Category Archives: embezzle

Let Me Vent About The CAI!

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guest blog by George Staropoli

How dare Susan French (lead ‘editor,’ of the 2000 Restatement of Servitudes, 3rd; co-author of Community Associations Law (1998 & 2008) with Wayne Hyatt, CAI national leader) take the attitude, accepted by the publisher, ALI, that this treatise is geared toward private governments because that’s what the people want. Did any group have her ear? (The Restatement is the common law treatise used by the courts when statutory law is silent.)

“Susan French begins with the assumption that . . . we are willing to pay for private governance because we are unable to pay for these amenities . . . individually. Therefore this Restatement is enabling toward private governance so long as there is full disclosure . . . and so long as decisions are made according to established and fair procedures.” (Foreword, p. IX). (My emphasis).

What part of reality did she miss? That people love HOAs? That there are fair procedures?

The Restatement speaks of private governance, which apparently French really meant as private government without being subject to the US Constitution. Section 3.1(2), Validity of Servitudes: General Rule, declares that the servitude cannot “unreasonably burden a fundamental right” (p. 347). What is a reasonable burden on a fundamental right? Does that control the Constitution? Is this private citizen law? After a long discourse on protecting fundamental rights, comment h makes it clear that,

“The question whether a servitude unreasonably burdens a fundamental constitutional right is determined as a matter of property law, not of constitutional law. Constitutional law decisions may be useful, but are not controlling, in determining when a servitude goes too far. When private parties create and enforce servitudes they are not governmental actors.” (p. 359-60).

Well then, what do we need the Constitution for? What do we need legislators for?

Community Associations Institute (CAI) presents the “Verdict:

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guest blog by Deborah Goonan

Community Associations Institute (CAI) presents the “Verdict: Americans Grade their Associations, Board Members, and Community Managers,” a 2014 survey of CIC residents, as evidence of “overwhelming” CIC resident satisfaction. CIC is an acronym for Common Interest Communities, industry-speak for homeowners’ and condominium associations, cooperatives, and variations such as planned communities, property owners’ associations, and other marketing catch-all phrases. I have blogged before about the results of this biannual survey, but, honestly, one has to take any market “research” conducted by an organization for its own benefit with more than a grain of salt. There are plenty of reasons to be skeptical about the validity and reliability of the statistics CAI presents to the media, and good reason to doubt the ability to generalize conclusions drawn by CAI to over 64 million people.

In today’s blog, I merely play along with the assumption that CAI is the authority when it comes to CICs, because I know these survey summaries are presented as “authoritative” research to legislatures across the nation. The brief CAI summary presented in their surveys and statistical summaries gives disinterested legislators a seemingly valid reason to ignore constituent bill proposals for state level regulation of CICs. “Look how satisfied most residents are, ignore those few ‘unfair’ attacks upon our well-meaning volunteer Board members and well-trained community association managers, because residents do not want more government control.”

So the industry says to validate its own existence.

Let’s look again at the industry’s own research, for what it’s worth.

When we look at the real estate industry’s OWN market research, we discover that there is little demand for HOA governance. There IS demand for newer homes with modern features such as extra bathrooms, efficient heating and cooling systems, and upgraded finishes. It just so happens that, due to political cooperation and/or demands from local governments, CICs are the only type of new construction or urban redevelopment permitted. If we as buyers want a newer home, we get a CIC by default. Increasingly, tenants end up in CICs, too, due to a shortage of rental properties in some markets.

When we compare 2012 and 2014 “Verdict” data on supposed overall satisfaction, we note that positive ratings dropped by nearly 9% (from 70%to 64%).  At the same time, respondents rating their overall CIC experience as Negative increased by 25% (from 8% to 10%). Neutrals increased by 15% (from 22% to 26%).  If we combine neutrals with negatives, and compare to 2012, there has been a 20% increase (from 30% to 36%)  in the number of residents who cannot rate their overall experience as positive.

