How Receivership Can Affect Your Community
Today's challenging economy has increased the number of community associations under receivership -- a process where a person or company is appointed by a government entity, court, or other party take over a community's daily operations.
Unfortunately, this action can have a drastic effect on your community because the receiver becomes the board of directors. As a result, residents lose their ability to provide input and the right to vote.
Costs also become a factor because residents must pay for the receiver, on top of any normal operating expenses. In some cases, fees could add thousands of dollars each month to an association's normal operational costs.
In Arizona, the biggest reason we see receivership today is because the builder went bankrupt and lost a property to a bank. When this occurs and a community isn't built out, the community is dependent on its solvency, which determines what money a receiver puts into a community.
Many properties that have receivers may only have 10 or 20 homeowners when there are 150 units in the community. In some cases, there may only be 50 units out of 1,000 occupied. Obviously, that's not enough residents to support the community.
What results is an incomplete infrastructure or a complete build-out that homeowners can't afford. This creates problems for receivers because -- as an intermediary between a bank or lending institution and a homeowner -- they won't put money into the community.
If your community goes into receivership, you should request a meeting of the members so the receiver can explain their role in the community's future.
Most important, you want to know how the receiver is planning to keep the community safe, sanitary and solvent until a bank takes over - or another builder or entity buys the vacant lots and contributes funds to keep the community maintained.