Home Owners Associations Struggle with Delinquencies

The growing problem of delinquencies is a very serious problem that is starting to affect almost every Home Owners Association (HOA) in the country. And unfortunately, the problem gets worse every day.

At the Kensington of Royal Palm Beach condominiums on Florida’s east coast, 70 percent of the owners are in arrears on their association fees. Many other associations have delinquencies in the 40-50% range. These fees typically pay for insurance, maintenance, landscaping, some taxes, staff, and energy. Clearly when not everyone pays their dues, which represent an equitable sharing of costs among all the owners, financial problems will ensue. Usually that means the remaining owners in the community association have to pay more to keep the ship afloat, a serious hardship. Many other problems spiral out from that.

Delinquencies can come in many forms. Owners who are in default on their mortgages typically stop paying everything, since they have nothing to lose. Banks often stall foreclosures, possibly to avoid having to pay the HOA fees once they retake title. In some cases banks don’t have to, or refuse to pay all of the arrears. Owners who are in financial trouble simply stop paying, since the HOA Board has limited recourse. And in yet another scenario, owners rent out their condos/homes to collect the rental income, but refuse to pay the HOA dues. In all of these situations the result is dire for the community association. Money becomes short, and the increased or advanced payments made by the remaining members can drive them into default or non-payment. Meanwhile employees, services, and amenities have to be cut to remain solvent. The spiral continues as homes become difficult to sell and prices plummet.

Some states are working on remedies to help these associations. One court in Florida awarded a blanket rule that allowed the association to collect dues directly from renters, thus bypassing the owners. Other legislation might impose more restrictions on banks to collect more money. The ultimate delinquent assessment collection tool is foreclosure, but this is a radical step with many complications (chief of which is many delinquent owners are already underwater; there is no equity left over for a second tier creditor like an HOA).

References
Condo Associations turn to Receiverships to Collect Rent
Seeking Solutions to Condo Delinquencies
Lenders Should Pay Up
The Great Foreclosure Debate
Community Associations Network (whose excellent newsletter provided all of these references)

Discover and Stay Is the Way - to Retire

You, and perhaps your significant other, might be obsessing about how to find your best place to retire, and what you might do once you get to the state of retirement. The process is fun for many folks, but an intimidating hassle for others. Wherever you come out on this spectrum, this article, in which we will discuss Fly and Stay packages, will be a help.

Fly and Stay packages (also called Discover and Stay, Play and Stay, Weekend Getaway, etc.) are the fun and low risk way to check out various best places to retire. You can usually purchase them at low cost from active adult communities, or you can make up your own for the towns you might be considering. The offers are so attractive that you just shouldn’t pass them up (but hurry, the high season is starting in the Sunbelt).

Active Adult Communities
Many good marketers often make it a point to offer Stay and Play packages. The theory being that if the community is really that good, nothing will sell it better than a fun-filled visit of a few days. Indeed if you ever visit the Visitor Center at a community like The Villages in Florida, your head will spin with how many people come in and pick up their keys and orientation packets. Some of our friends take advantage of these subsidized stays over and over again they are so much fun. Often, but not always, they end up buying in the communities they sample. One problem is that smaller communities usually don’t have the resources to offer these packages, so they are harder to sample.

Some of the packages we have encountered cost $199 for 3 nights, others charge more or less. Some stays are for longer or more flexible periods. The Villages charges $179/night. Most of these packages are a genuine bargain because they typically include bonuses like free golf, tennis, access to all recreational facilities, use of a golf cart, some free meals, even discounts at shops. The attraction for the community is that by making you feel like a resident, you get to sample the lifestyle, and you might just decide to purchase. For you, the package offers an inexpensive vacation and a very low risk way to try out a new lifestyle and location.

Here are some of the active adult 55+ communities we were able to identify that offer Stay and Play packages, but there are many, many more out there:
(Important: It doesn’t hurt to ask! If you are interested in a particular community call them up and ask if they offer a Discover and Play package -they might just make one up for you! Just be aware that these packages typically will not be available once the community is fully developed and the sales office closes up shop).
- Southern Dunes, Haines City FL. Play 10 Orlando golf courses.
- Mariner Sands,Stuart FL. Available Jan 20 - April 20.
- SunRiver, St. George UT. Packages starting at $99.
- The Villages. $175 per night Jan 1 - March 31.
- Pebble Creek, Goodyear, AZ. Most if not all Robson Ranch properties offer a peak season, 3 night package for $199.
- Talking Rock, Prescott AZ. Package available for $450.
- Wild Wing Plantation, Myrtle Beach SC. Choose from 3 different packages from $99 to $249.
- Golden Ocala, near Ocala FL. Live like a resident. Play like a member.
- The Settlement at Powhatan Creek, Williamsburg VA. Choose from $99 or $149 packages.
- Hot Springs Village, Hot Springs AR. Weekend Getaway packages.
- Porters Neck, Wilmington NC. Weekend Getaway Package.
- Hampton Lake, Bluffton SC. Their “Sneak a Peek” program even offers a $1500 travel rebate