Note that these surveys only included a sample of current residents – one can assume that a significant proportion of dissatisfied or neutral residents that did not care for the CIC moved and then became FORMER residents. Was there an exit interview or poll taken for these folks?  How many unhappy people just got out of Dodge?

The 2014 survey also compares data from previous surveys as far back as 2005. In 2005, 22% of respondents said that the Rules in their communities had NO impact upon or were harmful for property values. That figure jumped to 30% in 2014! That represents a whopping 36% increase in the number of CURRENT RESIDENTS who see no real value in the rules and architectural standards. At the same time, the percentage of residents who said rules and restrictions protect property values dropped from 78% in 2005,  to 70% in 2014. That represents an 11.4% drop in confidence of the value of all those rules and restrictions.

Now let’s look at the National Asssociation of Home Builders report of What Home Buyers Really Want.

The 2013 NAHB survey indicated the following percentages of buyers that DO NOT WANT the following features in a new home, all of them synonymous with CICs:

70% – elevator (in condos)

66% – golf community

56% – high density community

48% – gated community

44% – mixed use community

Under current development policies throughout the US, none of these community housing features can exist without the establishment of an Association to cover costs of construction and ongoing maintenance.

When you combine NAHB data with the 36% of respondents whose overall CIC experience is either negative or neutral, there is a pattern that emerges: at LEAST one third of current residents are prone to make a change by moving out, or would be open to options and/or improvements in their communities. And more than half of buyers are not interested in a CIC with closely spaced housing, multifamily housing, a security gate or expensive common amenities. (The bulk of what has been constructed and continues to be constructed)

So, if market demand were driving the housing market then at least one third of new construction would be in non-CIC developments – i.e. in new public communities such as municipalities or special districts, or within existing municipalities. In fact, the data points to a pent up demand for such free communities, since almost nothing without CCRs and deed restrictions has been constructed in the last 20+ years – especially in the states with the highest population growth. Why not put a moratorium on CIC construction, to give the housing market time to self-correct?

Our elected officials should seriously reconsider their laissez faire approach when it comes to CIC legislation, because a significant portion of their voters are not as satisfied as CAI claims in its self-promotion campaign.  More importantly, our state and local leaders need to put an end to continued creation of privately governed corporate communities – that’s what CICs are – and return property rights to homeowners. It is high time to end land use policies favoring deed-restricted HOAs in planned developments and condominiums.

(link to CAI 2014 Verdict survey summary)

(link to National Association of Home Builder’s survey of what buyers want)

 

 

 

Who or What is The Community Association Institute? (CAI)

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guest blog by Stan Hrincevich, (www.coloradohoaforum.com)

Homeowners Associations (HOAs) are comprised of three entities: home owners, HOA Boards and their legal counsel, and the property management company (PMC). Problems can arise from any of these but for those who follow HOA issues the involvement of PMCs can be most problematic. PMCs affect HOA governance with their direct involvement in operational and financial matters and through their trade organization, the Community Association Institute (CAI), which has undue influence in HOA legislative activities that craft HOA law. For decades the sole source for Homeowners Association (HOA) information for the media and the State Legislature has been the CAI. Why not? Their name implies they represent the concerns of community associations and home owners: aka HOAs. Legislators “trust” this organization to represent home owners and citizen interests but most have no idea who or what they represent.

Legislators actually think their membership and funding comes from HOA home owners and HOAs: WRONG. They have trusted this organization for decades and have allowed them to set the rules in HOA governance and financial management. Yes, they craft the legislation that sets the rules for their industry and interests and ensure through their actions that HOA State law and HOA governing documents are highly enforceable from the HOA Board’s and PMC perspective and very weak for home owners. Due to this close relationship between the CAI and legislators across the country, HOA legislative reform has been very difficult and the few Bills that have passed have been watered, are more cosmetic than effective, and in no way help with enforcing home owner’s right

If you visit CAI or their legal affiliate web sites and read their literature you would think they represent HOA home owner interests. Wrong! Their membership is mostly comprised of PMCs and lawyers. The CAI is an organization that derives most of its’ income from selling their educational classes. Nothing wrong with this but read below on how they commingle this business with legislation. Then there is CAI “the trade organization” for PMCs. Nothing wrong with this either except that they have ensured all State HOA laws aren’t written to hold PMCs accountable for their actions.

