Category Archives: HOA

HOA Renters Beware!

      4 Comments on HOA Renters Beware!
guest blog by Dave Russell

Do you think homeowners are the only ones being abused in HOAs? We have long blogged and discussed about the abuses of homeowners in HOAs. But what about those who rent in an HOA? Are they subject to the same HOA abuse? You bet they are!

Actually, renters are sometimes dealt a double whammy when it comes to renting in an HOA. I have heard it time and time again, “Oh great, another slum rental property, with more trashy renters!” Trust me when I tell you, rental properties and HOAs mix like oil and water. HOAs certainly do not roll out the red carpet for renters. Becoming a renter in an HOA is probably about as popular as playing leapfrog with a Unicorn, in most cases – “there goes the neighborhood!”

If the unfounded hostility towards renters isn’t bad enough, what if the landlord adds to it? Some landlords simply fail to inform their new renters that they are a little behind in their HOA dues. Now Mr. and Mrs. Renter, who are just thrilled with all of the amenities in their new humble HOA abode, that’s until they get what I call the “Nasty-Gram” from the HOA stuck to their front door.

Ah, the Suspension of Privileges Notice, that simple and short piece of paper informing the renter that their privileges to the pools, saunas, clubhouses and sometimes parking, have been suspended by the HOA for nonpayment of mandatory dues by their landlord.

Now you may be asking, what is a renter to do? Has the landlord violated the Tenant Landlord Act? In most States the answer to that question is no. The Tenant Landlord Act usually requires the landlord to keep the property in habitable condition. Most of these Tenant Landlord Acts do not address the issues regarding HOA amenities and simply state that the property has to be clean, safe and bug free.

Just like homeowners, the renters in HOAs are left with but one choice, which is suing the landlord. And just like with homeowners in associations, who has the time and money for that? The only difference between renters and homeowners is that the renter can simply move on while the homeowner is stuck in HOA purgatory.

Now just imagine this scenario, you are renting a condo, the doorbell rings and it’s a process server with legal papers. You see, the HOA is foreclosing on the property because your landlord has failed to pay his portion of the mandatory HOA dues. As we all know, some folks live from paycheck to paycheck, and many are already on the verge of homelessness. This leaves renters scrambling for a new place to live as well as paying for the cost of moving, deposits and time off of work to find another place to live.

Here is another frightening scenario where the HOA renter is once again victimized and stuck in the middle of the HOA vs. their landlord. The doorbell rings, again its Mr. Process Server with some more scary legal papers. The HOA has decided that they are going to do an assignment of rents because your landlord has failed to pay his/her mandatory HOA assessments. The court order directs you, as the renter, to send off your rent payments to the association’s law firm. Oh, did I mention that even though you are now paying the HOA, that you are still barred from all of the amenities?

HOA rental properties also seem to attract conmen and scammers. Here in my community, a single mother came in to introduce herself and requested keys to a specific unit. She stated that she just rented the unit through a “house sitting program.” The new renter stated the condo was in foreclosure and she paid a service $500 in exchange for free rent until the unit foreclosed. I personally knew the owner of this unit, and knew that the condo was not under foreclosure. I did some research on the person who signed the lease, to my amazement; it was a conman that I had seen on the news about a year ago.

I can’t tell you how bad I felt when I had to tell this single mother that she was the victim of a rental scam. I did contact one of my reporter friends at KPHO News Phoenix, who promptly blasted this conman’s scam and face during the evening news. This conman’s victims all had one thing in common — every scam he ran just happened to be in an HOA. I suppose it’s preferable to run a scam in a place where the biggest scams in history take place.

HOA Renters Beware! those gated communities, with those glorious amenities, may be a lot more, or a lot less, than you ever bargained for.

http://raycomgroup.worldnow.com/story/24812079/con-artist-accused-of-scamming-several-valley-victims-in-housing-program

Bribes, Kickbacks & Other Forms of HOA Honesty!

