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Shake-Up in Holly Lake HOA in Florida‏

guest blog by Deborah Goonan

Bob Norman of Channel 10 has taken on yet another rogue HOA in Florida.

One of the oddities of some HOAs in Florida is that the Board of Directors retains the authority to screen and reject buyers and tenants. But what are the criteria used to arrive at those decisions?

The “HOA screening” issue has been a contentious one in Florida, as many would-be buyers or tenants have sued or filed formal complaints of discrimination.

For example, last year, one Venice HOA enacted restrictions for unmarried couples seeking to buy or lease a home! The Board claimed the July 2013 amendment was an erroneous oversight, but has never offered a reasonable explanation of how or why the single-people-or-married-couples-only restriction was approved. The media picked up on the outrageous restriction, and that prompted the HOA to amend its declarations to eliminate the discriminatory restriction.

Holly Lake HOA, located near the Everglades in South Florida, is the latest site of buyer-tenant review controversy. But this one involves a Board member apparently profiting from his position. It seems that Board Treasurer Paul Morales has been approving plenty of applications to purchase (or lease) units, but nearly all of those buyers have been family members and business affiliates. Meanwhile, it has been alleged that other buyers or tenants lacking direct ties to Morales have been rejected without satisfactory explanation.

Bob Norman’s review of public records seems to support those claims. Check out the video report. HOA members are calling for a criminal investigation, and have put pressure on Morales and colleague Ed Patton (President of the Board), prompting both men to choose not to run for reelection for the Board. Coincidence?

Another bit of irony: Florida Statute stipulates that convicted felons cannot serve on the Board; however, it does not require background checks for Board candidates. Yet Florida Statute fully allows Board to screen and background check their tenants and buyers! Talk about a double standard. Guess what? It just so happens that Morales faced federal charges in 2000, involving a past real estate deal – charges that were mysteriously dropped.

As usual, requests for access to financial records have been ignored, and one owner has been harassed for daring to ask questions. Also predictable, although the conflict of interest seems obvious to anyone with two active brain cells, there has not been any determination of illegality.

Link to Channel 10, Bob Norman, Holly Lake HOA story

link to Herald Tribune, Casa di Amici COA story on amendments to restrictions

HOAs and Owner Involvement: An Oxymoron? (part 2 of 3)

guest blog by Deborah Goonan

Debunking the myth that owners can actually change their HOAs

CAI’s educational booklet makes the assumption that owners elect their Board. In reality, the Developer appoints the Board – or at least one or more members of the Board – for several years, or even decades during construction. When the developer still controls the Board and possesses weighted voting rights, isn’t owner participation essentially a moot point?

Have HOA proponents, and CAI in particular, ever considered that a homeowner, having had no opportunity to elect the Board or amend documents during many years of developer control, is unlikely to ever make a successful transition to widespread participation in voting? And by the time it is no longer developer-appointed, what if the Board is still controlled by a small minority of investors or developer affiliates, who hold the majority of voting rights? This situation is far more common than CAI industry professionals would lead us to believe.

Vote the bums out!

As for CAI’s oft-prescribed solution to dissatisfaction – electing a new Board – is it really that simple? Not really. Post-turnover election procedures are based upon written provisions of the governing documents, possibly subject to limited statutory guidelines. The fact is, HOA governing documents are not reviewed and approved for compliance with constitutional voting procedures. Therefore voting systems are generally built upon the following components:

–Inequitable allocation of voting rights (votes allocated by number of units owned or proportional share of ownership)

–Voting processes that often involve proxies and/or representative voting systems that disenfranchise residents

–Typically, tenants cannot vote

–Members can have their voting rights revoked as a result of an alleged violation or dispute, or for being delinquent on assessments. (If you were told you could not vote at the polls as a result of being delinquent on your property taxes, would you accept that?)

Although laws in some states address a few of these issues individually, no statute addresses all of them, most notably equitable allocation of voting rights. Some states mandate ballot election for Board members, but not for amending governing documents.

