Category Archives: HOA Issues

In A Million Years, Never Thought I’d See This Happen

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Colorado is a ‘cool’ state. The University of Colorado was named by Newsweek Magazine as the nation’s ultimate party school. People are healthy, alcohol abuse is low, but this is the first state that legalized recreational marijuana. There are hundreds of ‘maryjane’ stores all over the state.

In Colorado politics, as you can imagine, the heavy population centers are solid blue, the agricultural areas are red. And about the only thing that causes riots and tear gas battles is when crowds of young people are celebrating an end-of-season victory by the Broncos, the Nuggets or the Avalanche. On those nights, damage to store windows and police cars can run into the millions. A ‘cool’ state with an edge.

Our early history had an ugly side, it was the second home of the reconstituted KKK back when the Klan promised it was no longer opposed to the presence of the Negro race. Our history is checkered with 156 lynchings. Interestingly, the Klan only lasted about five or six years here before being run out of the state in the late 20s. And most of the lynchings were of white gold miners who’d gotten involved in fatal confrontations over bar girls, or the ownership of gold claims.

These days, Colorado is racially diverse and probably more tolerant than most other states. Here, we really recognize only two races, those who ski and those who don’t.

Oh, I should tell you there’s lots of population growth and private homes are being built by the hundreds of thousands. For many years, all new development has been in mandatory Homeowners Associations. As a result, we are the de facto “Homeowner Association Central” for the Western Plains. And HOA abuses here are legendary. Everything you see happening in Florida, Arizona, Nevada and Texas is happening right here in Colorado. Some of the largest embezzlements from HOAs in history were right here in the Denver area. In fact, it was here that I first started to write my book, Neighbors At War!

Since our gun laws are pretty loose, and since HOA neighborhoods are so angry, we keep waiting for the first gun violence to break out during the annual HOA meeting. It hasn’t happened yet. With our cowboy mentality, it’s only a matter of time, I suppose.

Meanwhile, I was really stunned to see a new group arise which is trying to get some common sense laws past a legislature that can sometimes do some pretty stupid things. A press release on a proposed HOA law is linked below. The proposal makes so much sense that I predict another eruption from the folks at CAI (Community Associations Institute). The CAI knows our state well, and in the past they’ve screwed up some pretty good proposed legislation.

But see if you don’t think this proposal is based on common sense.

(link to HOA proposal in Colorado)

 

Builders, Professionals seek to avoid liability for Construction Defects, with support from local and state government

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guest blog by Deborah Goonan

Colorado has been making news on HOA websites lately. In direct contradiction to Colorado state law, Lakewood city officials have recently passed an ordinance that prevents condo owners from suing developers for construction defects.

There are two sides to the issue of construction defects. Builders want to avoid litigation in lieu of binding arbitration, with the opportunity to correct defects. They maintain that defects are often minor, or that defects are a result of poor maintenance by the HOA, rather than shoddy construction.

Homeowners, wary of uncooperative Builders that may drag their feet taking corrective action, or may balk at making necessary repairs, are reluctant to give up their legal rights to sue in the courts.

But Builders have an ally in the form of the Colorado Metro Mayor’s Caucus, pushing for statewide legislation that reduces builder liability for construction defects. You see, the Mayors believe that reducing liability for construction defects will reduce building costs, and convince Developers to build new affordable housing in the form of condominiums.

Instead of working in the best interests of constituents, writing legislation with balanced legal protections for condo owners, proposals aim to gut existing statutory rights to file a lawsuit, requiring mandatory arbitration instead. Anyone who has been involved in arbitration knows that the filing costs are substantial, with results usually slanted in favor of Big Business.

Avoidance of liability for construction defects is a hot button issue, so much so that Colorado attorneys are actually encouraging developers and general contractors to include mandatory arbitration clauses in the Condo and HOA governing documents. Attorneys also recommend requiring Developer approval to amend (or remove) that arbitration requirement following turnover to an owner-controlled Board. (See link below)

Critics in Colorado point out that affordability is probably more affected by factors such as student loan debt and stagnant wages, rather than higher building costs involved with obtaining construction insurance.

Meanwhile, on the east coast, there are similar ongoing battles in my home state of Florida.

In Florida, the controversy centers on whether or not developers, general contractors, and design professionals should be liable for construction defects affecting common area infrastructure – roads, storm water drainage systems and structures, street lighting, and other essential elements – that affect the habitability of homes a the subdivision.

In response to Maronda Homes vs. Lakeview Reserve, where Lakeview HOA sought to sue Maronda for defects that resulted in storm water flooding and deterioration of roadways, Developers and construction firms sought to avoid liability for defects to common areas that are “unattached” to the homes, or that do not result in direct damage to individual homes. In 2012, the Florida Legislature passed, and Governor Scott enacted, FL Statute 553.835, preventing HOAs from filing suit to recover damages from construction defects to common area infrastructure. Attorneys and homeowners alike opposed this consumer-unfriendly legislation, but real estate development interests lobbied for its passage, and most state Legislators voted in favor of the amendment. The law basically states that homeowners are stuck with the cost of making repairs to defectively constructed roads, storm water ponds, swales, underground drainage, and the like.

