Category Archives: Horror Stories

Should HOAs be eligible for FEMA Public Assistance?

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guest blog by Deborah Goonan

I have previously written about Community Associations Institute (CAI), an HOA trade group, and its three Federal issues (pet peeves). One of those issues is what CAI calls Disaster Relief Fairness.

You can check out CAI’s brochure on the subject here. See pages 9-10.

https://www.caionline.org/Advocacy/FederalAdvocacy/Documents/CAI_FedAdvocacy.pdf

CAI laments:

Community association homeowners pay federal taxes to fund emergency services and disaster response, but their communities receive little or no federal support in the wake of a presidentially declared national disaster. Association homeowners bear the financial and practical burdens of disaster recovery in ways that non-association homeowners do not. This leads to uneven disaster recovery in our towns and cities across the country and is fundamentally unfair to association homeowners.

Yes, we all pay taxes, so why should FEMA discriminate against HOAs?

On the surface, who can disagree with that? As readers are well aware by now, owners in Association-Governed Residential Communities are already double taxed. We pay for essential services provided by our Associations through assessments, but also pay for essential services to areas outside HOA boundaries by way of property taxes.

But, not so fast. To understand FEMA’s role in disaster relief, let’s look at the type of relief they are authorized to provide:

FEMA link explaining type of assistance available.
http://www.fema.gov/disaster-assistance-available-fema

Basically, FEMA may provide assistance with temporary housing, relocation expenses, repair to primary residences, and emergency services that provide for basic needs immediately following the disaster. With regard to repair of a primary residence, assistance is intended to supplement insurance coverage, and, in FEMA’s words, “The goal is to make the damaged home safe, sanitary, and functional.”

The fact is, aid is only available if your home’s location is in a federally declared disaster zone. And the total amount of assistance available depends on what is appropriated by Congress. Assistance is divided into two categories: Individual Assistance and Public Assistance.

Individual Assistance dollars are intended to help individuals and households with various housing and disaster recovery expenses that have not been covered by insurance. FEMA will assist homeowners and tenants located in a disaster designated zone, regardless of whether their home is located within some sort of Association or not. The focus is on making sure the individuals involved have safe housing, but not necessarily guaranteeing that the assistance will enable the individuals to return to the same housing that was damaged in the disaster.

Public Assistance is defined by FEMA as follows:

Public Assistance (PA): Disaster grant assistance available for communities to quickly respond to and recover from major disasters or emergencies declared by the President

Emergency Work (Categories A-B): Work that must be performed to reduce or eliminate an immediate threat to life, protect public health and safety, and to protect improved property that is significantly threatened due to disasters or emergencies declared by the President

Permanent Work (Categories C-G): Work that is required to restore a damaged facility, through repair or restoration, to its pre-disaster design, function, and capacity in accordance with applicable codes and standards

Public Assistance dollars are earmarked for certain Eligible Applicants:

1. State Government Agencies

2 . Local Governments and Special Districts

3. Certain Private Non-Profit Organizations

4. Native American Tribal Governments and Villages

As you can see below, HOAs do not fit the criteria for the types of non-profit organizations eligible for FEMA Public Assistance: (because HOAs are not “open to the general public” and do not provide the specific public services specified below)

Private Non-Profit Organizations
Private Nonprofit organizations or institutions that own or operate facilities that are open to the general public and that provide certain services otherwise performed by a government agency.

These services include:
Education
Colleges and universities
Parochial and other private schools

Utility
Systems of energy, communication, water supply, sewage collection and treatment, or other similar public service facilities.

Emergency
Fire protection, ambulance, rescue, and similar emergency services.

Medical
Hospital, outpatient facility, rehabilitation facility, or facility for long-term care for mental or physical injury or disease.

Custodial Care
Homes for the elderly and similar facilities that provide institutional care for persons who require close supervision, but do not require day-to-day medical care.

Other Essential Governmental Services
Museums, zoos, community centers, libraries, homeless shelters, senior citizen centers, rehabilitation facilities, shelter workshops and facilities that provide health and safety services of a governmental nature. Health and safety services are essential services that are commonly provided by all local governments and directly affect the health and safety of individuals. Low-income housing, alcohol and drug rehabilitation, programs for battered spouses, transportation to medical facilities, and food programs are examples of health services.

http://www.fema.gov/public-assistance-eligible-applicants

As an example, we can take a look at what’s going on in South Carolina now, in the wake of widespread flooding caused by record-breaking rainfall and the failure of dozens of dams, most of which are owned and maintained by private homeowner associations.

Current FEMA appropriations stand as follows:

Individual Assistance dollars obligated: $112.7 million

Public Assistance dollars obligated: $6.3 million, all of it earmarked for Category A and B only. That is, only emergency repairs, and not restoration.