Touring Retirement Towns (not 55+ developments)
You say you are not interested in a 55+ or active adult community? Well go ahead and make your own stay and play package to sample the retirement towns you have been considering. If you are flying, pick out a few towns in a manageable area. If you are driving, select some retirement towns a day’s travel apart and visit them. Stay in B & B’s or motels (use TripAdvisor.com to find the best ones). Make a date with a realtor and tour a few homes - you will learn a lot. Use the National Directory of towns and active communities at Topretirements to identify the towns and active adult communities you want to pursue further.

Bottom Line
Fly and Stay packages are too good a deal to pass up. They are cheap, fun, and educational. You will at some point during your visit meet with a sales representative, but you can also view that as part of your learning process about the community. The New York Times just ran an article, “Like a College Visit, Minus the Kegs“, in which they profile several successful “Fly and Stayers” and their journeys to a host of more communities offering these visits. Most important of all - a Stay and Play package can save you from making a terrible and expensive mistake. If a community isn’t for you, a short stay like this will probably help you find that out…before you make a big purchase and difficult move.

Have you been on a Stay and Play visit? Share your experiences in the Comments section below.

For further reference:
25 Best Active Adult Communities of 2009

What You Need to Know about Your New Homeowners Association

This is the 2nd of a 3 part series of articles about homeowners associations, the organizations that have an outsized influence on your life in a condo, 55+, or active adult community. The first article, “Meet the New Boss, Your HOA”, talked about many of the problems to be of aware of concerning Home Owners Associations. Part 3 focuses on “What You Need to Know When the HOA Takes Over from the Developer“. In this article we were fortunate to gain an in-depth interview with Joe West, CEO of Community Associations Network, who provided his insight on the basics everyone should know before they commit to living in any community governed by an HOA. Joe’s organization, which is found at Communityassociations.net, is the largest free website of information for condo and HOAs. The third article in the series will cover the important points to consider when the day-to-day management of the community passes from the developer to the HOA, which typically happens once all or most of the units have been sold.

TR: What’s the first thing we should know about Home Owners Associations?
Joe: The first thing that you need to know is what the association is responsible for and what you, the owner are responsible for. Sometimes the terminology can be confusing. In a condominium association, generally the association takes care of everything from the perimeter walls out, including roofs, siding, roads, lawns, etc. In a Homeowner or Property Owner association, the association generally takes care of the common areas, which may include roads, gates, amenities and so on. They usually don’t take care of the home or structure, itself. However, this will vary from association to association and from state to state. In some states, the media and owners often refer to both types as “HOA’S”, even though it may actually be in a condo. This is why it’s so important to read and understand the documents, sometimes called “CC&R’s” (Covenants, Conditions & Restrictions) or Master Deeds & Bylaws. The generic term “Community Association” covers all of the forms of associations where membership in the association is mandatory. Unfortunately, laws governing the nation’s estimated 270,000 residential and commercial HOAs are confusing and sometimes non-existent. States like California and Florida have extensive laws governing them, but many other states have just a condominium law or a poorly written, often amended HOA law. As we shall see, the absence of clear legal guidance can be a problem.

TR: Joe, what is your number 1 piece of advice for anyone buying into a development with an HOA?
Joe: That one’s easy - Don’t fall in love with the house before you check out the association. You have to be comfortable with a few important things: the rules that you will have to follow, the people governing the organization, and its finances.

