Tag Archives: goonan

How to Create Conflict & Drama in Your Community

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guest blog by Deborah Goonan

A Tongue-in-Cheek Guide for HOA Boards & Managers

1.     Create as many rules as you can, the pickier, the better.

a.     Be sure to create rules in closed session rather than an open meeting.

b.     Optional: provide an announcement of the new rules only AFTER you  have put them in effect. Then ignore any objections.

c.      Rules created hastily as a knee-jerk reaction are guaranteed to cause maximum conflict.

2.     Be inconsistent about enforcing the rules.

a.     Allow friends and family to break rules. They will help you stay in power.

b.     If you are a Board member, you can make up your own rules. If anyone challenges you, tell the resident you are entitled to special privileges for doing such a thankless job.

c.     Use penalties for breaking rules as a weapon against residents you do not like, especially disgruntled troublemakers, or anyone who does not “fit in” with your expectations.

3.     Drive through the community actively looking for violations, so you can start sending nasty letters and charging fines.

4.     Encourage residents to turn in their neighbors for various violations of rules.

5.     Be especially vigilant about citing the following groups with rule violations: the elderly, people with disabilities, single parents and their children, veterans, racial and ethnic minorities, and any resident that dares to question your competence, ethics, or authority.

6.     Treat members like wayward children. Play the role of Strict Parent by scolding or talking down to them.

a.     Post stern reminder notices about not breaking rules in public places and in the newsletter.

b.     Repeat the mantra “the rules are the rules, and must be followed.”

7.     Alternative: treat members like insubordinate employees. Play the role of Authoritarian Boss. Use bully tactics, swift and harsh penalties, and always speak in condescending tones. After all, you must keep the residents in line.

8.     Find an unscrupulous HOA Attorney, and then keep him or her busy escalating disputes and running up legal fees for violators and the HOA.

9.     Authorize expensive contracts for unnecessary “emergency” repairs and renovations, without a vote of residents.

a.     Do not waste money on “boring” maintenance and repairs such as cleaning gutters, fixing plumbing leaks, or seal coating roads.

b.     Focus your attention on “window dressing” and “fluff” instead.

10. Issue a special assessment to cover excess legal and maintenance costs.

a.     Then move swiftly to lien and foreclose on residents that cannot afford to pay the special assessment.

 

Conflicts of Interest Abound in the World of HOAs

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guest blog by Deborah Goonan

What if your condominium leaks like a sieve? What if the streets flood every time it rains? What if your condo building develops foundation cracks and unexplained build up of mold?

Owners may assume that reporting serious problems to the Board will result in sincere concern and earnest investigation of possible construction defects. They might expect the Board to insist that responsible parties pay for damages and repairs. But what if one of the association Board members is affiliated with the Developer?

Residents of Boathouse Condominiums, Bay City, Michigan, have complained of numerous defects but have run into resistance. Their Board has denied their request to seek defect claims against the developer of their 37-unit high-end boathouse conversion, Marina Place LLC. The Agent of the Developer’s corporation just so happens to be a member of the Board at Boathouse Condominiums.

So nineteen residents have filed their own lawsuit against the Developer and construction company, alleging numerous defects that allow water intrusion into the units, and a faulty foundation. But the lawsuit also lists the HOA as a defendant, for failure to address their concerns.

The Developer denies knowledge of defects, and seeks proof of damages.

Attorneys for both sides are already engaged. This battle could get expensive.

(link to news story on Boathouse Condominiums)

 

HOA Residents Try To Bail Out

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guest blog by Deborah Goonan

The HOA, Association of Poinciana Villages (FL), wants to become a city. In fact, a group of residents have been attempting to become a municipal corporation for several years. The group has recently completed a feasibility study that it will submit to Florida Legislature.