“Too bad – Buyer Beware!”

However, in 2013, the Florida Supreme Court found that 553.835 shall not be applied retroactively in the case of Maronda v. Lakeview. The Court also left the door open for a constitutional challenge in defect suits brought after July 1, 2012, when the law became effective. The statute still stands, awaiting that challenge.

In the meantime, design professionals (architects, engineers, designers, surveyors, etc.) successfully lobbied for passage of their own protective legislation, FL Statute 558.0035, limiting individual liability for professional negligence claims.

Notice that nobody seems to lobby for quality construction, and protection of owners’ health, safety, or financial interests. Instead, Legislative focus is on reducing construction and legal costs for builders and related professionals. While it makes sense to inhibit frivolous defect lawsuits or fraudulent claims, it makes no sense at all to eliminate accountability of Developers and others who designed and created HOA subdivisions for personal profit.

Furthermore, it is outrageous that legislators continue to circumvent the judicial process by passing laws that limit the rights of constituents.

Florida references:

Florida Supreme Court rules that a homebuilder’s implied warranties apply to subdivision improvements that provide “essential services” to homeowners

http://www.lexology.com/library/detail.aspx?g=7c45caa0-800b-4874-b394-b8957310cb50&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+Other+states+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2013-07-24&utm_term=

Florida Condominium Law Protects Condo Owners from Construction Defects

http://www.floridacondohoalawblog.com/2012/05/articles/construction-issues-contractual-disputes/florida-condominium-law-protects-condo-owners-from-construction-defects/

FL Statute 553.835 Implied warranties (effective July 1, 2012)

http://www.flsenate.gov/Laws/Statutes/2012/553.835

Florida Statute 558.0035: Limiting Design Professional Negligence – See more at:

http://www.jimersoncobb.com/blawg/2013/06/florida-statute-558-0035-limiting-design-professional-negligence/#sthash.4j7R4QnE.dpuf (effective July 1, 2013)

Colorado References:

Building lawsuits could be reformed

http://durangoherald.com/article/20141130/NEWS01/141139971/-1/taxonomy/Lawsuits-in-building-defects-may-be-reformed—

How to guarantee the HOA can’t litigate condo construction defect claims

http://www.lexology.com/library/detail.aspx?g=b768d3c2-c021-4701-83eb-59bdc1998b87

ULI Promotes Urbanization, While Developers Prefer Rental Properties To Condos

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guest blog by Deborah Goonan

Members of a recent Urban Land Institute (ULI) panel are reporting high demand for urban housing, both within existing city cores and in densely populated “instant cities” (HOAs), created by developers in suburban locations near mass transit.

The attached article highlights how the major players in American housing policy and the real estate industry are not all on the same page.

Housing policy makers still push home ownership as the endgame, while NAR and CAI lobby Congress to pass FHFA proposals to relax mortgage standards. Meanwhile, developers and investors are shying away from less profitable, more risky condominiums, and engaging in new construction and redevelopment for the rental market.

Housing is becoming less affordable, across the board, as cities become more and more gentrified. If left unchecked, the majority of Americans will left with few housing choices: rent for the long-term in an apartment community, or buy or rent a single family home in a private, corporate-governed HOA.

(link to Urban Land Magazine: Changing Face of Residential)

(link to Urban Land Institute – mission and priorities)

 

More Embezzling, This Time New Mexico

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Yes, I know it’s wearying. But homeowners across the country just don’t realize how vulnerable their unregulated, uninspected, unwatched board members are to temptation. Egads! Give an ignorant board officer or property manager control over several million dollars in HOA funds….tell him or her that nobody’s watching, nobody’s prosecuting. Of course they’re going to steal! They will!  In fact, they’ll steal more and more as long as they think they’re getting away with it. Obviously, I’m exaggerating, but not by much!

The latest embezzlement apparently involves hundreds of thousands of dollars missing from Rio Rancho, New Mexico.

LOL! As I recall, this neighborhood had a very shady reputation right from the beginning. Some very suspicious characters (former Florida swampland salesmen) bought up tens of thousands of acres back in the 50s and 60s for pennies an acre. It was absolutely dry, worthless desert land. They advertised on the radio and in TV Guide, “Buy a five acre ranchette in Paradise for just 199 dollars. Know how I remember? My own parents bought  a parcel . In fact, it’s still in the family’s estate if anyone wants to buy it….cheap!

Anyway, decades later people actually started building houses, and Intel set up a big computer operation there to take advantage of the cheap labor. So fifty years later there’s actually a development….and a Homeowners Association. An Association that’s now complaining because some swine embezzled hundreds of thousands of dollars from the HOA bank account.

Life goes on.

(link to story on embezzling investigation)

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?