For those of you wanting to make a short sale on your house, you’d better keep an eagle eye on your good old Homeowners Association. They’re starting to get pretty crafty in keeping the neighborhood operating budget full.
For homeowners who are suffering through the housing mess and living with underwater mortgages, working out a short sale might help you save some of your retirement nest egg. The banks take a well-deserved loss, but you’re happy because you’ve found a buyer and you’ve escaped your nightmare of a mortgage.
But wait! Your HOA has superior rights over your bank. If it moves quickly, it can snatch your home and foreclose on it before your short sale can go through. Just about any violation of HOA covenants can make your home a nice grab. If you were a little behind on dues, if your grass became a little brown during those months you failed to water the lawn, if you got fined for leaving the trash can outside, once you add fines, collection fees, legal fees, late fees and all the other fees that can be conjured up, your HOA can actually claim you owe it tens of thousands of dollars.
Like a rat trap, the HOA springs shut on your pending short sale. You lose, the bank loses, your potential buyer loses. Ah, but your HOA wins. It gets to put your house on the auction block. Sweet, huh?
One puzzle about the HOA movement is, “Why doesn’t the left or right take a stance?” Think about it. Every homeowner signs away his Constitutional rights by agreeing to join an HOA. That abrogation of rights has been upheld in multiple court decisions.
But shouldn’t the left-wing ACLU be furious about the loss of free speech rights by homeowners? Shouldn’t the right-wing Tea Party be furious with the fact that citizens have lost their ability to claim First Amendment, Second Amendment, and Fourth and Fifth Amendment protections just by joining an HOA?
Of course, Americans have the right to contract away their claims to protections in the Bill of Rights. We do that all the time when we agree to abide by confidentiality agreements in out-of-court legal settlements. We agree not to ever discuss how a court case was settled, or how much was paid to which party to settle the case.
Yes, homeowners do have the right to sign away their rights, and that’s exactly what happens when you sign those HOA documents. But why don’t left-wing or right-wing activists raise cain about the excesses of rogue Homeowners Associations?
Ward Lucas
Author of Neighbors At War: The Creepy Case Against Your Homeowners Association
One question each homebuyer should deliberate before buying a property in a homeowners association is, “Am I buying a home in Paradise, or will the HOA make my stay a living hell?”
Homeowners Associations offer promises, of course: security, clean streets, well maintained homes, nice amenities. Some new home buyers find it a positive experience. Others discover they have bought into a nightmare. Still others find their homes foreclosed upon, sometimes for the pettiest of reasons.
Here are some recent homeowner stories collected by Bankrate.com:
When a couple in Lawrence, Georgia tried to sell their house, they discovered the HOA had quietly placed a $3,500 lien against their property because the couple had placed some pink flamingos on their lawn. HOAs have no sense of humor about such things as pink flamingos. The lien had to be paid before the house could be sold. Homeowners Associations often place such liens without informing the property owner. It’s not uncommon for homeowners to discover that these “secret liens” have been accumulating interest, attorney’s fees, and collection fees.
Maryland: a homeowner who was continually harassed by a neighbor asked his HOA to give him permission to put up a six-foot privacy fence. The HOA refused. The homeowner went to court, spent more than 23,000 dollars in legal fees and still lost. He then put up a smaller fence which he thought conformed to neighborhood rules. But HOA officials armed with tape measures, discovered it was several inches too high. He was slapped with a lien, and spent thousands more to settle the case.
A Homeowners Association in Donner Pass, California requires homeowners to make their properties ‘snowmobile friendly’. That means not driving cars over the snow or clearing it from around their homes. The intent is to leave areas open zones for snowmobiles. But a woman who had suffered a serious back injury ignored the rule. She drove her car up her half mile long driveway over the snow, saying her back injury made it impossible to walk the half mile to her home. But driving up her own driveway cost her $500 a day in HOA fines. The dispute eventually cost her more than $50,000 in fines and legal expenses.
Tampa Florida, a homeowner committed the ultimate sin of being late on her HOA fees. She thought her attorney had arranged the payment of more than $4,000. But she was short $497. The HOA foreclosed on her property, and sold it in a courthouse auction for $4651. An investor bought it and promptly sold it for $88,000. The homeowner lost her home over the $497 shortfall.
There are literally thousands of such stories across America and there is rarely a happy ending for the homeowner.
Ward Lucas
Author of Neighbors At War: The Creepy Case Against Your Homeowners Association
Millions of Americans have moved into covenant-protected neighborhoods, thinking the experience will be a positive one, maintenance will protect property values, neighbors will be friendly. A good percentage will find exactly what they were searching for.
Sadly, many others will discover that the move to the new neighborhood constituted a fundamental change of government. Yes, they’ve actually moved out of the United States of America and into a private non-profit corporation governed, not by the U.S. Constitution, but by a set of bylaws and restrictions. The restrictions were created by the original real estate developer and control handed over to neighborhood boards. The new corporate rules have nothing to do with the Bill of Rights with which most of us are familiar.
They’ve been called ‘private governments’ because they operate largely outside the control of traditional established government. Neighborhood covenants, controls and restrictions take precedence over such mythical concepts as freedom of speech, freedom of assembly, the right to bear arms, equal protection, the right to privacy in one’s home. In fact, in thousands of cases across the country homeowners are discovering that snooping, spying and reporting on others is de rigueur. In the HOA system there is no such thing as privacy. Violators of local rules have no right to trial by jury, in fact the governing boards play simultaneous roles of judge, jury and executioner. And the number of lawsuits inside the HOA movement is exploding.
These ‘sub-governments’ are the fastest growing part of the housing sector. Traditional governments are refusing to allow developers to build homes unless they create these little gestapo neighborhoods. In many suburban areas across the country up to 100 percent of all new homes are built within these controlled neighborhoods, making them in essence, de facto governments. Yet these ‘governments in fact’ are unimpressed and uncontrolled by the Constitutional restrictions our founders created to protect the citizenry.
The Community Associations Institute, which thrives on the billions of dollars paid to private management companies, debt collectors and armies of lawyers, claims that 70% of HOA members think of the experience as positive. Surveys by groups not connected with the CAI report a different experience. In fact there is a tidal wave of homeowners who say they’ll never live in an HOA again.
According to Janet Portman, editor of Nolo Press in Berkeley California and author of “Every Landlord’s Legal Guide.”, homeowners in the community are treated more like tenants than property owners. New homeowners often find themselves being fined or sued for incredibly minor violations like having an oil spot on a driveway or leaving a trash can outside a few minutes longer than the prescribed deadline. Claiming that board members are guilty of the same violations is not a defense, so it’s not uncommon for new HOA residents to begin believing there are two distinct sets of rules; one for the ruled, and one for the rulers.
The big club being wielded by board members and HOA management companies is the threat of sudden foreclosure, and in 37 states that means non-judicial foreclosure. Homeowners can and have found their homes confiscated and sold on the auction block without the case ever being heard by a judge.
This blog, by the way, is meant to be interactive. Please share your own stories while we take names and kick butt. And we’ll build a list of other resources for beleagured homeowners. Post your comments, or tweet me @ward_lucas— I would love to hear your stories!
Ward Lucas Author of Neighbors At War: The Creepy Case Against Your Homeowners Association
