Should There Be Federal Standards & Regulations For HOAs?

guest blog by Deborah Goonan

My colleagues and I have posed this question on several occasions in HOA discussion forums frequented by Community Associations Institute (CAI) members – mostly community managers and attorneys, with an occasional Board member.

Of course, the knee-jerk HOA industry reply is “NOOOOO!” The standard mantra is that HOAs do not want or need more government control. Why would Association members want some bureaucrats in far-off Washington DC telling communities how they ought to govern themselves? They reason that members of HOAs are quite capable of choosing their own destinies, within their own “form of democracy.”

In theory, perhaps. In reality, perhaps not.

I find it curious that, while HOA cheerleaders abhor government interference in any form, they see nothing wrong about the excessive and often petty interference of HOAs over the property and lives of its owners and residents.
Typical HOA-manager/attorney/developer reasoning is along these lines, “We all know how very important it is to establish rules about what you can put in a flowerpot, how long your dog’s leash can be, where your children are NOT allowed to play, and what colors are acceptable for your front door. For these types of decisions, you, American HOA resident, are incapable of clear thinking and sound judgment. Therefore, the developer’s attorneys have crafted a legal contract detailing every aspect of your limited rights to dwell in your HOA, subject to swift and sure penalty should you fail to conform.” In practice, you may be subject to swift and sure penalty simply in order to keep you in line.

For the official party line on government regulation of HOAs, see page 47 of CAI’s Public Policies (emphasis added in italics):

“Community Associations Institute supports effective state legislation–when it is deemed necessary for consumer protection, conversion limitations, protections for ongoing operations or other additions to existing statutes or common law to ensure that community association housing is developed and maintained consistent with legitimate public policy objectives and standards that protect individual consumers, balancing the legitimate rights of the development industry.

Local legislation concerning the creation or governance of community associations is antithetical to a balanced, well-considered assessment of all issues and interests affecting community associations. It also encourages a patchwork of regulations within an individual state and is, therefore, better dealt with at the state level.”

According to CAI, if you live in an HOA, your legitimate rights are secondary to the rights of the corporate HOA – which is, in fact, the creation of a Developer.

Read this policy between the lines: municipal level legislation would make the HOA’s job too inconvenient, potentially limiting where and how HOAs can be built. However, at the state level, developers can pretty much call the shots to “balance” their legitimate rights.

And how does CAI justify its encouragement of “a patchwork of regulations” within the US, on a state-by-state basis, when their own public policy strongly discourages differing regulations within each state? That stance defies logic. Why is it that owners and residents find vastly different HOA laws in each state? The HOA industry lacks federal consumer protection standards that exist for virtually ever other major market sector in America.

What makes the HOA (i.e. Development) industry so special, that it should be deserving of less scrutiny and oversight than, for example, insurance, banking and financial services, healthcare, or public and private education?

By now it’s old news: HOAs are obviously vulnerable to financial mismanagement, corruption, and white-collar crime. Money crosses state lines and with over 65 million taxpaying residents nationwide, these issues certainly rise to the level of general public interest.

Therefore, there most certainly is a need for federal level legislation and regulation of HOAs.

(link to CAI Public Policy)

 

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About

Ward Lucas is a longtime investigative journalist and television news anchor. He has won more than 70 national and regional awards for Excellence in Journalism, Creative Writing and community involvement. His new book, "Neighbors At War: the Creepy Case Against Your Homeowners Association," is now available for purchase. In it, he discusses the American homeowners association movement, from its racist origins, to its transformation into a lucrative money machine for the nation's legal industry. From scams to outright violence to foreclosures and neighborhood collapses across the country, the reader will find this book enormously compelling and a necessary read for every homeowner. Knowledge is self-defense. No homeowner contemplating life in an HOA should neglect reading this book. No HOA board officer should overlook this examination of the pitfalls in HOA management. And no lawyer representing either side in an HOA dispute should gloss over what homeowners are saying or believing about the lawsuit industry.

