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A Lesson in Contradiction and Irony – America’s Real Estate Market

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guest blog by Deborah Goonan

I must admit, it’s becoming very difficult to keep up with real estate market news these days. The most recent Census data report pegs the US homeownership rate at a mere 64% – a 25-year low. Yet, markets are heating up and home prices are making the American Dream even less attainable.

I’ve included a few links to some of the dozens of recent reports that I read every month. If I had to describe the current housing market in one word it would be “insanity.”

The so-called market recovery varies considerably from one market to another, and even between market segments. For instance, in Miami 4th Quarter year-on-year sales of single family homes were up 7.7%, while condo sales in the same market were down 3.3%. Prices were up 4.7% for single-family homes, and 8.6% for condos, despite falling demand. Yet 325 new condo towers have been have been proposed in Miami, and 13,000 of the total 41,000 units proposed are currently under construction. Foreign buyers from Russia, South America, and European countries make up a significant portion of the market, but their buying power is eroding as the value of the dollar increases.

Who is going to buy all of these condos?

Phoenix and Denver also reports low supply and high prices, while in Chicago, sales are still lagging behind.

Meanwhile, in the Tampa Bay area, where dozens of condo conversions gone bad were de-converted to apartment rentals in recent years, several previously stalled new construction condominium projects have since been scoffed up by investors and rented for several years. Guess what? Now those rentals are converting back to condos for sale. Staging companies are having a field day furnishing vacant units to woo buyers.

So in addition to displaced condo owners losing their homes and life savings, we also have displaced tenants competing in an already tight rental market. The problem is, condo prices are too high for most of these displaced owners and rents are going through the roof for all of these folks on the move. But who cares? Not all those private investors in the process of making their next wave of fortunes in this budding boom market.

The same condo conversion euphoria is reportedly occurring in other major urban areas, especially New York City.

My head hurts from shaking it.

At the same time, the luxury real estate market is going wild. In Tampa and Miami, for instance, many condos are selling above $1 million, even though the median price for condos in the Tampa-St. Petersburg market last year was a mere $110,000. New high-end condo complexes in Tampa Bay are pre-selling their units for millions of dollars.

Washington Post’s Christopher Ingraham reports that the McMansion is back in vogue across America. Developers are apparently targeting affluent families buying up the real estate ladder, despite the fact that the millennial generation is opting out of buying first homes and renting instead. (Be sure to check out the photos of some very posh properties in FL, selling at $5 million and up. The author also notes that despite all the marketing and political hype about the virtues of urban living, most developers and construction companies are politically Conservative (according to campaign contribution records), and prefer to live in spacious homes with large lots in far-flung locations away from the hustle and bustle of the city.

Go figure. After all, I suppose big-time stakeholders in this insane real estate market need somewhere nice and private to live

(link to Tampa Bay Times on condo de-conversions to conversions)

(link to NBC real estate market report – Miami)

(link to Tampa Bay Times on luxury condo market)

(link to Orlando Sentinel/Washington Post  on the return of McMansions)

(link to Jan 2015 US Census housing data)

Sewage backups a problem for St. Cloud condo complex, trailer community

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guest blog by Deborah Goonan

There is a national misconception that HOAs are all prestigious gated communities or luxury condos for the wealthy. That’s just not the case. The vast majority of HOAs across the country are home to people of all income brackets.

Florida, like many other states, has its share of “affordable” and low-income housing in Associations. Most of these are multifamily arrangements such as low-rise condos and townhouses, or trailer parks where residents lease lot space.

But in St. Cloud, FL (Osceola County), owners in Palm Gardens condominium complex and Floridian RV Park have something to make a big stink about – literally. They’ve got sewage backing up when it rains, and bubbling up from the street and into yards. Their children cannot safely play in contaminated areas. The stench is terrible, and owners and residents are frustrated.

