When fees get out of control

Question: I paid $139,000 for my Desert Hot Springs condominium in 2005, but according to the Riverside County tax assessor’s office, it’s now valued at only $100,000. My mortgage balance is $109,000. I pay two homeowner association dues monthly, $350 to a master and $200 to the sub-association. My mortgage payment is $1,150 a month, and so far this year more than $650 has been levied in special assessments by the board. There is a glut of empty condos where I live, and I’m finding it exceedingly difficult to make all these payments. Rather than be stuck with an unsalable condo and two homeowner association dues, can I negotiate a lower monthly payment with the board and the bank? The majority of owners cannot afford all the association fees. Is there a way to get the board to stop levying special assessments and cut the association dues in half?

Answer: According to Marina del Rey-based certified financial planner David R. Bergmann, owners like you face ethical choices between honoring an obligation and commitment on one hand and avoiding financial suicide on the other. A purchase money mortgage is generally a “non-recourse” loan, he said. When a homeowner refinances, the loan becomes “recourse,” meaning the lender looks to assets beyond the original property to satisfy the debt obligation.

If a renegotiation of the mortgage would make the loan “recourse,” you need to be aware of the potential dramatic change in what’s at risk.

Although the board has an obligation to repair, replace and maintain common property, it also has a duty to keep costs within the pro forma budget. Special assessments may reflect a board policy of not having enough money to fund obligations or may indicate fiscal mismanagement.

Every owner of deed-restricted property must try to regularly attend monthly association board meetings and ask to view books and records including accounts receivables and payables. Depending on the outcome of those efforts, determining the board’s fiscal responsibility may entail initiating an audit or, in extreme circumstances, even a lawsuit. The outcome of such investigations may help you determine what you should do with your property.

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Send questions to P.O. Box 11843, Marina del Rey, CA 90295 or e-mail noexit@mindspring.com.