afford an increase in payments
and others who can't may vote against necessary projects," says Kwechansky. "That will create animosities."
Even if that homeowner recovers financially, their relationship
may not.
The collapse of the sub-prime market is just one of the
things that should concern a condo buyer.
Would a
person get married after only a first date? Of course
not! Would a person buy a condo after the first visit? Well, very likely yes! In either case one is being
seduced into a commitment before knowing what the relationship has in store.
In
today's sub-prime situation, this relationship is even riskier.
Like the person one marries, a condo has characteristics good and bad. Its personality is
reflected in its unit owners, its regulations (in some areas called CC&Rs) and its Board of Directors. And before buying
in, the buyer may not be able to gauge whether their future neighborhood and they are compatible.
Is the Board of Directors controlled by involved homeowners or by tyrants who gain pleasure
in imposing legal and social power upon fellow owners?
A condo's
regulations are legally binding and control all legal, as well as, financial activities. One that says "no dogs"
-- means man's best friend is not welcome -- and neither, possibly, are animal lovers. Other regulations can ban barbeques
or a holiday wreath on a front door or even a snack at the pool.
Alex
Kwechansky is a Certified Fraud Specialist in Los Angeles specializing in detection and resolution of fraudulent activities.
He has advised condo owners facing disputes with management boards and says those rules and personalities will have a profound
impact on one's day-to-day life. A resident may have experiences that are nice or nasty, friendly or fiendish and costly.
Here are some situations a new owner needs to recognize and beware
of:
Board members are unpaid.
Some members serve reluctantly (no one else wants the job, etc.), some enjoy the involvement while others enjoy a feeling
of power over their fellow residents.
Unresolved disputes
must be handled by the Board and create stress between residents that can escalate to virtual war. While the regulations structure
conduct, personalities may weaken these rules by mixing personal relations with arms length regulations. Accusations of favoritism
frequently arise.
A dispute's inertia may cause individual
Board members to fear opposing other Board members to stop an action or to settle. They fear being accused of favoritism or
creating a precedent that may undermine the regulations. Finding themselves in a no-win situation, they allow these minor
issues to grow into a lawsuit where a judge decides the issue. The judge can end the legal dispute but cannot restore harmony
between residents, not to mention acts of revenge or reprisal.
When these issues fester, one begins to consider simply moving away. A homeowner may feel
forced to decide between peace or place. The financial and disruptive costs to move again may be prohibitively high. Non-payment
of one's homeowner fees becomes a possible short term source of moving money in a dispute or eviction.
In the event of legal action taken by a Board, all the residents are equally responsible for
the legal expenses. This includes an equal contribution demanded from the party being sued. The defendant homeowner contributes
to the lawsuit against them. Their own legal expenses are their own additional expense.
An owner can find himself as the outsider of a social group, or what Kwechansky calls, a "power
group". This group believes they have a special position within the community. While not legally enforceable, these formations
can cause one to feel ostracized in their own home. This feeling may seem similar to the social cliques once experienced in
school.
In a condo, each owner becomes financially responsible
for the other. If one owner fails to pay their share or disputes a demand, the other owners may have to pay more to cover
for that owner. This has become a bigger risk in sub-prime foreclosures. While these funds should be legally recoverable,
that process may take months or even years.
Property
management firms that handle the funds of the association must provide clear and verifiable information about cash balance,
receipts from each homeowner and expenses paid. While this request seems clear enough, Alex Kwechansky is investigating a
case in England where a homeowner has been denied access to the financial information of his Resident's Association and
has been sued for non-payment of disputed amounts.
Through
litigation, the management firm has disclosed that it co-mingles the funds of all its clients Resident's Associations
into one bank account. Direct verification of each association's cash balance is impossible due to the combining of all
the deposits and payments of all the associations' funds. This inability to reliably verify such an essential element
has led to distrust and litigation that has substantially exceeded the original amount contested by the homeowner. The client
chose peace over place and moved while the dispute continues in court.