Florida DEP and Osceola County have been slow to respond. Palm Gardens condo owners have been told they will each have to come up with $3000 to rebuild the entire system, but few can afford that much money. They already pay $165 per month maintenance fees to the condo association.

It is unclear who will pay for repairs in both of these low-income residential neighborhoods, and perhaps that’s part of the reason these issues have festered so long.

This is another shining example of what can go wrong when public works are privatized: poorly built infrastructure, no regular maintenance or inspections of the system, finger-pointing and blame-shifting when inevitable problems come to the surface. Local governments say that the owners in the private community should pay for repairs. Owners say that building inspectors and code enforcement should have been doing their jobs all along. HOA and Condo Boards, with little guidance and oversight, have been allowed to underfund reserves or squander money over the years, and now owners cannot come up with hefty special assessments. They wonder, “Where did all our money go?”

Where indeed.

Palm Gardens condo complex

Floridian RV Park, WFTV Video coverage

Differences Between Incorporated & Unincorporated HOAs

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(drawn from different sources)

The law allows a homeowners association to be either incorporated or unincorporated. An incorporated association has a legal identity that is separate from that of its members, just as Microsoft has a legal identity that is separate from its shareholders. Unlike Microsoft, which is a for profit corporation, an incorporated homeowners association is a non-profit mutual benefit corporation which means that its powers are limited to those normally associated with a homeowners association, and it is exempt from certain governmental fees and taxes.

Traditionally, homeowners associations have been incorporated to protect owners from responsibility for association debts, losses and liabilities. California law extends most of these protections to owners of unincorporated associations provided the associations have proper insurance. Under current law, the advantages of incorporation are some (very limited) additional protection from owner liability, ease of opening association accounts with certain banks and vendors, and qualification of the units or lots for mortgage loans from lenders that require an incorporated association. Balanced against these advantages are the costs of forming the corporation, the burden of annually filing a form with the Secretary of State, and additional procedural formalities such as having officers and directors, and conducting formal meetings. States other than California will have their own laws which could differ greatly.

An unincorporated association can be incorporated by its owners at any time. The process of incorporation involves amending the governing documents, preparing Articles of Incorporation, and filing with the Secretary of State.

Must the HOA have directors?

Incorporated associations are legally required to have directors. Unincorporated associations need not have directors.

Must the HOA have officers?

Incorporated associations are legally required to have at least (i) a chairman of the board or president, (ii) a secretary, and (iii) a chief financial office or treasurer, but, unless prohibited by the governing documents, one person may hold all of these offices. Unincorporated associations need not have officers.

IRS and tax liability?

If an association has lost its tax exempt status through a lapse in its non-profit status, the IRS can certainly begin looking at the money an HOA has raised from dues paying residents. Sun City Anthem in Las Vegas, even though legally incorporated as a non-profit, was hit with millions of dollars worth of fines and back taxes because it failed to declare money from its country club restaurant as income. It’s almost a sure bet that someone will be looking at the books of any HOA that loses its non-profit status.

Source: http://www.andysirkin.com/HTMLArticle.cfm?Article=17

Does an HOA technically need to be incorporated?

If the CC&Rs lay out the existence of the HOA, and each homeowner’s deed requires the homeowner to adhere to the CC&Rs, then it’s possible to have a defacto association that operates without the benefit of the corporate structure or protections.

Without being a corporation, what you’re left with is one big partnership. That means each homeowner is individually liable for anything the HOA does. If an employee, for example, sues the HOA for back pay or sexual harassment or discrimination, then every homeowner is equally liable as if they had been the employer. That’s because, just like in any business partnership, they are. That’s the nature of partnerships. Everybody is responsible for every other partner’s actions.

It may be that founding CC&R documents require the HOA to be incorporated. If so, ultimately, the homeowners can sue the officers to make them incorporate. In the end, it’s all up to the lawyers.

Source: http://www.dailyrepublic.com/business-and-real-estate/does-a-hoa-need-to-be-incorporated/

 

Benzer Testimony Gets Interesting!

