Category Archives: HOA

A New HOA Book Comes Out

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More and more people who’ve been burned by their Homeowners Associations are going public with their horror stories. The latest is from a resident of Las Vegas, Robert Stern. His book is entitled, “HOA Wars: What Happens in Vegas Can Happen Anywhere.”

Stern owns several houses in different parts of the country. But because he travels among them he’s run afoul of HOA boards that raise complaints that a Stern home isn’t being properly maintained. This, despite the fact that he pays dues which are supposed to pay for property maintenance. For retired people (who are often the ones targeted by abusive HOAs) being a snowbird can be dangerous. Some HOAs, notably in Nevada, have actually outlawed homeowners who aren’t full time residents.

Yes, folks, the HOA movement is getting scary. But it’s encouraging to see more and more people step up and tell the world about their own HOA nightmares.

“You have enemies? Good. That means you’ve stood up for something sometime in your life.” -Winston Churchill

(link to Stern’s new website on HOA Wars)

 

Judge Rules Frisco City House Can Stay in HOA While Civil Case Pending

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guest blog by Deborah Goonan

On October 31, 2014, a District Judge in Texas ruled against a demand by a Homeowners Association that a group home in the neighborhood be shut down. City House has 8 residents, young women who would otherwise be homeless. But the legal battle is not over.

A report from the Dallas News which discusses key arguments in the dispute is linked below.

Chad Robinson, who represents the Plantation Resort 2 Homeowners Association, claims that neighborhood deed restrictions require that homes only be used by single families, people related by blood or by law. He acknowledges there are exceptions for such things as nannies or single renters. But he says eight unrelated women in a transitional living program cannot be considered a single family.

Monica Velazquez, attorney for City House, argued that the non-profit transitional living program operates similar to a single-family unit. “It’s what the home is being used for, not who gets to live inside.”

Darlene Horan, HOA Board member and Real Estate Agent, offered the usual, predictable testimony that if the rules aren’t followed, home values will plummet.

But where is the evidence behind such a claim? And what is the underlying intent of this testimony?

Ms. Horan’s argument is eerily similar to fear-mongering marketing claims of the 1940s-1960s – that families who are ‘different’ from the norm will ruin the neighborhood for everybody. “There goes the neighborhood!” The old fear tactic being used again, albeit in more covert fashion.

Instead of fretting about racial diversity, per se, now some HOAs are fretting about “single family use,” and attempting to conjure up a new definition of family designed to exclude certain types of households from moving into Utopia.

You can be certain that the City House residence will remain a target of this HOA board while a civil case is pending.

(link to Dallas Morning News story on City House)

 

CAI Law Firms Fight Back

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CAI lawyers in Florida (and most likely elsewhere) are whining about one of the few court decisions that ever favored a homeowner against an HOA. It’s a case where the homeowner wrote a check for $840 with the notation, “in full and final satisfaction (of disputed amount).” The homeowner included a letter with the same basic language.

The HOA attorney instructed his clients to cash the check, but only apply part of it toward the original disputed amount. An Appellate Court has now ruled that since the check was cashed, the HOA cannot go after the $38,000 in additional fees it claimed was owed by the homeowner.

This is another one of those trashy HOA scams that have given the industry such a horrible reputation among American homeowners. If a homeowner claims, rightly or wrongly, that an HOA fine was improperly assessed, the HOA immediately begins tacking on late fees, fines, attorney’s fees, collection costs and interest. Florida law forces the homeowner to pay the most recent fees first. In other words, interest, collection costs, lawyers, fines, late fees, and only then can the homeowner ever repay the original debt.

It’s a beautiful system which has worked well for generations of Mafia families and for low-life debt collectors. While the debtor desperately tries to pay his original debt, the associated fines and interest keep rising, as do legal fees and collections. It’s a daisy chain that’s impossible to break. It’s a massive money maker for lawyers and collections agencies who, while doing absolutely no work, can raise their charges indiscriminately and perpetually until the homeowner is broken. Of course, the HOA prances in and seizes the home which it promptly puts up for auction. The lawyers then begin picking through the estate of the bankrupted homeowner. The system is fundamentally unfair to the individual homeowner who never has a chance to plead for his own day in court.

So in this rare decision where the Court ruled in favor of the homeowner, the tears and gnashing of teeth are being heard throughout the CAI community.

(CAI firm’s warning to the HOA industry)

 

National Association of Home Builders’ Federal Agenda

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guest blog by Deborah Goonan

To further challenge the misguided notion that buyers, owners, and residents in HOAs need no federal legislative policy, we will now examine what NAHB is doing on the Congressional level. Although NAHB’s scope and mission is more broadly defined, and encompasses the multi-family rental sector, a significant portion of new residential construction designed for home ownership will undoubtedly be governed by HOAs. Therefore, this analysis has relevance to HOA Reform efforts.

In March 2014, NAHB conducted its “Bringing Housing Home” campaign. Regional conferences were held for the purposes of allowing NAHB members to meet with their respective Congressional leaders to discuss important federal issues for home builders.