15 thoughts on “Should There Be Federal Standards & Regulations For HOAs?

  1. Cynthia

    Deborah, thank you for a another brilliant and factual blog. The federal factor concerning HOAs has been long over looked, or intentionally ignored. Money not only crosses state lines, but abusive and criminal HOAs and their attorneys make extortion demands over state lines of their victims. Instances such as demands for monies not owed, or due, yet demanded from the homeowner. The homeowner is told they have to pay this amount within 24 hours, or their home will be sold the next morning at a sheriffs sale. The amounts may include knowingly fraudulently obtained legal that have been recorded as liens and thousands of dollars, and in one case $13,500.00 for the projected cost of a foreclosure, by the HOA board and HOA attorney. The only option the innocent homeowner has is to find a way to file a bankruptcy within this short window of time, which creates an entire new range of problems for the homeowner. Unbelievable legal, personal and financial problems problems there is no reason for, other than the criminality and legal abuses of some greedy HOA boards and their greedy attorneys. In one locale, the homeowner victim asked another attorney how this could happen and they were told either judges signatures were forged, or anything filed by an attorney in the prothonatory’s office (clerk of courts office), by an attorney was/is deemed to be true. This is just one instance. Where are innocent victims of the corrupt and criminal in the HOA industry to go? Where is the oversight and accountability for the range of crimes being committed by these abusive HOAs, the HOA attorneys involved, and any other co-conspirators they may have? Individual state oversight and enforcement, along with substantial federal oversight and enforcement for these crimes and abuses is long overdue and it is difficult to understand why any of this abuse and criminality of innocent and unsuspecting homeowners in HOAs has been allowed to happen and endure in the first place.

    Reply
  2. Dave Russell

    I have stated for years, that the HOA crisis must be addressed on the federal level. There is no consistency in state sponsored HOA legislation, nor is there any real protection for the homeowners.

    If anything, state HOA legislation is harmful to homeowners. The intended or unintended consequences of state legislation, usually has catastrophic consequences, as this type of legislation is backed by special interest groups.

    Most all state HOA legislation is fundamentally unconstitutional. We hear it time and time again from the HOA industry “its a contract.” The United States Constitution provides in part: Article I, section 10, clause 1. No State shall pass any Bill of Attainder, ex- post-facto Law, or Law impairing the Obligation of Contracts.

    Many states, such as Arizona, have the same provisions in their State Constitution(s): Art. II § 25 is the contract clause of the Arizona Constitution. Art. II § 25 states: “No bill of attainder, ex-post-facto law or law impairing the obligation of a contract, shall ever be enacted.”

    So what gives? How can these states continue to violate these “contracts” and the Constitution? While a state may be allowed to regulate a corporation, they do not possess the inherent power to interfere in contractual agreements. A state may impose regulations on things such as, transfer fees, However, all states are prohibited from interfering in these contracts.

    Here in Arizona, the Legislature took it upon themselves, to knock out key provisions of city sponsored crime prevention programs in HOAs so that it would be easier for management companies and the real-estate agents to rent to criminals. This legislation runs afoul, as it is a substantial interference of a contract, and a violation of the United States and Arizona State Constitution(s). I have brought a lawsuit against the State of Arizona to prove this.

    Why our US Lawmakers are ignoring the HOA crisis is anyone’s guess. They leave it up to the individual states which violates the U.S. Constitution and allows the special interest groups such as, the real-estate industry and the CAI to continue their unconstitutional rampage against homeowners.

    Reply
    1. melody

      Exactly Dave!!!! Federal is the way and yes no matter what everyone here says they are doing in their state it will never be consistent, but hey you and I must not know what we are talking about. All the talk at the state level is what it is, talk. Talk in my book is cheap and in this case VERY EXPENSIVE, just ask the lawyers I have been paying

      Reply
      1. Dave Russell

        The biggest problem is….that almost every state legislature in the land has been bought and paid for by the real-estate industry and the CAI. If we look back at the federal fair housing laws, that are regulated by the feds, it wouldn’t be terribly hard to form the same type of laws/protection for homeowners living in associations.