      1 Comment on Bribes, Kickbacks & Other Forms of HOA Honesty!

It’s not even an open secret that the typical HOA board member and common area maintenance company probably gets kickbacks from vendors. THEY GET KICKBACKS FROM VENDORS! Get over it. Don’t even question it. It’s about as common as worms on a sidewalk after a spring rain.

Since HOAs make their own laws and since government oversight over such things as kickbacks, bribery, extortion and embezzlement is approximately zero this kind of nonsense will continue indefinitely.

Jan Bergemann, one of the heroes of our movement just posted something unbelievable on his website. Actually, it’s not unbelievable. It’s just sad.

http://www.ccfj.net/CCFJCAMBribe.htm

What Happens When Government Fails to Ensure Quality Construction in HOAs?

      1 Comment on What Happens When Government Fails to Ensure Quality Construction in HOAs?
guest blog by Deborah Goonan

Does your HOA have problems with shoddy construction or defects in common areas such as roads, storm water drainage, street lighting? Did your developer fail to deliver what was promised at the time of sale?

If so, you’re not alone. Check out the video reports linked below. Hidden Lake Estates HOA in Sherwood, Arkansas, has issues with poor drainage, causing owners’ yards to flood every time it rains. At Stone Hill Estates HOA in Durham, North Carolina, the Developer has left roads, sidewalks and storm water drainage systems unfinished for several years.

Owners from both HOAs have appealed to city leaders to help resolve these issues. In both cases, the Cities initially balked at getting involved. However, one council member from Sherwood has called for an investigation into storm flooding at Hidden Lake, and a judge in Durham recently ruled that the City help pay for unfinished work at Stone Hill. Protracted battles will likely continue. These are just two examples, but this is becoming a common problem all over the country.

Who’s responsible, and who should pay?

During the building boom of the last decade, plenty of planned developments and condominiums were hastily approved and built to keep up with growing buyer demand. Additional contractors were hired, and some of them lacked sufficient skills. When the dust settled, problems began to appear.

It’s clear that architects, design engineers, and developers ultimately bear responsibility for the quality of their work and that done by their construction crews, but the obvious unasked question is:

What is government’s role in development of HOAs and prevention of poor construction?

Local development and planning commissions have responsibility for issuance of construction permits, establishment of building codes, inspection of work at various phases in the project, and issuance of occupancy permits upon successful completion.  In many cases, additional state and local agencies, such as the Department of Environmental Protection also play a role in ensuring development meets health and safety standards.

As taxpayers, we expect our local government agencies to ensure that our homes and major infrastructure of our communities are built to a standard of safety and reasonably sound quality. Unfortunately, as evidenced by thousands of construction defect claims in the past decade, local planners and inspectors quite often fail to do due diligence before, during, and following construction.

Why? Perhaps it is because city or county staff does not have to maintain HOA infrastructure or Condominium buildings. Therefore they are not overly concerned about quality of design and construction, and ease of maintenance.

Worse than that, sometimes our local elected officials undermine quality control policies.

Take the Lakewood City Council of Colorado, for example. (see link) The Council wants to enact an ordinance that would make it easier for Developers to avoid litigation of construction defect claims with HOAs. If passed, the ordinance would reduce rights that currently exist under state law, making it more difficult for HOAs to sue.

Supporters of the City ordinance claim that current state law makes it too easy for owners to sue Developers, drives up the cost of insurance, and makes it unfeasible to construct additional entry-level condominiums for millennial buyers.

So let me get this straight: Lakewood City Council wants to make it easier for developers to avoid liability for shoddy construction, in order for the Mayor and Council to entice Developers to build more Condos (with HOAs). No doubt, the city government’s goal is to increase its tax revenue base, with minimal impact to the city budget. But at what cost to taxpayers and consumers?

In all fairness to Lakewood City, local government politicians in cities and towns all across the nation have adopted a similarly misguided stance.

Dare I say, depending on the politics of local government, committees that vote to approve new construction projects can have cozy family or business ties to real estate developers and to investors?

Attorneys representing all sides of ensuing controversies – developers, engineers, construction companies, HOAs, owner groups in HOAs – are the only clear winners when local government fails to prevent shoddy or unsafe construction in the first place.  Owners of HOA properties often find themselves stuck with unresolved problems, damages to personal property, uncooperative Boards, special assessments to cover fees for attorneys, and possibly even higher property taxes.

