Category Archives: HOA violence

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)

 

California Drought Worsens

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Reservoirs that supply water to tens of millions of people in the Southwest are dangerously low. Folsom Lake northeast of Sacramento is typical of what’s been happening for the past few years in California, Nevada and Arizona. The LA Times article linked below says 99.8 percent of the state is suffering a severe drought.

How tough is it for homeowners to find buyers these days? What buyer can find a mortgage company that wants to risk its money when a disaster like this is unfolding? And what’s going to happen to home prices when half the homes in a neighborhood have For Sale signs in the front yard?

It’s stunning to know that HOA boards and managers have been fining homeowners who didn’t keep their Kentucky Bluegrass nice and green.

(link to LA Times story on drought)

 

The Most Underreported Crime In America

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Yes, once again we’re talking about embezzling. I could, and probably should do a story a day on how board members are embezzling from Homeowners Associations. There are so many creative ways to steal from your neighbors. But a woman arrested in Broward County just forged the names of other board members and wrote herself checks from the HOA bank account.

Michelle Changer-Coe was the president of the Mainlands Seven Homeowners Association. She’s in jail facing charges that she stole nearly $200,000 from her HOA.

Actually, while I hate to say it, this HOA got exactly what it deserved. They elected this woman president despite the fact that she was convicted a number of years ago for grand theft/forgery.

Now the big question: How many HOAs boards and managers are not involved in embezzling?

(story on Broward County HOA embezzlement)

 

The Failed Legacy of HOAs

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guest blog by Deborah Goonan
Let’s not sugar-coat the truth about so-called planned communities.
Part of the reason that HOAs move toward obsolescence is because they are not, and never have been, true communities, in the sense of being created of, by, and for the people. HOAs have always been created by Developers, to protect their narrow set of interests at a certain point in time. 
 
The Tuscan Villa community from the early part of this century is about as desirable as the Brady Bunch house with avocado paneling and hideous wallpaper. The difference is that Brady Bunch era houses have usually been updated several times over the past 4 – 5 decades. 
 
The larger difference is that older, traditional neighborhoods have evolved naturally over time.  Small children become teens, that grow up and move out. Parents grow older. Eventually they sell and move elsewhere. But new young couples and families with children move in to take their place. The neighborhood includes several generations among its residents, each younger generation breathing new life into the neighborhood and adding its personal touch to homes, both inside and out. 
 
While it is true that some cities have done an abysmal job of maintaining a healthy economy, leading to blight in some cases, the vast, vast majority of American cities, towns, boroughs, townships, and counties continue to survive and thrive for many decades, even more than a century. 
 
The same cannot be said for HOAs and Condominiums. There has never been an attempt to create planned communities with lasting legacies. The purpose has always been to create exclusive (Balkanized?) enclaves with a particular theme or lifestyle, subject to the ever-changing whims of the market. The goal has always been to squeeze the maximum number of homes and profit onto available land. The architectural and landscape standards were created to keep the HOA or Condo in a perpetual mode of being “ready to show” to buyers. Like the pages of a slick real estate brochure. Just like cars, HOAs have a limited life span: planned obsolescence.  
 
Ah, but that creates new opportunities for redevelopment, does it not? 
 

Not Just HOAs! ALL Of You!

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guest blog by Deborah Goonan

There may be a tendency on the Neighbors At War website to concentrate on warning people in Homeowners Associations. But that may be too narrow a scope.

Don’t limit our audience to HOA owners. Include tenants, who make up more than 30% of HOA residents in many communities. Include home and condo buyers, particularly those who are looking for a home and true quality of life.

Savvy real estate investors who really want the HOA model and know how to work the system: We can leave them out of the equation.

But an important audience of people who SHOULD be paying attention to the big picture are the owners of non-HOA properties. You see, all taxpayers are eventually going to foot the bill for the next approaching crisis in housing, as aging, failing HOAs with insufficient funds to maintain the infrastructure turn to traditional government to solve their problems. When HOAs cannot be maintained, blight and crime increase. Property tax bases decrease along with property values.

Evan McKenzie has explained this well in Beyond Privatopia. Local governments will have to pick up at least some responsibility – and cost – of repairing crumbling roads, correcting poor drainage that leads to flooding, increased police protection for crime-infested areas, increased strain on the courts related to crime and HOA-related lawsuits, etc.

I will give you a real life example. My former HOA in Florida had a developer-owned water & sewer utility which was recently sold to the local municipality and County under an inter-local agreement.

According to the pre-purchase County-funded Engineer evaluation, the water/sewer system was in shambles, the sewer system out of compliance with FDEP since 2010, the water system with a history of sporadic water quality violations and boil water advisories. Two out of four wells were unusable, and two wells were barely enough to meet demand. The entire system needs to be rebuilt – potable and sewer treatment system, lift stations, wells, etc. The system lacks redundancy – meaning there is NO back up if a major component fails. So redundancy must be built in to bring the system up to current code. This will cost in excess of $11 million. There are about 1500 homes and a handful of commercial customers (who threaten to connect to a different utility provider). After the purchase last fall, owners received a 47% rate hike. More increases will follow. So far, it has only been HOA owners affected.

But the local news recently reported that the city who purchased the utility is “broke” and they blame the high cost of acquiring the water utility from the HOA! They are reporting there will be tax increases for City residents! So you see, the people in this municipality are going to have to pay for the former HOA developer’s deferred maintenance of a water/sewer system that is not even used by non-HOA residents.

I recently read that Fairfax County VA is seriously considering taking over maintenance of “larger” storm water ponds in HOAs. Why? Because the HOAs cannot afford to maintain them, and downstream flooding is resulting due to lack of maintenance. Who will pay for this? Fairfax County homeowners, even if they do not live in an HOA.

So, should the Neighbors at War message be aimed only at those who own homes in Homeowners Associations? My answer would be “NO!” It’s a problem for all American homeowners. You will eventually be taxed for the misdeeds of the out-of-control Homeowners Association Industry.