        Reply
    1. Ward Lucas Post author

      Hi Jill. I’ve always believed federal was the only way to go. Still, our victories are so few and far between I see just about any change as positive.

      Reply
      1. melody

        Thank you HOA saver for the short and sweet commentary. Bottom line is if a HOA can foreclose on a person’s property it needs government oversight for the money only. Once you get the money issues and problems under control you will see the rest dwindle away. People miss the point and confuse the oversight with control. I have been saying all along we need to lobby Washington which has gone on deaf ears. Strangely now that we have Andy Ostrowski people are getting with the program.

        Reply
  3. hoasavers

    Can we start with getting unlicensed and unregulated hoa management companies off our checking and savings accounts! Couldn’t a refund check simply be cashed over the counter? It seems to be a breach of fiduciary duty to allow unlicensed/unregulated mgmt companies to be signers on our accounts.

    Reply
  4. Chuck Welsh

    I have a Big Hearing today. Motion before the Court to Amend my Complaint against my HOA, the Board and its Management Company to Include Punitive Damages on grounds of Gross Negligence and Intentional Misconduct. If enetered, this should greatly change the landscape of my case. Trial is still set for January 26, 2015.

    Reply
      1. Chuck Welsh

        Nila, The Motion Amending my Complaint agaisnt my Association, its President and the Management Company to Include Punitive Damages for Gross Negligence and Intentional Misconduct WERE Granted by the Court in my Case on October 28. This took the case out of Issue until their Reply in 20 days, at which time we will file a motion for a new trial date (the trial was scheduled for January 26, but the Judge indicated that would be difficult to achieve with the Granting of the Motion taking the case out of issue). My next Hearing is January 6, which is a Motion for Sanction against the Defendants for with holding Discovery from the Court. Hopefully, wewill have a new trial Scheduled in the early Spring. I amvery reluctant to Settle.

        Reply
        1. Nila Ridings

          Thank you for this update, Chuck.

          Fight the good fight! If you have not listened to Shu’s interview with Bill Davis on 11/8/14 yet, I think you would appreciate what he is saying about homeowners winning HOA cases. Because an HOA can bully you does not mean they can win in a jury trial. Jurors seem to be too smart for the nonsense that HOAs are dishing out.

          Has your attorney considered Tort of Outrage for the stress and aggravation you are being put through? The mediator in my case was a retired district court judge. He told the HOA board members and their attorneys if they did not settle the case during mediation he was going to have me amend my petition to include Tort of Outrage for the stress related health issues I was dealing with. The HOA attorneys threw a fit and said I could not do that. The retired judge/mediator said, “the hell she can’t and she’s going to!!!” 45 minutes later the case was settled.

          This was before I knew what I know today about HOAs. The mediator worked in my favor. My attorney was concerned about my health issues and encouraged me to settle. It was the right advice at the time but today I would not back down from the HOA. With the knowledge I have today I would wipe the court room floor with the board members.

          I highly recommend you read Ward’s book, Evan McKenzie’s books, Shelly Marshall’s ebook, all of George Staropoli’s articles/ebooks, and listen to Shu’s radio shows. The more knowledge you have the better you can help your attorney defend you. Attorneys don’t know nearly enough about HOAs and the corruption with which they operate. Post questions you have on here because plenty of experts are reading this blog and the comments. I’m sure they will respond and offer suggestions.

          Good Luck! Looking forward to your future postings.

          Reply
    1. melody

      GOOD LUCK Chuck my attorneys don’t want to include punitive damages, they are trained to screw their clients in these cases by telling them you will not get it. Why do they know that and why will they not explain why they state that? What legal reason do they make that statement? In response you get a BS answer not a legal answer DESPITE the laws state you can get punitive damages for willful behavior. Now tell me that not getting a statute required audit for 6 years is not wilful

      Reply

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