TR: Could you give us an example of why that’s important?
Joe: Sure. Especially today, because of the economy, there are some community associations where a 1/3 or more of the owners are not paying association dues. What that means is that at least in the short term, the remaining residents will have to make up for that by paying higher fees and special assessment s. The people who live in condos generally understand that the building has to be maintained and that there will be expenses required to keep it running. But in HOAs, particularly those with predominately single family homes, the new residents don’t realize the scope of the infrastructure that has to be maintained – roads, landscaping, recreational facilities, etc. That requires money, but the benefits aren’t always visible. Similarly new residents are usually not prepared for the amount of HOA control they are now under. After years of living in the suburbs where their home is their castle, many become upset when they realize that exterior colors, fences, decorations, and improvements will be tightly controlled in their new community. One of the key areas that is often overlooked when someone is moving into the association is, how does the board govern? The basic rule of associations’ is that good boards make good associations – bad boards make problems. Make sure you read the minutes of board meetings before you move in (at least a year back) and once you live there, pay attention to what’s going on and who you elect.

TR: To be better prepared, what steps should a new buyer take before entering into a contract to buy a home with a Home Owners Association?
Joe: The first step is to gather the information to help you assess the HOA. Unfortunately that’s not always easy. In many states, the HOA is often prohibited from providing a new buyer with information directly. So anything you get will have to come from the seller. You should ask for the HOA master deed and by-laws (governing documents), recent minutes, and financial statements at a minimum. While some states, like Virginia, have strong disclosure rules protecting buyers, many other states have no rules at all, even though disclosure is in everyone’s best interest.

Secondly, you either have to read and understand these documents yourself, or hire a lawyer, financial planner, or accountant to review them for you.

Third, if the seller unreasonably delays getting you the documents, or won’t provide the information you asked for, be prepared to walk away. There is probably a reason why they won’t, a reason you want to stay away from. At a minimum you can get some of this information by going to the local office where deeds are recorded and ask to see the restrictions and covenants that are attached to the property. Unfortunately, the minutes and financials (last audited financial statement, current year-to-date financial statement and current budget) will probably have to come from the seller.

TR: What kind of problems are you seeing in HOAs and condo associations these days?
Joe: First, let me say that the vast majority of these associations are well-run. They take care of problems and they maintain their properties. The problems we see among community associations usually come when they are not proactive, instead reacting only after an issue has arisen. There are many problems that can occur in a community, because you are dealing with people and their “castles”, but most of them can be avoided with planning and oversight. More problems are coming up all the time, and associations need to be ready for them. Since the advent of the Internet, a issue in Florida can and will become an issue in New Hampshire at lightning speed. A recent case in Chicago, where a Jewish couple’s mezuzah was prohibited on the exterior condo doorframe (a common area), is a good example. That case led to a discrimination suit because Christmas wreaths were allowed on doors. Thanks to the Internet, it quickly became an issue for communities across the country. Pro-active solution: What can or can’t be placed on a common area needs to be thought out in advance and take into consideration our multi-cultural, multi-religious society.

Another big problem is not being pro-active financially, which means planning ahead and establishing reserve funds. Condo associations generally understand the need to plan for and adequately fund reserves, but often HOA’s ignore or underfund them. If the board never gets around to setting up a reserve for their maintenance or replacement, a big assessment will come out of the blue some day and cause much heartache.

Lastly, lack of transparency is a frequent HOA board problem. Meeting minutes should be quickly and prominently posted. Members of the community have a right to know what is going on and have the ability to provide some type of input. Associations should have newsletters and a web site to provide solid information on a timely and continuing basis.

TR: Thanks Joe, we appreciate your advice.

For Further Reference:
CommunityAssociationsNetwork is the largest free website for information for condo and HOAs. This site has more than 4000 helpful links, newsfeeds that link to breaking news affecting HOAs from 30-40 legal blogs, and a very helpful newsletter. Joe is working feverishly on a new version of the site for release later this year, although we think he already has a very good one!

Part 1: Meet the New Boss, Your HOA

Feedback Needed! What do you think? Be sure to add your feedback in the Comments section below.

Meet the New Boss - Your HOA

NOTE: This is the first of 3 part series about Home Owners Associations. This article introduces the topic. The 2nd in the series feautures a very helpful interview with Joe West, CEO of the Community Associations Network about the issues buyers should know about Home Owners Associations before they sign on the dotted line. Part 3 focuses on the transition from developer-run HOA to one controlled by the HOA. Many people moving into an active adult community will find new meaning in the lyrics from that great 70’s song by The Who, “Won’t Get Fooled Again”. In the song the punch line is “Meet the New Boss, Same as the Old Boss”. That’s where Pete Townsend warns that “the new revolution” might not be any better than the last one. The parallel for baby boomers moving into a 55+ development applies to the Home Owners Associations (HOAs) that govern most these communities - be careful what you are buying into.