In HOAs, owner financial responsibility for common areas often leads to common headaches.

(link to video of defective drainage in Sherwood, AR HOA)
(link to video of unfinished development, Stone Hill HOA, Durham)
(link to article on proposed Lakewood, CO ordinance)

The Rental Restriction Quandary in Residential HOAs

      2 Comments on The Rental Restriction Quandary in Residential HOAs
guest blog by Deborah Goonan

One of the most controversial battles in residential HOAs and Condos centers on rental restrictions. This blog analyzes the arguments for and against rental restrictions in HOAs, and why the ratio of tenants to owners in Associations has become a hot button issue.

The argument against rental restrictions

Like many Americans, I have owned homes in HOA-free neighborhoods, and I lived in these homes as my primary residence. However, when employment opportunities took my family to another state in the midst of the recent real estate bust, we found ourselves unable to sell our home of 14 years. Fortunately, we were able to lease the home to another family for about a year and half, until the market improved, when we were able to sell. I don’t know what we would have done if we had been forced to keep the house vacant due to rental restrictions that are often imposed by HOAs.

A vacant house or condominium presents financial challenges – hiring someone to maintain the yard and periodically check on the property; winterizing in cold climates; keeping the house cool and mold-free in warm, humid climates; prevention of vandalism and squatting; and increased property insurance rates.  Renting the home covers most if not all of the carrying costs, allows owners to deduct some of their expenses from income taxes, and, if the tenant is properly vetted, keeps the property relatively well maintained.

But what if your HOA restricts rentals in your community to just 5% of homes? One woman in a Pennsylvania HOA is now challenging her Board because, as explained in the story linked below, the Board of Freedom Woods HOA, a community of 275 homes, has enacted that rather draconian rental restriction without a vote of its membership. The Association attorney claims the Board has the authority to enact these restrictions under the “business judgment rule,” however now that the HOA has been challenged, he is also recommending an amendment of the Declaration. (CC&Rs)

Aside from the issue that the Board may have overstepped its boundaries by unilaterally creating rental restrictions, when a formal amendment is most likely required, there are larger considerations.

What about the property rights of individuals to rent their homes? In HOAs, that right is simply not guaranteed. It is very common for HOA and condo associations to cap the percentage of units rented to 20-30%, but, as this example illustrates, the restrictions can lead to enforcement of any arbitrary ratio decided by the Association, including an outright ban.

Why would owners want to discourage rentals in HOAs?

The flip side of the argument in favor of restricting rentals is that when the number of rentals exceeds a certain ratio (currently not more than 50% for FHA), many buyers cannot qualify for financing, thereby reducing the marketability of homes. And then there are the somewhat debatable arguments that too many rental properties result in a less stable neighborhood with a transient population, and that properties tend to be less well maintained by renters than owners. All of these factors are believe to drive property values lower.

Additionally, let’s consider why HOA and especially Condo and Townhouse communities tend to evolve toward a relatively high percentage of rentals, when compared to HOA-free neighborhoods.

During the recent economic downturn, many owners became reluctant landlords. But very few non-HOA neighborhoods changed from primarily resident-owners to tenants with absentee investor-landlords. For the most part, people who rented their single-family homes were those that had no other viable economic alternative.

On the other hand, a significant number of HOA buyers never intend to live in their units. It is common for investors to purchase multiple properties within the same community, particularly in locations that are in high demand, gaining voting rights for each unit. In short, they acquire a significant share of the corporate HOA, in order to obtain greater control over the community. The more they can affect the direction of the Board (often serving on the Board) the more control they have over variables that affect their profit potential.

Typically, investors buy units at low prices, hoping to sell later at a profit, and generating rental income during the holding period. Sometimes they buy early in the process to take advantage of price incentives. Often they will purchase in a depressed market, or in transitional communities – where owners are moving to newer homes or more desirable locations. HOAs or Condos that occupy valuable land are particularly attractive to investors or developers. Once they purchase several units, investors can entice or pressure existing owners to sell to them, sometimes at a low price. Over time, a few investors can acquire a majority of units, perhaps even enough to stage a hostile takeover by voting to dissolve the Association. After dissolution, investors are free to redevelop and convert to different, more profitable residential or commercial uses.

