Category Archives: HOA Issues

Voting Rights are a hot button issue in US elections – except in HOAs

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guest blog by Deborah Goonan

I follow think tanks from both ends of the spectrum, so I can learn how people see important issues from different perspectives. A few days ago, a Cato article on a proposed Voting Rights Amendment came up in my news feed. (See link below)

But while Americans debate the pros and cons of issuing Voter IDs – do they prevent voter fraud, or do they disenfranchise minority voters? – Nobody wants to talk about universal voting rights for residents of HOAs.

Why not?

That’s nearly 65 million voters, many of them disenfranchised by corporate voting systems that allocate votes per “unit” or “share” owned, Representative Voting Councils, heavy use of proxy ballots, and many unmonitored election processes. Let’s face it. In many HOAs, voting is rigged – in ways that are sometimes technically legal.

Under the current voting system in place in HOAs:

·      Investors can simply “bulk buy” control of the Board,

·      Developers can hang onto control of their affiliate-appointed Board for years or even decades due to various legal loopholes,

·      Board members can intimidate owners into giving up their proxy votes,

·      Ballot boxes can be stuffed, mail ballots “lost” or otherwise mishandled

·      Owners who are delinquent on their accounts for any reason (even fabricated) cannot vote,

·      A handful of Voting Members can legally vote on behalf of hundreds or thousands of owners without any input, and

·      Tenants are almost always not allowed to vote even though they have to follow all of the same rules and create equity for their landlord-owners.

As a result of such shenanigans, millions of Americans are subject to the whims of their often-unaccountable HOA Boards. Collectively, HOA residents stand to lose millions of dollars in wasted or misappropriated assessments, their rights guaranteed under the Constitution, and, in too many cases, even their homes.

http://www.cato.org/publications/commentary/voting-rights-amendment-unnecessary-measure-meet-exaggerated-needs?utm_content=buffer7abd8&utm_medium=social&utm_source=linkedin.com&utm_campaign=buffer

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

Statement from FHFA on Super-Priority Liens

CAI press release – FHFA Move Threatens Homeowners and their Communities

SFR vs. US Bank, NV Supreme Court Decision

HOA Embezzling Comes to Bakersfield

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Because it’s Christmastime, we usually expect a little more embezzling by employees of Homeowners Associations. Michelle Haughton, the accounts receivable employee for the Bear Valley Springs HOA apparently took the word ‘receivable’ a little more literally than her job description intended. The cops won’t say how much money was missing, but it’s greater than $2000. She’s now charged with embezzlement and grand theft.

It won’t matter much to homeowners. They’ll just see a special assessment come along and no one on the board will tell them them what it’s for.

(HOA embezzlement arrest in Bakersfield)

 

NJ Supreme Court: Upholds Free Speech in HOAs

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guest blog by Deborah Goonan

In the recent landmark victory for HOA residents, Dublirer v. 2000 Linwood Avenue Owners Inc., Amicus Briefs were filed on behalf of both Plaintiff and Defendant. While CAI’s Amicus Brief filed on behalf of the defendant was not considered by the court, due to its late filing date, in this blog, for the sake of comparison, I will briefly summarize the opposing arguments, and offer my analysis.

Note to readers who may not be aware: In legalese, the term Common Interest Community (CIC) is used to encompass what we generically call HOAs: homeowners’ or condominium associations, cooperatives, master planned communities, and the like.

On behalf of Dublirer, Frank Askin, Esq., NJ American Civil Liberties Union (ACLU), argues the Court should uphold appellate court’s ruling in favor of Dublirer because:

· Property rights of a CIC are not absolute, and must yield to “fundamental individual rights.” The CIC is not entitled to dominion over its residents. Askin cites State v. Shack (1971), and this particular passage sums it up quite well:

“Property rights serve human values. They are recognized to that end, and are limited by it. Title to real property cannot include dominion over the destiny of persons the owner permits to come upon the premises. Their well-being must remain the paramount concern of a system of law.”

· Constitutional rights to free speech and expression outweigh private interests of the CIC, particularly with regard to political activity.