NAHB addressed four Priority Issues:

1) Housing Finance Reform:

On this issue,  “NAHB has made recommendations to Congress outlining a plan by which Fannie Mae and Freddie Mac would be gradually phased into a private-sector- oriented system, where the federal government’s role is clear, but its exposure is limited.”

NOTE: While CAI appears to oppose expanded privatization of mortgage financing, for fear that such a system would result in unfavorable lending standards for HOAs, NAHB appears to more fully embrace it.

While both NAHB and CAI insist upon a federal role in housing finance, they fail to support a federal role in oversight of governance and management standards for those communities.

2) Immigration reform:

NAHB states that “foreign-born workers account for 22% of the construction labor force nationally,” and NAHB contends there is a current labor shortage. Therefore, NAHB favors an immigration policy that will remove the current cap of 15,000 immigrants for construction industry. They further urge Congress to enact legislation “… preventing state and local governments from creating their own versions of verification requirements for employers. This is essential for any business that operates in multiple states.”

If NAHB is successful in convincing Congress to relax E-Verify standards for immigrant construction workers, what might this mean for HOA buyers? NAHB seems to be making the argument that labor shortages are driving up construction costs, but does not state that increasing the labor supply will result in lower sale prices for buyers. At this point, there does not appear to be a shortage of available homes for sale. The main purpose of NAHB lobbying appears to be aimed at reducing labor costs for home builders.

Yet there are no legislative efforts by either CAI or NAHB to reduce operating costs for HOAs. Indeed, Developers and CAI-backed HOA Boards want to maintain carte blanche on their ability to generate revenue from homeowners the form of regular and special assessments. It is up to owners in HOAs to press Congress for reasonable limitations upon the HOA’s ability to demand ever more money, with nothing to show for it.

3) Tax Reform

NAHB favors maintaining the Mortgage Interest Deduction on first and second homes, and maintaining Low Income Housing Tax Credits for construction of multi-family rental housing.

So why not extend a comparable tax deduction to homeowners in HOAs for assessments – at least the portion that pays for services that would otherwise be provided by local governments? After all, to some extent, HOA homeowners are subject to double taxation. Why should non-HOA taxpayers of similar size homes have a tax advantage over HOA homeowners?

4) Flood Insurance Reform

NAHB successfully lobbied Congress to pass legislation that keeps flood insurance rates affordable in the short term, while buying more time to reevaluate flood maps.

On the surface, that appears to be a good thing for some homeowners in high-risk flood zones. But at the same time, this new legislation has not provided any mandate or disincentive that would prevent Developers from continuing to build in flood prone areas.  In the future, inevitable increases in rates will hit HOA owners hard. If FEMA continues to remain underfunded, all taxpayers will feel the pinch.

In conclusion, for every major federal legislative issue that CAI and NAHB pursue, there are related or competing federal issues for HOA owners and residents that have been largely ignored for decades.

Isn’t it high time we change that trend?

(link to NAHB assessment of 2014 election)

(link to NAHB Federal Lobbying Campaign)

To Spark Some Financial Brainstorming

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I just finished taping a TV interview in Denver on the future of Homeowners Associations. The host generally agreed with me that a financial tidal wave is coming that will slam into the nation’s housing market. It will begin with a collapse of the U.S. mortgage industry and HOAs will be the first to be decimated. With the unprecedented amount of federal debt, the ending of quantitative easing, Japan’s weak-kneed attempt to begin its own form of quantitative easing, Russia vowing to outlaw circulation of the U.S. dollar, China’s weakening international trade, a U.S. stock market trading (weakly) at all-time highs, threats of war in Ukraine, Iran, Syria, North Korea, the US/Mexico border, former Communist leaders predicting a return to leadership in East Germany. All the signals for world-wide financial disruption are there.

Outside the TV studio the host asked me a question I had trouble answering: “OK, if you believe all this is coming, where do you put your money?”

Whew! Talk about a million dollar question.

Some experts are advising stashing savings into commodities like silver, copper, any basic manufacturing materials. Others advise using your spare money to pay down mortgages to help you hold out for the long run. Still others say to get ready for hard times you need 9 months of food and water stored in the basement.

I’m not an economist, not even a great investor, and I’m certainly not a survivalist. But if HOAs are the first to be hit in the coming tsunami, why would a homeowner want to pay off a mortgage in an HOA house? With the massive potential for a troubled HOA to bully marginal homeowners with extra fines, fees, liens, legal fees and collection costs isn’t a paid-off HOA home a prime target for greedy (or desperate) board members and managers? Isn’t a supposedly ritzy HOA neighborhood a prime target for questionable slip ‘n’ fall lawsuits where each owner has to fork up money to pay off judgments and legal expenses?

Add to the mix the Nevada court decision (and pending replication elsewhere) the fact that a super-priority lien (the HOA’s petty fine for unmowed grass) can extinguish the first deed of trust (your mortgage) and you’ve got the formula for neighborhood nitroglycerin. It’s unstable at best.

We’re learning more each day about the risks of owning HOA property. Abusive boards, management companies and complicit law firms have brought all this seeming lack of stability about. So, what is the smart investment in troubled times?

Comments?

I’m all ears.