The subject of Home Owners Associations is a very complex one and cannot be adequately covered in one short article. In this piece we will try to lay out some of the broader issues that you should be aware of when moving into a community governed by a Home Owners Association.

If you have been living in the suburbs in a single family house for the last 30-some years, you might not be prepared for the minutiae that your new Home Owners Associations is lord over. To name just a few such rules:
- Dress code in public areas; joggers must wear shirts, cover-ups in common areas, etc
- Pets can’t weigh over (25, 40, ?) pounds
- Number and breed of pets is restricted
- Use of common areas like pools, picnic areas, and trails prohibited after (9, 10, ? PM)
- Renters must rent for at least (1, 3, ?) months (or no renting at all)
- Renters cannot use certain facilities on same terms as owners
- Parking restrictions apply by location or type of vehicle
- Guest restrictions
- And on and on and on

This is not a piece against Home Owners Associations. They are an important and welcome component to successfully living in a 55+ or condominium development. These organizations are essential to the effective operation of any community: they set the rules, enforce compliance, manage the assets, and look out for the financial and legal well being of their communities. The people that volunteer for these boards tend to be unsung heroes - they work hard and they spend a lot of time unraveling really thorny questions. Far too often their only reward is to be interrupted and criticized everywhere they go by someone whose narrow self-interest was affected by a policy or rule.
Some folks have a constitutional inability to live around rules. Those people might want to think twice before moving into a community with an HOA, because the association is going to have a lot to say about what goes on (or doesn’t go on) in their new community. As an extreme example, if they want to have junk cars or funny lawn ornaments in their yards, or have a pen full of barking beagles, an organization with an HOA is a bad fit.

Regardless of whether you go into your new community positively or negatively disposed towards HOA’s, here are some considerations you should keep in mind.

1. Due diligence. Before you buy your new home find out as much as you can about your HOA. Read the rules, check out the minutes, and assess the financial condition of the HOA. This step is crucially important so you are not surprised later on.

2. Be aware of the law. Some states, notably Florida and California, have extensive laws regulating Home Owners Associations, while other states have almost no law on the subject. You should be assured that your association is following both the regulations and best practice. For example, you generally have a right to prompt and accurate minutes of official HOA meetings.

3. Learn about the problems your community might be facing. Some issues to be concerned about: foreclosures or delinquent dues; excessive litigation with neighbors, former owners, or tenants; overdue major maintenance items (and funding thereof).

4. Who are the people on the board? It is always wise to meet with at least some of the current board members. Ask them about the big issues facing the community and get a sense for their qualifications and ability to handle them. The quality and expertise of the board is extremely important to handle the significant issues they face.

5. How effective and how prepared is the HOA for handling troublesome issues? Until you move into a community you probably aren’t aware of all of the issues that need to be managed - it can be almost as complex as running a small town or a very large business. Some of these include:
- Major maintenance sinking funds (money put aside for future major projects like paving, roofs, elevators)
- Annual fee increases, assessments, and budgets. What is the history of increases? Look for an organization with steady, modest increases and an absence of unexpected assessments. Erratic fees and unpleasant surprises are usually a sign of ineffective management
- Insurance. Is the HOA adequately covered for legal and natural disasters? Are they paying too much or have the wrong policies in force?
- Pets. Few issues cause more trouble between sometimes oblivious owners and touchy non-owners. Sizes, breeds, numbers, access to facilities - the potential areas for conflict are legion
- Renters. How long (or how short) can they stay, do they have equal access to facilities?
- Visitors and family members. What are the rules about visitors, especially younger people in a 55+ age restricted community?
- Facilities. Go to just about any facility (swimming pool, exercise room, etc.) within an active adult community and look for the list of rules. Dollars to donuts the list of potential infractions will be long and onerous. That’s because someone, somewhere, was inconsiderate. Once they annoy the wrong person, a rule will come out to try to control that issue.
- Water leaks. In many communities water leaks, particularly in unoccupied units, are a major issue. Are there policies and procedures for prevention and remediation?
- Environmental problems. Mold, asbestos, chinese dry wall, leaking oil tanks, natural disasters - all of these issues must be handled intelligently.
- Personnel. An HOA usually has employees - sometimes a facilities or property manager, a business manager, security guards, maintenance personnel, clubhouse and possibly restaurant workers. Does the HOA hire effective managers and monitor and review their performance?
- Rule making history and enforcement. An effective HOA has to be a bit like Solomon. They must have specific and general rules in place to cover most contingencies, and be prepared to reasonably address problems that come up unexpectedly. Look out for long lists of petty rules that try to cover every narrow issue that ever emerged. On the other hand when truly troubling issues come up, like one we know of where a disturbed adult child continually harassed his neighbors, is the board up to the task of removing the source of trouble?

