Monday, August 21, 2006


  • By Shu Bartholonew

    August 20, 2006

    A conservative estimate has it that one in six Americans, or over 57 million people live in some 270,000 mandatory membership common ownership developments across the country. These include condominiums, cooperatives, townhouses and single-family homes that are all part of a homeowners’ association. Those numbers keep growing.

    Today, over half of all new housing built nationally is part of an association. However, many municipal jurisdictions mandate HOAs so in those towns, cities and counties virtually all new housing includes automatic membership in an association. In fact, in some of the fast growing areas of the country it is impossible to buy a house that does not include an association of some sort.

    Contrary to the glossy ads promising carefree living, recreational amenities for pennies a day and the promise of protected and enhance property values, far from an asset, HOAs are a liability.

    The first thing housing consumers should understand is that associations were never intended to benefit them. They benefit municipal governments, builders/developers and the growing industry that feeds off associations. This $30 billion annual industry includes managers, attorneys, landscape companies, pool companies, CPAs, insurance companies and now, banks as well.

    One of the main purposes of an association, and the reason they are required to be part of all new construction in many parts of the country, is that of a vehicle for local governments to shunt their responsibilities off onto the private sector, while still taxing the citizens ­ at the full rate. What this means for the taxpayer, homeowner and voter, is that they are not only double taxed but also living under the auspices of another layer of government ­ a private government ­ one that is not bound by the protections afforded in the Constitution.

    Because homeowners associations are “private” enclaves, developers can increase density, thus building- and selling - more units than would otherwise be permissible. Moreover, since the streets, sidewalks, lighting and other facilities will be maintained privately, they are not always built to code. Since substandard construction is considerably less expensive, this maximizes the builders’ profits but saddles the homeowners with the cost of maintaining expensive infrastructure that all too often breaks down.

    Another equally important fact to keep in mind is that failure by the association to properly maintain the common areas will adversely affect property values. Furthermore, unfunded future repairs and replacements could easily result in enormous special assessments. Special assessments of $10,000, $20,000, $50,000 even $90,000 are not unheard of. Associations have the power to foreclose to collect these assessments.

    However, the physical condition of the common elements of the association is not the only thing the homeowners are left holding the bag on. Because associations are private entities, local governments and law enforcement are reluctant to get involved in the event of problems. Citizens who seek protection from their elected and appointed officials for illegal actions are often told that their problems are civil matters to be litigated in court, since they occurred on “private property”.

    Homeowner’s associations enforce enormous powers ­ powers real government can only dream of having. These powers, and their abuses by boards and management often lead to arbitrary rules that give the governing committee power over property owners. For example, recorded deed restrictions have gone from as few as one page to hundreds of pages long, controlling everything from the weight of a dog to the exact shade of white of the interior window treatments. Along the way, some associations have even taken it upon themselves to approve reading material and clothing articles kept on the premises. As completely ridiculous as this may seem, newspaper archives and court records are full of such stories and cases.

    And state legislators, at the insistence of the homeowner association industry, amend state statutes increasing the powers associations already enjoy. The most heinous of these laws are the statutory power to fine and then to foreclose, in some states, to foreclose non-judicially. In the absence of any adult supervision and oversight, these powers are being misused and abused on a daily basis.

    Consider the case of Wenonah Blevins, an 82 year old Texas widow, whose mortgage free $150,000 house was sold on the courthouse steps for $5,000 to satisfy an $814 assessment. What is so incredible about this case is that Mrs. Blevins had remitted a check for the full amount shown on her bill from the association but the association refused to accept her payment, preferring to foreclose instead.

    There are many myths and misstatements associated with this type of housing. Do not be fooled by the glossy ads promising carefree living, enhanced property values, recreational amenities and yes, even romance. The reality is very different. It means giving up part of the American dream. It means leaving the American zone.

    PT. 2

    The dog in the lobby
    Pamela McMahan didn't expect her cocker spaniel to become a problem at a historic condominium building in Long Beach, Calif. But she was fined $25 each time she walked her dog through the lobby because HOA rules required all dogs to be carried. McMahon, an elderly woman who walks with a cane, said she couldn't carry the dog. She racked up hundreds of dollars in fines last year and has since moved from the building.

    "There are just too many things going on in the lobby; the dog might jump on someone or go to the bathroom," says Stormy Jech, an assistant property manager in the building.

    Other things HOAs commonly regulate include:
  • Shingles and exterior paint color.
  • Fences and hedges: whether you can have them at all, and if so, what type, color and how tall -- right down to the inches.
  • Trees, lawns and weeds: what types of plants can be put in and even how many times a month you must water and mow your lawn.
  • Pools: These are often hot-button items. Boards regulate whether owners can have pools, diving boards and how large they can be. Community pools often come with strict rules on times they can be used, supervision of youngsters and whether guests are allowed.
  • Swing sets and basketball hoops: At some communities these are big no-nos. At others, they must be small and out of sight. Owners often get into trouble if they are in the front yard.
  • Garages and sheds: Unauthorized sheds are another sticking point, and junky garages will get you in trouble, as will leaving your garage door up.
  • Mailboxes and garbage cans: size, color and types. Also, leaving garbage cans out for more than a day can get you fined.
  • Pets: size, type and breeds. Dogs off leashes are usually prohibited.
  • Outdoor lights: One family got in trouble for leaving their tasteful, white decorative Christmas lights up until February. Know what types of lights and how many are allowed.
    In addition to setting standards for your own home, homeowner's associations usually require members to pay fees for common property maintenance. The assessments can run particularly high if the development has a pool, golf course or other recreational facility. And many HOAs let their boards raise regular dues up to 20% per year and levy other fees for capital improvements.