· Askin equates a campaign for the Board of a CIC with running for public office, therefore there must be a fair process.

o Each candidate is entitled to equal time and opportunity to campaign, using the same methods.

o Reasonable restrictions with regard time and place are permissible, but blanket prohibitions against a particular type of communication are not.

o Rules cannot restrict “too much speech,” by making it inconvenient, difficult, or unlikely that residents can exercise their rights without breaking a rule.

· Askin also references the Planned Real Estate Development Full Disclosure Act (PREDFDA), a NJ statute that states that CICs must protect the health, safety, and general welfare of its residents. Excessive restrictions to Constitutional rights to free speech and assembly can be legally challenged on the basis of failing to uphold the general welfare of those who dwell within the CIC.

On behalf of 2000 Linwood (Med-South) Owners Association, Michael S. Karpoff, CAI-NJ Chapter, counter-argues that the court should find in favor of the Defendant, because:

· Constitutional rights do not apply to a CIC, considered private property

· Constitutional rights are not necessary, because CIC residents can rely upon statutes, contractual rights (the governing documents), and other protections such as the fiduciary responsibilities of the Board.

· If the court allows dissemination of information and speech within or by way of common areas (such as elevators, meeting rooms, or hallways), CICs will then be forced to allow members of the general public to the same access. CAI fears “that will interfere with a primary purpose of the private community – to preserve the peace, tranquility, and aesthetics of the residences.” Karpoff does not explain how he draws such a conclusion.

The Supreme Court, in a unanimous decision, largely agreed with Askin’s arguments on behalf of Dublirer. The Court made an important distinction between people who reside on the premises of a CIC and third parties who visit, with regard to applicability of Constitutional protections for free speech and assembly. In essence, the Court has concluded that those who reside in the CIC constitute the CIC’s public, and therefore, political speech of its residents cannot be excessively restricted in the common areas. Each resident must have equal access to the political process, and the Board cannot use rules and restrictions to skew the process to its own advantage.

Finally, there is judicial recognition that statutes and governing documents do not necessarily offer adequate protection of fundamental rights, guaranteed by the Constitution, for CIC residents.

I wonder about the Court’s reference to those who “dwell” on CIC property, as that seems to exclude CIC Members that own units, but do not reside on the property. Some clarification may be needed on that point.

But, in general, I think the NJ decision opens the door for similar challenges in other states. The political process in general – not just political speech and free assembly – is often rife with unfair election processes, unequal access to voting rights (based upon share of property ownership), abridgement of voting rights for those who allegedly violate restrictions or fall delinquent on assessments.

And if the political campaign process is to allow free expression, then why not also allow free expression in any process to amend governing documents, which are akin to local Constitutions or Ordinances? CIC residents have complained about this vexing problem for decades – Boards commonly find ways to circumvent input from members.

What of other Constitutional rights to due process, with true division of powers – where hearings are conducted by neutral judicial process in lieu of a Board-appointed committee in what amounts to a Kangaroo Court?

CAI can no longer argue with confidence that the Constitution need not apply, or that contractual agreements trump the rights of residents in CICs.

References: (see also attached)

http://www.caionline.org/govt/news/Political%20HeadsUp%20Public%20Document%20Library/Dublirer%20Amicus.pdf

http://www.njlawjournal.com/id=1202677991358/Dublirer-v-2000-Linwood-Avenue-Owners-Inc?slreturn=20141111144542

http://www.northjersey.com/news/n-j-supreme-court-fort-lee-co-op-board-violated-man-s-free-speech-rights-in-leafletting-case-1.1145408

Why Does CAI Lie?

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guest blog by George K. Staropoli

“HOA constitutionality will cause the collapse of CAI”‏

Such statements made in court filings are astonishing! It is a complete refutation and about face to CAI’s propaganda material made for public consumption. It repudiates our democratic system of government and the US Constitution!

What would cause CAI to argue such statements without merit before a state supreme court? Maybe because CAI knows that if HOA constitutionality is accepted and HOAs are seen as state actors or made to become state entities, it would no longer control and dominate the industry. All would be lost!

HOAs would not be lost as CAI has argued from time to time. CAI would be lost! It would have to rethink its public policies, its Best Practices, its training seminars, etc. It would need to include such courses, which are not and never have been in the CAI vocabulary, understanding the Constitution and Bill of Rights, good local government, best city management practices, etc.