It seems as though the large subdivision of Poinciana is tired of being underfunded and getting no services from Osceola and Polk Counties, despite the fact that 47,000 residents pay taxes to both Counties and the state of Florida. Their mature HOA cannot provide needed services provided to residents of nearby cities of similar size. Apparently the residents pay assessments, while the developer does not. The residents are tired of Developer Avatar retaining majority control since 1971 and want each resident to have voting rights, instead of a 9 member Board of Directors voting on behalf of each of Poinciana’s Villages. What a concept!

Who can blame these residents? After all, compare PUBLIC local government (municipal or county level) to PRIVATE governance in HOAs.

*A municipality has access to property and sales tax revenues, low interest loans, issuance of municipal bonds, state and federal grants. * The HOA is limited to collection of assessments that are NOT based on assessed property values. (often the $50K home pays the same assessment as the $500K home and even commercial property owners) The HOA has very limited access to financing through loans.

*A municipality can take advantage of economies of scale, and can cooperate with nearby towns and cities, or enter into local agreements to provide needed services. * HOAs have no option to collaborate with neighboring communities or public entities to provide needed services. In fact, its governing documents (the so-called CC&Rs contract) often state that the local governing entity will NOT provide such services, because the Developer has given away owner rights to these services as part of the development agreement at the time permits were issued.

*Local government elected officials are compensated, are publicly vetted, and they generally possess experience relevant to their respective roles. They often have term limits. Should these officials fail in their work, they are usually voted out of office in the next election. If they engage in unethical or illegal conduct, they will eventually be investigated, and held personally liable, without constituents having to bring a legal suit. *The HOA Board is comprised of volunteers who are practically immune from personal liability and oversight. The burden is placed upon owners and residents to investigate wrong-doing or spend personal funds in filing a civil suit.

*Voting and elections in a city – one vote per registered adult voter vs. one vote per unit (dwelling) owned. That means tenants vote, and each adult in the household gets to vote. No one in the community gets more than one vote. * The HOA Developer is granted weighted voting rights and appoints the Board as long as he controls most of the votes. After turnover, Boards are often elected by representative voting members, proxies, and other dubious means. Of course, allocation of voting rights is inequitable: the more property one owns, the more votes one has. They and the managers they hire often lack necessary personal and professional skills to do the job.

*The city has sovereign immunity, limiting its legal liability. * The HOA is a corporation that must insure itself against potentially high legal liability.

This is one evolving story to monitor closely.

(article on Poinciana seeking municipality status)
(PINCHOS residents group statement on reasons to incorporate)
(Letter from PINCHOS to Florida Legislators)

 

Norristown PA Condominium Failure Costs Taxpayers Millions‏

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guest blog by Deborah Goonan

Why should you care about continued construction of HOAs, even if you do not live in one?

City and County planning boards love HOAs because they increase the property tax base, while requiring very few, if any, additional services to be provided within the boundaries of these communities. In theory, HOA residents pay assessments for their own services – which can include road maintenance, storm water system maintenance, security, and the like, as well as maintenance of common areas and multifamily (attached) housing structures. In other words, HOA owners pay more of their property tax dollars for a lower level of city or county service. That means higher net tax revenues for cities and counties. Or does it?

I have blogged before about the fact that non-HOA taxpayers are increasingly footing the bill for HOA failures in their cities and counties. Over the past few months, several media reports have surfaced about troubled and failed private HOA communities. Today I present one example from Norristown, Pennsylvania, as originally reported in The Inquirer last month. (see link to article below)

According to the report, a 26-unit condominium at 770 Sandy Street was constructed in the mid-2000s. After construction, when problems became apparent, city “Inspectors pinpointed hazards years after the building was occupied, including load-bearing walls that were hollow, exposed wiring, and fire escape stairs made of wood.” How did the developer, R. Bruce Fazio, get away with selling homes with so many apparent construction defects?

Upon further investigation, it was discovered that the municipality had issued a flawed permit, and apparently failed to identify building code violations prior to occupancy.

In 2010, the building was condemned, and a judge ordered the city of Norristown to make repairs totaling $3 million.