Source:

http://www.fema.gov/disaster/4241/?utm_source=hp_promo&utm_medium=web&utm_campaign=fema_hp

What does this mean for residents, particularly homeowners in HOAs, Condominiums, or Cooperatives?

But remember, even though a single dam repair can cost hundreds of thousands or even more than a million dollars, HOAs will not be receiving any of that assistance, because they are private non-profit organizations that FEMA classifies as business entities. (Where have we heard that before?)

Recall that the original premise behind HOAs was to create new housing and increase the tax base of local governments, but with minimal impact upon that local government’s operating budget. In return, developers were granted dominion over private communities during construction, Association Boards were granted exceptional powers to manage community affairs without government interference, and homeowners were granted the supposed prestige and privilege of living in a more-or-less self-contained housing community.

At the time, when HOAs were still relatively new in America, there was a general discontent with how municipal governments were performing, and so certain stakeholders in the real estate industry decided that Associations could do a better job, and set out to sell that concept to millions of American home buyers.

Except that in South Carolina, homeowner associations did not do a good job of maintaining their dams. And the state’s regulatory agency, DHEC (Dept. of Health & Environmental Control), did not do a good job of regularly inspecting privately owned dams, nor following up on repair recommendations. In fact, SC barely even funded the DHEC, making it next to impossible for timely inspections of dams.

So the federal government and state government are more than happy to take tax revenues – property, sales, and income tax – to create all these agencies, including FEMA and DHEC. And local governments in particular seem more than happy to push privatization of essential services, giving Americans fewer and fewer non-HOA choices.

But then government agencies don’t do what they are supposed to do, and expect “private” HOAs to figure it out for themselves when disaster strikes. And that is definitely not disclosed to buyers or current owners.

News flash: That’s what privatization is all about!

Just for your reference, it seems that there is nothing to stop a homeowner, condo, or cooperative association from applying for a Small Business Administration loan, as an alternative source of FEMA assistance, albeit the kind of assistance that has to be paid back.

Apparently CAI wants Associations to be regarded as a mini-government in this instance. In this case, they want government interference in the form of FEMA grants and emergency assistance to repair common elements in condominiums and cooperatives, and also with debris removal for all homeowner associations.

So I suppose that if FEMA decides that HOAs are “governmental in nature,” and deserving of Public Assistance, then we should soon see major changes in governance policy. Surely, the federal government will require all Association-Governed Residential Communities to provide meetings and official documents that are open to the general public. Free Speech, Due Process, and all the rest of our Constitutional rights will apply, as they do in schools, universities, public housing, and medical facilities.

Bring it on!

Madness In HOA Arizona

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guest blog by Jill Schweitzer

I’ve been taking HOA classes put on by the City for the last few years. I used to attend to learn, now I attend to see what I missed the first time around, what the HOA industry omits in the discussions, what blunders I am able to witness.

Recently I attended a class where the HOA attorney was discussing how he is representing an HOA which is suing an owner because he put an extra block on his block wall. He told us how the lawsuit has been a pending for a couple years and his fees are now up to approximately 22k.

The attorney then went on to say how he was basically looking forward to winning the lawsuit, putting a lien on the house and then taking the house.

I do not understand how Boards allow homeowners to be treated this way. That attorney’s attitude is horrible. No one should lose their home because they made their fence a little too high. No one should arrogantly state they are going to take someone’s home. There is too much power in HOAs, and in the actions of those in the industry.

This behavior simply wouldn’t happen if Boards smarten up…and if the laws were changed to protect owners. I highly doubt that an extra row of block impacted property values in that community.

One more note, attendees in class fill out a survey and make suggestions for future classes. The person who coordinates the classes then sends an email to all attendees with the results. I made two suggestions that were omitted from the email:

1. Have a class taught by an attorney who is not a part of the industry lobby groups.
2. Have a class taught by a particular attorney in Scottsdale who is offering arbitration at a much lower cost to owners. He is not a part of the industry lobby groups.

The powers-that-be must have decided those two suggestions were too outrageous. Or quite possibly there is some control over the content provided to homeowners and board members who attend classes. My goal is to have a class taught by non-lobby group attorneys in the near future regardless of whether the City sponsors the class.

Another Day, Another Embezzlement (heavy sigh)

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Kevin Costner said, “If you build it they will come.”

A new movie could have him saying, “If you create it (checking account), they will come (embezzlers).

Years ago there was a rash of stories about soccer-moms who were stealing from the soccer club checking accounts. Some people just can’t withstand temptation.