Then there is the connection between the CAI and HOA lawyers who have ensured through their legislative influence that no binding, affordable, and accessible out of court dispute resolution process is available to resolve HOA home owner complaints. This of course ensures HOA legal enforcement from the home owners perspective against abusive HOA Boards and PMCs remains in our litigious, time consuming, pay-to-play court system making HOA law mostly ineffective.

The CAI and the entities they represent and work with in State legislatures have thwarted HOA legislative reform for decades. Recent examples:

*killing an HOA Transfer Fee Bill that would have limited the fee and required explanation and justification of the fee (this costs home owners in Colorado $10 million a year);

*opposition to a Bill that would have required HOA home owners to approve the use of HOA funds prior to entering into expensive legal actions;

* opposing an out of court binding dispute resolution process for home owner complaints (leaving home owners with only our pay to play court system for the most minor dispute resolution);

*their involvement in writing Colorado legislation to license property managers resulted in using such legislation to promote their sales of educational courses and hence drive up the cost of such required educational courses for property managers;

*opposing the limiting of HOA fees, fines, and administrative and legal fees on HOA debt; opposing term limits on Board members when others are available to serve;

*obstructing legislation on protections of home owners against liens and foreclosure for HOA debt; attempts to promote legislation that would expand the independent authority of Boards in governing HOA operations (without home owner approval); and the list goes on and all anti-home owner.

You can blame the CAI for the lack of HOA reform with their legislative intervention but much blame also goes to our political process that makes money the name of the legislative game and places unfunded citizen groups at a disadvantage.

The CAI and its constituents are the most anti HOA home owner group in the nation and in Colorado they most certainly are a wolf in sheep’s clothing and our legislators and the media are only beginning to realize their role. The beginning of HOA legislative reform and improved governance thus begins with dispelling the belief that the CAI represents home owners; revealing their history and actions in HOA legislative reform; curtailing the CAI’s influence with our Government agencies, media, and legislators; and having HOA home owner groups recognized in our legislature and in the media to offer a home owner centric perspective to improving HOA governance.

Fireworks in Carson City, Nevada

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This is shameful.

No state in the union has suffered more from HOA abuse than homeowners in Nevada. No homeowners have been financially stripped and laid bare more than people in Nevada. Organized crime in so entrenched in Homeowners Associations in that state that many people in HOAs have lost up to 90 per in value in their homes. But when Organized Crime sees a chance to put OPM (other peoples money) into their pockets, there’s not much that will hold them back.

But ripped-off homeowners in that state were finally able to convince the U.S. Attorney and the FBI to do an investigation, and 39 people including police officials, attorneys, businessmen, political figures, a well-known TV star were indicted and now face felony trials for theft and official corruption. Well, I’ll modify that, a bit. In typical Nevada fashion, certain key suspects began killing themselves in strangely concocted ‘suicides’, and others began to rat out the bigwigs, eight or nine of whom still face trial for their crimes.

Nevada citizens were even able to get a couple of homeowners advocates placed in key positions on the eminently corrupt Nevada Real Estate Division. These homeowners rights advocates tried to get NRED to respect such Constitutional ‘novelties’ as Due Process, a well-recognized Constitutional Right which protects all the people from government abuse.