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Guns? Organized crime? Fear of winding up in the desert? Major law firms involved? The HOA racketeering trial in Nevada is producing some interesting testimony from witnesses in the scheme to takeover Homeowners Associations across the valley.

This trial continues to be a travesty because 37 of the criminals involved were allowed to plead guilty in order to get lighter sentences. The sentences won’t be announced until after the current trial is over. But I’ll take a reporter’s wild guess that the average sentence for these mobsters won’t be greater than 18 months, with much of that time off for good behavior.

This is the one instance where I’d be all in favor of debtors’ prisons. Keep these animals locked up until every Nevada homeowner is made whole.

That’ll never happen.

I know there are some FBI people who read this blog. Have some guts and start investigating racketeering in HOAs all over the country!

(link to ReviewJournal article on Las Vegas HOA racketeering)

 

StoneGate Gets Its HOA Butt Spanked

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guest blog by Dave Russell

For those of you who know me, messing with sick or disabled children is my biggest pet peeve. So when I heard the story about the StoneGate Homeowners Association, in Raymore MO and their board president Stacy Bayers, I did a little research. Now according to the Missouri Secretary of State’s Office, the StoneGate HOA was actually ‘dissolved’ back in 2009. I’ll get back to this later. For now, let’s take the story from the top.

Ella Schultz is only 6 years old and she’s battling cancer. The Make-A-Wish Foundation heard that little Ella wanted her very own playhouse. They contacted construction giant J.E. Dunn and that company agreed to build one in Ella’s backyard in Raymore, Missouri. They even used shingles to match those used on other homes in the neighborhood. .

What a touching story — a sick child and some awesome people who wanted to help out. That is until the HOA board officers reared their ugly little heads and threw a wrench into Ella’s playhouse. “I’m not at liberty to discuss that,” Bayers said Tuesday night when asked why it’s difficult to make an exception for Ella. “The proposed plan they’ve given us is a violation of our covenants.

KCTV 5 News (CBS) in Kansas City, has reported, “The StoneGate Homeowners Association is not in good standing with the Missouri Secretary of State’s office and hasn’t been properly registered for four years.” If you pull up the information on the Secretary of State’s website, it clearly shows that this HOA’s status is “Admin Dissolved –nonprofit.” Oh, say it isn’t so! I wonder how the reporters found out about this. No doubt one of those crazy anti-HOA people called them up.

So did the StoneGate HOA really have the legal right to deny the playhouse in the first place? You know, considering the HOA appears to have been ‘dissolved.’ Can this HOA legally enforce any of their governing documents? Has this HOA been illegally operating as a not-for-profit corporation? Are they illegally collecting assessments, fines and placing liens on properties within their Association? As one would imagine, it’s probably going to take a lawyer and judge to figure this one out. This also makes one wonder if the HOA dues they took in over the past four years should be considered taxable income.

I guess you could call this a bad case of HOA KARMA. Now StoneGate HOA president, Stacy Bayers, is doing a little backpedaling. She issued this unbelievable statement last night. Really, it’s unbelievable.

”The board has met for the better half of the day and at this time we would like to release the following statement:”

“Our hearts are with Ella Schultz and her family as they battle this terrible illness. Our homeowners’ association board is committed to working with Make-A-Wish Foundation and J.E. Dunn to see if we can figure out a way to make Ella’s wish come true. The initial request from Make-A-Wish to place a barn-style shed was not accepted because the board did not have enough information to grant an exception to the subdivision’s covenants. In hopes of getting enough information, we are requesting an immediate meeting with Make-A-Wish and J.E. Dunn Construction to work out a solution in the most expeditious manner possible.”

Oh, how nice of you Stacy Bayers, president of the StoneGate HOA, working so hard to make this little girl’s wish come true. I’m personally not buying a word of it! Neither is the rest of the world.