6. New communities often have a bigger challenge. A new development generally forms an HOA soon after the first owners move in. At the beginning there might not be a big talent pool to draw from, and there is no institutional experience. So the new HOA’s track record might be rocky at first.

7. Be prepared to serve. Like we said earlier, there is no great reward for serving on a volunteer HOA board. But somebody has to do it to ensure the success of the community. Particularly if you have management, legal, or building related skills; and especially if you have common sense, volunteer to take your turn on the board. Someone has to run the place; you might as well know the person doing the job!

For further Reference:
Part 2: What You Should Know about Your New Home Owners Association
Wikipedia article on Home Owners Associations (very good)
Community Associations Network
Community Associations Initiative
When Active Adult Communities Go Bad

10 Steps You Must Take Before Buying in an Active Community

Our latest installment, “When Active Adult Communities Go Bad“,  might have put the fear of the Lord into many of our readers.  This week’s article is intended to provide the basic steps you can follow to minimize your risk in buying into an active adult community, and help you take advantage of the many bargains out there in the market.

The topic is particularly important in 2009 because the housing market is in such turmoil. As the expression goes, a rising tide lifts all ships; unfortunately the converse is true today. Things can go very wrong in a down real estate market, so extra caution is well-advised. Here are our top 10 Self-Defense tips (and of course start with this one:  Find an ethical, knowledgeable real estate agent and use his or her advice wisely).

1.  Don’t be the first buyer (or one of the first). These days there are no guarantees a community will ever get finished, or sell out.  If it doesn’t get built the way it’s promised, you could be living in a ghost town.

2. Go with reputation. America’s top builders with solid financial numbers are generally a safe bet. They have the marketing and financial muscle to finish their communities, and you have less chance for getting burnt.  Not to say there aren’t many local developers with blue chip reputations.

3. Practice your due diligence. Regardless of who you buy from, dig into  the company financials. Interview current residents and neighbors.  Has a 55+ community been renting to anyone just to pay the bills (and jeopardize its age-restricted status or have undesirable neighbors)? Google the project to look for controversies or legal issues you might have overlooked.

4. Consider a resale unit. In many active adult communities today local real estate agents have a long list of attractive properties. Their owners are eager to sell, usually at a lower cost than a comparable new unit. Often these homes  have the kinks worked out, and there might be additional improvements you won’t have to pay for. On the downside, you might not qualify for a warranty or have little recourse.

5. Scrutinize the Home Owners Association (HOA). Effective HOA’s are a lifesaver. Well-run associations run a tight financial ship; they won’t ignore bills that could lead to your community going bankrupt. They enact meaningful and fair rules to protect everyone’s assets. They fight for the community’s legal rights vs. the developer to make sure that the community’s interests are served.  The converse is true too.  Inbred, lazy, or unskilled associations drop important balls.  Everything is fine until one day you find out that bankers have foreclosed and you are about to lose your golf course or community clubhouse.  If you want to see what can happen when condo associations go bankrupt, read this article: “Condo Associations in Bankruptcy“.

6. What is the Reserve (Sinking) Fund status. A reserve fund is essential. It puts away money every year to pay for future major capital costs like a new roof, road resurfacing, or utility lines. If inadequately funded, some day you could face a bankrupting assessment.

7. Assessment History. Find out if there have been assessments in the past, and for how much.

8. Relationships with the Developer. Research and interview to find out how the relationship between owners and the HOA is going with the developer.  There will always be issues, but look for a relationship that is cooperative and friendly.

9. Home Inspection. Always, always pay a professional for a home inspection. Even a new home can have serious problems.

10. What else could get built nearby? Too many people have bought into an idyllic setting, only to smell the bulldozers clearing that forest across the street.  Find out what protections there are for any views or undeveloped areas.

Finally, invoke all your common sense.  There are many excellent bargains to be had today. Careful buyers  can make some smart investments. Just make sure you do your homework before you turn over that deposit check!