But despite the fact that taxpayers have already forked over $3 million for the apparent negligence and incompetence of the developer and city officials, problems still continue, with many units remaining vacant and unlivable due to water damage from frozen pipes. Another condemnation may be in the works. How much more money will it cost the city of Norristown?

The unfortunate owners of these ill-fated condos have faced major financial loss and stress, but the residents of Norristown at large are also paying the price to clean up the mess left behind. Meanwhile, the developer and city officials are not being held accountable. Read the article below for details.

Your tax dollars at work?

(link to news story about Norristown failures)

 

When it comes to collection of HOA liens, it’s all about the money!

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guest blog by Deborah Goonan

The latest controversy in HOA Land: in Nevada – and by extension 21 other states with similar legal status – the HOA super priority lien can now extinguish an outstanding mortgage backed by the Federal Housing Finance Agency (FHFA).

It’s ironic, because when CAI was founded back in 1973, it was with cooperation from FHA. Their agreement to back mortgages in common interest developments was the glue that held disparate CAI interests together.

But after years of mortgage deregulation, followed by out-of-control real estate price increases, and the ensuing mortgage default crisis, things have certainly changed.

Now it’s very difficult to obtain mortgage financing for condos, and not that easy for detached single family homes either. In the 22 states that have enacted priority lien status for HOA assessment liens, mortgage financing just became a great deal more difficult to obtain.

In early December, CAI boasted about its Nevada Supreme Court victory, where the court ruled that the FHFA backed-mortgage lien is extinguished following the HOA’s non-judicial foreclosure to collect unpaid assessments.

But a few weeks later, FHFA has fired back, vowing to fight in court to invalidate HOA foreclosures that wipe out taxpayer-financed guaranteed mortgages.

CAI claims that FHFA is “bailing out mortgage servicers” and vows to fight for the rights of HOAs to maintain super priority lien status.  CAI’s statement presents the usual argument that the owners that can afford to pay assessments have to cover the costs for owners who cannot or will not pay.

But at issue for FHFA is the fact that HOA foreclosures can now wipe out entire mortgage interests, at dollar amounts that far exceed state super-priority lien allowances of 6, 9, or 12 months unpaid assessments.

The super-priority lien, CAI argues, is a means to motivate mortgage servicers to either speed up the foreclosure process or pay the HOA’s lien prior to or at its assessment foreclosure sale.

It is interesting to note that the Nevada Supreme Court was split 4-3 on whether a judicial foreclosure is necessary in an attempt to wipe out the mortgage lien, citing due process rights to redemption for owners and mortgage lien holders.

It seems clear that FHFA will not sit idly by, allowing HOAs to beat them to foreclosure and wipe out mortgage interests. FHFA has filed action in Nevada Federal court because, in its own words, it “has an obligation to protect Fannie Mae’s and Freddie Mac’s rights, and will aggressively do so by bringing actions to void foreclosures that purport to extinguish Enterprise property interests in a manner that contravenes federal law.”

Will FHFA challenges lead to statutory mandate of judicial (vs. non-judicial) foreclosure of HOA liens? Will increased legal costs and lending risks lead to higher costs for borrowers, including escrow of 6 – 12 months assessment fees?  Or will FHFA push for elimination of HOA super priority lien status? These are interesting times.

Given the history of more than a few HOA attorneys to abuse the foreclosure process in order to evict owners and acquire homes with high equity (little to no mortgage balance owed) at the HOA’s auction sale, the recent NV Supreme Court decision is unsettling, to say the least.  If first mortgages can be wiped out following HOA foreclosure, doesn’t that create additional moral hazards?

CAI-HOA corporate interests will duke it out in court with FHFA. And while HOA homeowners may “win” the relatively small battle for collecting a portion of unpaid assessments upon mortgage foreclosure, they will probably lose the war for preserving property values, if homes are allowed to sell at HOA auctions for pennies on the dollar, or if FHFA pulls the plug on favorable financing terms.

CAI press release – Win on Priority Lien Case in NV