Tomorrow and Thursday day is when well-reimbursed stooges on the Division of Real Estate tries to crush that right forever. It’s happening in Carson City. And the largest CAI vultures ever spotted by bird watchers are flying the skies over the state capitol right now making sure their paid minions succeed at stifling any sort of free speech or respect for law and order. Nevada is well known for its deep layers of official corruption. By the end of this week you’ll know whether it’ll be business as usual, or whether those struggling under the weight of oppression can reserve for the people a tiny hope for fairness.

 

Legal Pitfalls of HOAs

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guest blog by Deborah Goonan

One often-overlooked fact about homeowners associations (and condo, too) is that they are legally classified as corporations, separate and distinct from cities and towns. And just like any other corporation, anyone can sue the HOA or be sued by the HOA for any number of reasons.

What does this mean for the HOA owner? It means the Board has a duty to protect the Association against the very real risk of expensive lawsuits. Insurance policies can help, but only if the Board purchases the right coverage with limitations high enough to cover the risk. Even then, insurance companies have been known to refuse to pay some or all legal expenses or judgments, especially when Board or Manager actions have been deemed insufficient or reckless. When that happens, homeowners are often on the hook for unpaid insurance claims, hefty legal expenses and any other awarded damages.

Want some examples?

1) In the video linked below, you can watch what happened when the deck of an Indiana clubhouse collapsed during a December 2013 family gathering, hurling twenty-four people to the ground below, seriously injuring several of them. The builder claims the deck is beyond its ten year warranty period, and the HOA is responsible for its maintenance. If the HOA failed to maintain and repair the deck, the Association might be found liable for injuries resulting from its collapse. Will the HOA have sufficient insurance coverage for multiple lawsuits brought by the injured and their insurance carriers? Or will the insurance company deny payment because of something the HOA failed to do? Will insurance even cover replacement of the deck? All of that remains to be seen.

2) In the second news video linked below, in April 2014, neighbors in a Florida HOA said they were concerned because a man drowned in a retention pond. The HOA owns this pond as part of its common areas and is responsible for its maintenance. Retention ponds like this one are very common in Florida, and, as the attorney points out in the interview, it would be impossible to protect all of them with a barrier. Nevertheless, according to the attorney, the HOA can face liability for not adequately warning of potential danger, or knowingly or unknowingly creating any “unsafe” condition. There is very little this Association can do to prevent any child or adult from walking up to the pond and either jumping or falling in. Draining the pond is probably not an option in Florida’s tropical climate. The Water Management District requires retention ponds to prevent flooding and environmental contamination from storm water runoff. It is doubtful that all adjacent homeowners will agree to install a fence to prevent another drowning accident because, in many HOAs, lots adjacent to retention ponds are sold at a premium price as “water view.” Some HOAs expressly forbid fences of any kind, for any reason. All of these factors increase liability risks and insurance premiums for those living in an HOA.

3) Sometimes when an owner sues the HOA, things get out of hand. Such was the case of Maria and Sam Farran and their Virginia HOA, whose legal battle began in 2008, over the display of an Obama presidential campaign sign (that, according to the rules was four inches too big). After a protracted dispute spanning nearly four years, Fairfax County, Virginia judges ruled in favor of the Farrans in two lawsuits: the first over the HOA’s lack of a legal right to issue fines, and the second over the HOA’s secret meeting denying the owners’ requests (in apparent retaliation) to add a new roof and a deck. During the ongoing feud between the HOA and the Farrans, assessments reportedly increased from $650 to nearly $3,500 annually, mainly to cover legal expenses. After the dust settled in 2012, the HOA found itself unable to pay $100,000 in legal fees awarded to the owners, and had to declare bankruptcy. Now the community square, once used for neighborhood gatherings, is awaiting a new buyer.

Bottom line: if you own property in an HOA, due to no fault of your own, you may be on the hook for thousands of dollars in legal expenses, not to mention neighborhood strife, and possibly even bankruptcy of the Association.

(link to KSDK news story on deck collapse)

(link to News4Jax story on retention pond drowning)