In the story linked below, owners of storage facility lockers in Lake Havasu City discovered their board president had skated off with about $300,000. They’d love to sue him to get it back. But he had the temerity to die. It’s happened before!

(link to story about embezzlement)

What about your Property Rights?

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By Deborah Goonan

(Independent American Communities Blog, http://independentamericancommunities.com/)

Spokespersons for the US Common Interest, Association-Governed Communities industry give plenty of lip service to the concept of property rights. But what does that mean for special interests such as Community Associations Institute (CAI), National Association of Home Builders (NAHB), and National Association of Realtors (NAR), to name three of the biggest players in the HOA industry?

I’ll let you in on a little secret: the industry is not interested in preserving your individual property rights, or even your Constitutional rights, for that matter. When CAI, NAHB, and NAR speak about property rights for residents in HOAs, it is generally in the context of balancing the rights of owners with the rights of the Association.

CAI attorneys are especially vocal about the rights of Associations. In their Public Policy Guide, here’s what CAI has to say about private property rights: (emphasis added)

Community Associations Institute (CAI) supports protections that enable property owners to challenge governmental taking of common or private property. CAI opposes legislative or judicial actions that would limit or restrict the ability and rights of community associations to maintain control over association common property.

Read between the lines. When CAI refers to “private property,” it is really talking about the Association’s “private” property. However, to be more precise, commonly owned property is, in fact, collective not private. And that collective ownership is structured as individual shareholders in a corporation.

Due to its collective nature, a homeowner or condo or cooperative association almost always holds more rights than the individual. It is the Association that controls and spends assessment funds collected from individual owners. And as we all know, the one that holds the purse strings tends to hold power and influence.

Whose interest is served by HOA industry groups?

Here’s my observation: both CAI and NAHB (and related investor groups) want to increase and preserve the power of Owner Association Boards. That’s one of the most insidious hazards of HOA living, not only for owners, but also tenants. But one needs to recognize that these special interest groups seek to preserve the power of HOAs for different reasons.

CAI benefits from a powerful HOA Board that will engage in contracts, that will in turn collectively pay millions to their CAI-members: management companies, attorneys, insurance and reserve professionals, landscape companies, and other community service providers.

NAHB and investor groups, on the other hand, create and control HOA Boards. They find it imperative to control the voting interests – and therefore HOA finances. From their perspective, it is of critical importance to maintain developer’s rights and a corporate shield from liability for as long as possible. At heart, these real estate moguls do not trust common owners to properly manage what they see as their Creations and Empires.

But individual homeowners and residents also endure the effect of other conflicting interests of builders, developers, and speculative investor groups. After all, developers and their affiliates are the ones who can choose to cut corners on construction and do fracking right under your house, but yet they don’t want to be held accountable for resulting health and safety hazards or damage to your home. Association-Governed Residential Communities are often intentionally designed to provide ongoing income streams that outlive the developer’s construction phase.

Too many developers and savvy investors are the kind of people who want the right to sell homes and condos at inflated prices, and then take over the association and buy back your property at pennies on the dollar. These are the folks who want to turn a residential property into their personal real estate investment – as they morph what was sold as owner-occupant communities into poorly managed apartments or Airbnb, VRBO hotels.

The Realtor association (NAR) has its own special interests — they want their members to sell as much real estate as possible and avoid legal liability for selling you a money pit, or a bad investment. Of course, some real estate agents are ethical, but the current system with regard to sale of property with HOA strings attached lacks accountability.

But by far the biggest consumer problem we face is this: federal government policy makers and local politicians often bow down to these special interests and throw the rights of individual housing consumers under the bus.

It’s time to change that dynamic and shift rights back where they belong – to individual consumers of housing. Learn more at Coalition for Community Housing Policy in the Public Interest, http://www.chppi.org/

Arizona HOA Law Firms Are Whining

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Anybody who’s seen the ugly insides of the national HOA scam knows that Homeowners Associations are lawsuit machines. In most lawsuits and criminal actions Americans have access to the Due Process clause of the U.S. Constitution. In the typical Homeowners Association each member unknowingly contracts away that access. Bam! In Pennsylvania Dutch, “there goes the egg money!”

Throw away your access to Due Process and every lawyer within spitting distance knows there’s money to be had. Free money. Your money. Paint your door the wrong color and you get fined, liened, sued and you pay all the HOA’s legal expenses. Lawsuit machines. No other possible description.

In Arizona, a prominent HOA law firm is all upset by a court ruling that says lawyers can’t tack on extra legal fees they rack up trying to garnish the wages of a losing homeowner.

Rest assured, though, this law firm has a number of sneaky plans to hijack this decision. The lawyers win. The lawyers always win.

(link to column by the HOA Institute)