Quite often, loopholes allow existing HOAs to avoid compliance with applicable statutes, with the qualifying phrase “unless otherwise stated in the governing documents” inserted before election and voting provisions. And because there is no national standard, the relative fairness of elections and voting varies considerably from state to state and from one Association to another. Obviously, more realistic solutions are needed.

See Part 3: Exploring Solutions

Link to CAI’s publication, Community Association Living

What Happens When Government Fails to Ensure Quality Construction in HOAs?

guest blog by Deborah Goonan

Does your HOA have problems with shoddy construction or defects in common areas such as roads, storm water drainage, street lighting? Did your developer fail to deliver what was promised at the time of sale?

If so, you’re not alone. Check out the video reports linked below. Hidden Lake Estates HOA in Sherwood, Arkansas, has issues with poor drainage, causing owners’ yards to flood every time it rains. At Stone Hill Estates HOA in Durham, North Carolina, the Developer has left roads, sidewalks and storm water drainage systems unfinished for several years.

Owners from both HOAs have appealed to city leaders to help resolve these issues. In both cases, the Cities initially balked at getting involved. However, one council member from Sherwood has called for an investigation into storm flooding at Hidden Lake, and a judge in Durham recently ruled that the City help pay for unfinished work at Stone Hill. Protracted battles will likely continue. These are just two examples, but this is becoming a common problem all over the country.

Who’s responsible, and who should pay?

During the building boom of the last decade, plenty of planned developments and condominiums were hastily approved and built to keep up with growing buyer demand. Additional contractors were hired, and some of them lacked sufficient skills. When the dust settled, problems began to appear.

It’s clear that architects, design engineers, and developers ultimately bear responsibility for the quality of their work and that done by their construction crews, but the obvious unasked question is:

What is government’s role in development of HOAs and prevention of poor construction?

Local development and planning commissions have responsibility for issuance of construction permits, establishment of building codes, inspection of work at various phases in the project, and issuance of occupancy permits upon successful completion.  In many cases, additional state and local agencies, such as the Department of Environmental Protection also play a role in ensuring development meets health and safety standards.

As taxpayers, we expect our local government agencies to ensure that our homes and major infrastructure of our communities are built to a standard of safety and reasonably sound quality. Unfortunately, as evidenced by thousands of construction defect claims in the past decade, local planners and inspectors quite often fail to do due diligence before, during, and following construction.

Why? Perhaps it is because city or county staff does not have to maintain HOA infrastructure or Condominium buildings. Therefore they are not overly concerned about quality of design and construction, and ease of maintenance.

Worse than that, sometimes our local elected officials undermine quality control policies.

Take the Lakewood City Council of Colorado, for example. (see link) The Council wants to enact an ordinance that would make it easier for Developers to avoid litigation of construction defect claims with HOAs. If passed, the ordinance would reduce rights that currently exist under state law, making it more difficult for HOAs to sue.

Supporters of the City ordinance claim that current state law makes it too easy for owners to sue Developers, drives up the cost of insurance, and makes it unfeasible to construct additional entry-level condominiums for millennial buyers.

So let me get this straight: Lakewood City Council wants to make it easier for developers to avoid liability for shoddy construction, in order for the Mayor and Council to entice Developers to build more Condos (with HOAs). No doubt, the city government’s goal is to increase its tax revenue base, with minimal impact to the city budget. But at what cost to taxpayers and consumers?

In all fairness to Lakewood City, local government politicians in cities and towns all across the nation have adopted a similarly misguided stance.

Dare I say, depending on the politics of local government, committees that vote to approve new construction projects can have cozy family or business ties to real estate developers and to investors?

Attorneys representing all sides of ensuing controversies – developers, engineers, construction companies, HOAs, owner groups in HOAs – are the only clear winners when local government fails to prevent shoddy or unsafe construction in the first place.  Owners of HOA properties often find themselves stuck with unresolved problems, damages to personal property, uncooperative Boards, special assessments to cover fees for attorneys, and possibly even higher property taxes.

In HOAs, owner financial responsibility for common areas often leads to common headaches.

(link to video of defective drainage in Sherwood, AR HOA)
(link to video of unfinished development, Stone Hill HOA, Durham)
(link to article on proposed Lakewood, CO ordinance)