For Further Reference:

10 Questions to Ask Before You Buy

When Active Adult Communities Go Bad

Community Associations Network (an excellent resource about HOA’s)

When Active Adult Communities Go Bad

With prices in some very interesting active adult communities sliced in half from just 2 years ago, it is tempting to buy a retirement home. But as many thoughtful people have pointed out, those bargain prices could have some high costs associated with them.  This article will attempt to point out some of the pitfalls.

The Tideland Condos, of the Palm Coast, Florida is just one example of a community where bargain prices abound. Condos with 2 or 3 bedrooms that were originally priced at $350 - $500k are now offered in the low $100’s according to some reports.  There are plenty of other examples as well, and many of these communities are very tempting - great homes with plenty of amenities in desirable areas. Their prices have probably come down mostly because of timing - they came on the market just as the market collapsed.

But buying a bargain active adult community is not without its perils.  Here are some of the chief problems:

1.  Many existing owners might be underwater on their mortgages. Since they owe more than their unit is worth, many will walk away, leaving foreclosed homes in the development.

2.  Ongoing maintenance costs do not change much, regardless of how many homes are unsold or in bankruptcy. As the number of active owners go down, the common fees per homeowner must necessarily go up.  Because even more homeowners could be driven out by the increase, it is impossible to predict what the charges might become.

3. Foreclosed, abandoned, unsold, and unbuilt homes hurt property values - so resale values go down further.  Some communities will probably become ghost towns, at least temporarily.

4.  The development could go into bankruptcy. This can happen whether it is owned by a developer or by a Home Owners Association (HOA).  This adds more negative fuel to the fire.

5.  Immense legal problems can develop in a bankruptcy or change of ownership. An unfortunate drama like that is now playing out with the Four Seasons at Charlottesville, a community that was recently auctioned off on the Courthouse steps.   Only 83 homes are currently occupied of the 650 that were originally planned.  The new owner believes that the development’s large clubhouse with indoor pool belongs to it, whereas the HOA contends it owns the clubhouse. A legal battle is playing out now for control. Even if the HOA does end up controlling the clubhouse, the reduced number of homeowners means that owners might have to pay as much as $650 per month to maintain those common areas.

6.  Similar problems are occuring in many high-end developments with fancy golf courses and other facilities. Expensive equity country clubs with $100,000 entrance fees might now find themselves either becoming semi-private courses, or they and their extensive cost structures might force their developments into bankruptcy.

7. Communities might not go bankrupt but they could default on loans or loan commitments. This in turn could result in liens being attached to all homes in the development, a serious impediment to resale.

8. A different kind of problem recently came to light at The Villages, the giant active adult community near Ocala, FL.  There a court case seems to be determining that its Community Development Districts (similar to a Home Owners Association) paid too much for the common areas like golf courses it bought from the developer. Now the tax-exempt status of the bonds used to finance the purchase is being challenged by the IRS, which could lead to much higher common fees in the future.

9. Developments can fall behind on taxes, causing more liens and fines.

10.  A more hidden problem usually also occurs when a development is at less than full occupancy. The community’s contingency funds, the money banked over the years to bankroll expensive infrastructure repairs like roofs and roads, are usually stopped or spent. So in future years homeowners could face big and unexpected assessments when those repairs must be made.

11. Another problem tends to occur in active adult communities that are not finished. If the developer runs into financial trouble some of the planned amenities (like the clubhouse, pool, or clubhouse) might be cut or down-scaled. This can lead to more legal troubles and other disappointments.

12. Desperate owners and developers who need cash could lead to yet more problems. Renters can be less than ideal neighbors, and if too many people move in who are less than 55 years of age, the community could lose its age-discrimination protections as a 55+ community.

These problems might discourage you from acting on your impulse to purchase that bargain active adult community. Nevertheless there are plenty of reasons why a purchase now might be a smart move.  In the next installment we will explore the steps you can take to protect yourself in a bargain purchase.

For further reference:
10 Questions to Ask Before You Purchase in an Active Adult Community

Why Not Live in an Award-Winning Community

Special thanks to OldNassau, our member who sugggested this important topic.

What Can You Add to Our List? Please use the Comments section below to put in your 2 cents.

Just what is a 55 plus active adult - and why should I care?

The first part of the definition is easy - there are a lot of people who are 55 years of age or older. By the year 2010 there will be 74 million people who fit that category in the U.S. - nearly 1 in 4 people.