Of course, that is exactly what we see happening in HOAs, and especially condominiums. Notably, in the state of Florida, investors can vote for dissolution with an 80% voting interest. So it is little wonder that HOA owners fear the increased presence of tenants in their communities.

A new kind of block busting?

Investor influx and takeovers are rarely seen in HOA-free neighborhoods, where owners cannot accumulate multiple votes within the voting jurisdiction. There is no corporate Board, and votes at the municipal and county level are allocated one per resident rather than based upon shares of property owned. In other words, there is no inherent advantage to acquiring and holding onto multiple homes within a defined geographic neighborhood.

A review of history prior to passage of the Fair Housing Act in 1968 calls to mind the once-profitable practice of block busting. Although economic circumstances and owner fears are somewhat different nowadays, it certainly appears that real estate investors and developers have seized upon a similarly profitable but onerous process in HOAs.

The controversial decision in your HOA

No matter which side of the issue you favor, if you are part of the voting minority, you must abide by whatever the majority decides. If most of the owners are full-time residents, the Board may easily convince them to restrict rentals, with the consequence of limiting owner rights in the future.

But keep in mind that sometimes a minority of individual owners is the voting “majority.” If a few individuals just so happen to own multiple properties, they control the vote. And if most of the properties they own happen to be rentals, then they will most likely favor lax restrictions that could lead owners to migrating out of the HOA, and making the community vulnerable to decline and investor takeover.

Definitely a quandary.

How to Create Conflict & Drama in Your Community

      6 Comments on How to Create Conflict & Drama in Your Community
guest blog by Deborah Goonan

A Tongue-in-Cheek Guide for HOA Boards & Managers

1.     Create as many rules as you can, the pickier, the better.

a.     Be sure to create rules in closed session rather than an open meeting.

b.     Optional: provide an announcement of the new rules only AFTER you  have put them in effect. Then ignore any objections.

c.      Rules created hastily as a knee-jerk reaction are guaranteed to cause maximum conflict.

2.     Be inconsistent about enforcing the rules.

a.     Allow friends and family to break rules. They will help you stay in power.

b.     If you are a Board member, you can make up your own rules. If anyone challenges you, tell the resident you are entitled to special privileges for doing such a thankless job.

c.     Use penalties for breaking rules as a weapon against residents you do not like, especially disgruntled troublemakers, or anyone who does not “fit in” with your expectations.

3.     Drive through the community actively looking for violations, so you can start sending nasty letters and charging fines.

4.     Encourage residents to turn in their neighbors for various violations of rules.

5.     Be especially vigilant about citing the following groups with rule violations: the elderly, people with disabilities, single parents and their children, veterans, racial and ethnic minorities, and any resident that dares to question your competence, ethics, or authority.

6.     Treat members like wayward children. Play the role of Strict Parent by scolding or talking down to them.

a.     Post stern reminder notices about not breaking rules in public places and in the newsletter.

b.     Repeat the mantra “the rules are the rules, and must be followed.”

7.     Alternative: treat members like insubordinate employees. Play the role of Authoritarian Boss. Use bully tactics, swift and harsh penalties, and always speak in condescending tones. After all, you must keep the residents in line.

8.     Find an unscrupulous HOA Attorney, and then keep him or her busy escalating disputes and running up legal fees for violators and the HOA.

9.     Authorize expensive contracts for unnecessary “emergency” repairs and renovations, without a vote of residents.

a.     Do not waste money on “boring” maintenance and repairs such as cleaning gutters, fixing plumbing leaks, or seal coating roads.

b.     Focus your attention on “window dressing” and “fluff” instead.

10. Issue a special assessment to cover excess legal and maintenance costs.

a.     Then move swiftly to lien and foreclose on residents that cannot afford to pay the special assessment.