Beware what you're buying into:

Some people love the security of an HOA and the rules designed to protect property values. According to a study by the Community Associations Institute, which represents community associations, more than 70% of people living in HOAs have had a positive experience. The danger is that most homeowners, especially first-timers, don't realize the extent of the control these associations have until it is too late.
Even if homeowners get copies of the covenants, conditions and regulations, it can be hard to decipher them. The rules are often written in legalese and can be 100 pages or more, leaving owners without a clear understanding of the extent of the regulations or what can happen if they don't comply.

"Basically, you have people who own their home, but are being treated like tenants," says Janet Portman, a managing editor at Nolo Press in Berkeley, Calif., and author of "Every Landlord's Legal Guide." "People running these associations can get into real power trips."
One homeowner's association in Arizona paid residents to turn in neighbors who violated association rules. Those reporting someone with a dog not on a leash got $100; someone reporting a resident throwing away trash not allowed in a dumpster got a $150 reward.
Vindictive as that may sound, it pales in comparison to other HOA nightmares:
Marie Brown, a 77-year-old widow in Arizona, was evicted from her home of 18 years after it was foreclosed when she failed to pay her association dues and fines levied for failing to keep up her property.

In Sea Ranch, a managed community in Northern California, a widower had his home foreclosed on in 1995 when he didn't pay $600 in owed association dues. The house, worth more than $300,000 at the time, was auctioned and sold to someone for $2,000, according to his attorney. After a protracted legal battle, he got his home back.

Even a small amount of money can get homeowners in big trouble. Just ask Tom and Anita Radcliff, a retired couple in Copperopolis, Calif., who had their home foreclosed by their HOA in 2002. They were late paying $120 in annual dues when Tom Radcliff became ill. Until then, they had paid dues on time for five years straight.

"They didn't even know about the foreclosure until someone came and gave them a 30-day notice to vacate the property," says their attorney, Michael Macomber, who filed a suit on their behalf and was able to get their home back. "Why didn't someone just pick up the phone and call them?"

Messy, personal businessUnlike most laws, which are enforced by nameless bureaucrats, conflicts in homeowner's associations can get petty and personal very quickly.
"When you have a neighbor being put in charge of you, it just breeds resentment," says David Feingold, a San Rafael, Calif., lawyer who has represented homeowner's associations in disputes with neighbors for more than 10 years.

Sometimes the group responsible for enforcing the rules, a volunteer and elected board of directors, gets carried away with its role.

"Homeowner associations will dig in like nobody's business and will spend obscene amounts of money to enforce their rules," says author and lawyer Portman. "There is a sense of the slippery slope thing. If they let one person do (anything outside the rules), the community will not have that consistent, conformed look."

Unfortunately, violence is not unheard of. In Northern California's Marin County, the head of an HOA and a resident got into a battle over a shared patio wall. They ended up in a fistfight, rolling down a hill. The board president, an older man, had a minor heart attack and later sued.
"The fistfights and almost coming to blows, it's not uncommon," says Feingold. "I've been in the meetings and seen it -- pure rage. It comes from that 'home is my castle' kind of feeling."
HOAs not universally hatedHOA supporters point out that associations are governed by an elected group of neighbors and that all property owners have a voice in monthly meetings usually open to homeowners.

"It's important to remember, these are democracies at their basic level," says Frank Rathbun, spokesman for the Community Associations Institute. "They are elected by the neighbors and run by 1.7 million volunteers nationwide."

Others argue that there are plenty of HOAs that hold meetings that are not open to everyone -- and some that even change bylaws so majority approval isn't needed to change regulations.
Some state governments are taking notice. New legislation in Arizona, Texas, California and Florida is attempting to move power back into the hands of homeowners and limit the ability of HOAs to foreclose on homes, for example. And in California, where HOAs are numerous, a new law requires associations to show residents detailed information on the HOA's finances several times a year.

How to protect yourself

Despite conflicts, it's clear the HOAs are not going away. There are more than 286,000 nationwide and the number is growing -- and with them, so is the need to exercise caution when you're home hunting.

"When you buy a home, just as important as the state of the roof and plumbing is … what it has historically been like to live with the HOA that comes with your home," says Portman.
The Community Associations Institute's Rathbun agrees: "We strongly urge people to understand the nature of the community they are moving into -- before they buy."
What you should know before buying into a homeowner's associationOnce you have an eye on a home, ask the real estate agent if it is part of a homeowner's association. If it is, make sure you take the following steps*:

  • Get copies of the governing documents from the association manager.
  • If you don't understand the rules, ask your real estate agent or lawyer for help.
  • Take time to talk to people who live there about the association.
  • Know how much the assessments are.
  • If you are on a tight budget, find out how easy it is for the board to increase the assessment amount.
  • Does the community have a cash reserve for new projects?
  • Are there restrictions on renting?
  • Do you feel comfortable with the architectural guidelines?
  • What are the rules on pets, flags, satellite dishes, fences, patios and home businesses?
  • If you are considering an age-restricted community, what is the policy on underage residents and visitors?
  • Consider whether the rules fit your lifestyle and sense of community.

*Tips provided by the Community Associations Institute

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