Arguably the term “55 plus active adult” includes just about everybody in this age group-except for those in prison, hospitals, or who live a sedentary lifestyle. But realistically, the term “active adult” is more of a marketing handle than anything else.

By applying the the term “active adult” to products, usually active adult communities, it immediately puts a lot more marketing fizz on the development than say – “passive adult communities”, “inactive adult communities”, “old people communities”, or “senior communities”.  “Active adults” serves a very important function for baby boomer marketers, because it allows them a safe handle for addressing a group that doesn’t want to think of themselves as old! According to a Wikipedia article the term, “active adult retail” is credited to Rick Abelson. We are not certain who first coined the term “active adult community”.  If any alert readers happen to know or have a lead we could follow on that factoid, please use the Comments section below.

Why Should I Care
If you are lucky enough to be an active person – enjoy it!  If you are considering living in an active adult community, consider if the amenities offered are up to your personal standards for activity.  Golf is an active pursuit in our opinion, although there are those who would differ. If you like jogging, tennis, biking, and exercise – but the community you are considering offers shuffleboard and bocce–the developer is appealing to active adults who are probably a lot older and quite a bit less active than you consider yourself – so evaluate your purchase decision in that light.

Villages CDDs Get Proposed IRS Settlement

Update: July 27, 2009.  As promised, the IRS has expanded its audit of the tax-free status of more bonds after failing to reach a settlement with Community Development Districts at The Villages.  The investigation now covers almost $400 million in recreation and other bonds, up from $64 million in the original audit. See the Bond Buyer Story for more.

Original Story: The Villages, the giant active adult community south of Ocala, FL, has received a proposed settlement from the IRS to resolve an investigation of tax-free bonds issued by 2 of its Community Development Districts (CDDs). The Bond Buyer reports that the settlement would mean that the Village Center and Sumter Landing Districts would redeem over $355 million bonds issued in 2003, pay the federal government $2.85 million, and refrain from issuing more tax-exempt bonds. The IRS suggested that if the Districts did not agree to this settlement the Agency might expand its investigation to 7 other bond offerings. Neither the CCDs nor the IRS commented in the article about the IRS proposal.

The Villages is one of 580 Community Development Districts in Florida. These Districts are permitted by Florida law to let homeowners associations issue tax free municipal bonds as a way to finance infrastructure. Topretirements readers may recall in our recent story about The Villages that its complicated ownership structure was a focus of Andrew Blechman in his book about the community, “Leisureville”.  It appears that concern is now playing out with the IRS.

One of the IRS’s main contentions is that The Villages’ Development Districts are too tightly controlled by the developer. Florida law requires that, after an initial period, their boards must be controlled by members of the community.  Another contention is that the CDDs overpayed for the facilities (golf courses, parks, and other facilities) that the bonds were issued to finance.

The story about the Villages’ bond issue originally broke in the Orlando Sentinel. The Sentinel published a follow-up that explores what the impact of the proposed settlement could be on residents in the Active Adult Community. Since they are the ones paying the debt service and principal, it might logically assumed that resident fees (and possibly taxes) will be going up to pay for a higher bonding cost (tax-free bonds usually have lower interest charges), not to mention any penalties to the IRS.  Or, since it appears that it was the developer who profited from its sales of assets to the CDDs, maybe they should pay. Since this is early days in the case, only time will tell. But residents are probably concerned, and many of them angry.

For Further Reference:
The Villages

Facts, Fiction, and the Fast Life at The Villages, FL

In 2006 Central Florida was shocked and titillated to read this headline in the Orlando News: “STDs Running Rampant in Retirement Community“. The community in question being The Villages, the sprawling active adult enclave spanning several towns and home to over 60,000 people. Dr. Colleen McQuade, a gynecologist, was quoted that she “treats more cases of herpes and the human papilloma virus in the retirement community than she did in the city of Miami.” The patients, as old as 80, are “very shocked (to hear the diagnosis)”. Viagra, no risk of pregnancy, and lack of sex education were viewed as the culprits.

That bit of press was a source of merriment to talk show hosts around the country. On the other hand, it is probably a minor activity in a community obsessed with golf and non-stop activities of all types.  Indeed, if you lurk on “Talk of the Villages“, a popular Forum for residents of The Villages, you will find that life there is more typical than sensational. Topretirements has just reviewed 2 books that discuss The Villages.  In “Leisureville”, Andrew Blechman follows his 55+ neighbors to the active adult community. It is a fascinating read but tends to show life there through a (much younger) prism than his former neighbor’s. Here’s how our Topretirements Guide OldNaussau described the book: “Repeatedly, the retirees with whom he speaks, or who speak to him, quite clearly contradict him. He tries to present the Villages, and several other retirement communities, as sterile, lock-step, isolated, vacuous – like the towns in the movie “Pleasantville” or the novel “Fahrenheit 451″ - but the Villagers praise the activities, security, economy, and socializing around them.”

Ryan Erisman’s “Complete Guide to The Villages Florida” is a much more straightforward and factual guide to the ins and outs of buying and living at TV, as insiders call it.  Check out the entire article in our Tips & Picks section, The Villages - Facts and Opinions

Do you Know The Villages? If so, report on what you think, either in the Comments section below, or in the TR Forum - Is Leisureville on or off the Mark

For Further Reference
The Villages CDDs get Proposed Tax-Free Bond Settlement from IRS

Best 50+ Communities Awarded at Building for Boomers

Philadelphia - For builders, winning an award at the National Association of Homebuilders (NAHB) Best of 50+ Housing conference is really good PR. For baby boomers, looking at the winners provides insight into what the housing industry thinks are the trendsetting ideas in home building. If you are looking to purchase in an active adult community, you should check out this list of communities winning awards to make sure you make the best decision. The awards were given out at the April 2009 Building for Boomers and Beyond Symposium to honor excellence and innovation in the design, development and marketing of housing for older consumers.
There were 80 gold and silver winners in a wide range of categories. Many of the award winners were true to the trends noted elsewhere at this conference:

- Slightly smaller homes and community spaces. No one wants to be conspicuously consuming right now.

- More flexible spaces. You might want 2 dining areas, someone else might want 3. You might need 2 home offices,  another baby boomer needs extra guestrooms instead. The savvy builders of tomorrow’s active adult communities are providing flexible designs that let everybody get the spaces they need.

- Greener designs. Rarely will you ever see LEEDs certification in an active adult community, but you will find developers paying more attention to siting, materials, windows and insulation, HVAC, and other low-cost, high return ideas that produce a more environmentally friendly development.

- Smarter amenities. Builders are trying very hard to find the right kind of amenities that will attract buyers. The mix is changing in subtle but significant ways.

Here is a sampling of some of the winners in this year’s competition (Note: Many of the awards went to retirement communities or CCRCs. For this article Topretirements is only reporting on those within our editorial focus - active adult 55+ communities).

Best Active Adult Community (up to 500 homes)
Parkview Court -  Torrance, California. This new development has homes ranging in size from 700 to 1400 sq.ft. Luxury touches include stone in baths and kitchens, balconies, large exterior courtyard. Fitness center/recreation room.  Available from $275,000.

Brookhaven of East Cobb - Kennesaw, Ga.  This silver winner features 2 and 3 bedroom, flexible floorplans. Front porches, oversized masters, and vaulted ceilings.

Best Active Adult Community (over 500 homes)
Sun City Festival-  Buckeye, Arizona  by Pulte Homes Corporation.

Del Webb at Lake Oconee -Greensboro, Georgia by Pulte Homes Corporation. This community of 2 and 3 bedroom homes is south of Athens in the great recreation area near Lake Oconee and the Oconee National Forest.

Best Clubhouse in an Active Adult Community

Heritage at Todd Creek - Thornton (Denver), Colorado. This clubhouse overlooks the Rockies and a sensational 18 hole golf course. Each wing of the clubhouse, branching from the main lobby, has a different activity.

Best Detached Home at an Active Adult Community (up to 2,000 square feet)

Eskaton National Demonstration Home - Roseville, California. The Eskaton Home is a ground breaking project that everyone interested in the future of housing for our older population should be studying.  It is Green-Built certified and has smart technologies, , universal design, and social connectivity in mind.

Best Attached Home at an Active Adult Community (over 2,000 square feet)
Chester River Landing- Chestertown, Maryland. This is a very cool place. It has 49 homes (single family, townhomes, condos) on the Chester River. Almost all homes come with a private boat slip.

What do you think? Give us your ideas for the best active adult communities using the Comments feature below:

For further reference:

The Full List of Winners at the NAHB

Why Not Live in an Award Winning Community

Choosing the Best Retirement Communities