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City of Irvine-Orange County-California |
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In the February 27, 2000 Real Estate section of Los Angeles Times, Jan Hickenbottom, a vendor to the homeowner association industry , a leader in the lobby group Community Associations Institute (CAI), and a founding director of the lobby group California Association of Community Managers (CACM), responded to a readers concern about their association board ignoring regulations and the Davis Stirling Civil Code with, "There is no state or local agency to make the board comply with the law".
On the same day, Ellen James Martin, stated in her article, Breaking the Mold, to "avoid selecting a community (association) so restrictive that even displaying an American flag on a front porch is prohibited". This violates even the most fundamental civil rights. Herein lies the root of the problem with the fatally flawed Homeowners Association concept. While the restrictive covenants can be enforced by the board of directors of a homeowners association by assessing fines, sanctions and foreclosure upon a homeowner, there is no state or local agency to make the homeowners association Board of Directors comply with the law. The original intent of these governing documents were put in place to protect the best interests of the homeowner and their investments. They were not put in place to be used as a litigation tool against the homeowners. It appears that this is exactly what is happening in associations across the country. Concerns regarding private property rights resonates in the hearts and souls of all Americans. Upholding the preservations of these rights is paramount to ensuring basic freedoms. However, living in an Homeowners Association (HOA) even further bungles the issues of private property rights affecting Americans today. When an individual buys into an HOA they enter into a binding contract/agreement with other property owners called Covenants, Conditions and Restrictions (CCR's). We enter into various contracts throughout our lives - nowhere does the impact of a contract affect us more than when we purchase a home in an association. It is substantially one of the largest investments most consumers make. In homeowners associations - this binding agreement/contract is only as firm as the latest board of directors majority. The CCR's are subject to interpretation by a volunteer board who may have little or no training in handling the corporate formalities of a multi-milion dollar corporation, which is what an association is. When you buy a home in an HOA, you are buying a home in a business as a stakeholder. Would you invest in a stock option run by a group of unknown volunteers? Furthermore, a valid contract requires a mutual promise upon lawful consideration and binds the parties to a performance. The subjective interpretation of the 'mutual promise' becomes a dead end street in an HOA. Any dispute regarding who's interpretation of the CCR's is correct often ends up in costly litigation. Reading the CCR's alone can not possibly enlighten one to the 'politics' of an HOA - or lack thereof. The bundle of rights and obligations one acquires as a member of one of these corporations includes attendance at board meetings and participation in the politics and legislative affairs of the corporation. Most people have better things to do than to leave work only to have to go back to work on the home front attending board meetings and becoming political activists. However, a failure to participate in these member obligations leaves the homeowners and their investment vulnerable. (Read about the recent Simi Valley Le Parc Association where a litigation nightmare virtually ceased maintenance of the common areas/pools and nearly caused the foreclosure of unit owners homes.) With regard to the 'politics' of an HOA, many do not have a mandatory double envelope, secret written ballot process. Nor are they collected and counted by an independent third party. This violates even the most fundamental principles of the rules of order and the importance of which must never be underestimated. The very premise on which democracy is founded can be trampled upon in an electoral process that does nothing to insure its integrity in the election of new board members. Many HOA's also have no mandatory term limits for Board of Directors. Board members may become emotionally entrenched and soon lose sight of serving their constituents. The mindset of one who would enjoy telling others how to live in their homes to begin with, could become the perfect breeding ground for a dictator type to be born. Random, errant and/or heavy handed enforcement of the governing documents as well as the making up of rules as they go along, can result in violations of homeowners rights. Many prospective home buyers do not realize that various Civil and Corporate codes apply to these regimes and may supersede outdated CCR's. The applicable Civil and Corporate codes are often not included in the mountain of documents one must read in the escrow process or preferably - PRIOR to escrow. At least a years worth of minutes of business meetings and financials should be included but are often not. It is impossible for prospective home buyers to gain a fair understanding of these 'contractual' obligations when such pertinent information is excluded and more important, it raises questions as to the validity of the contract. Real estate agents don't always clearly communicate to prospective home buyers the complexities and obligations that come with HOA life. The Department of Real Estate does not set forth any requirements for listing the various housing choices in separate categories - like "Covenant Free" housing and "Covenant Controlled" housing, Home buyers develop an emotional attachment to a home before they realize that it is a part of an association. The HOA amenities (pools, tennis courts, etc.) are sold to them before they are sold the CCR's, Civil Code, Corporate Code, Financials/Minutes of Business Meetings and Member Obligations. When homeowners feel their rights have been violated and/or want to hold errant board of directors accountable under the law - there is no recourse but to resort to costly litigation. It is often said there is no 'association police' and those involved know this. On the other hand - the HOA has the option of imposing fines and sanctions against a homeowner for for any rules they make up or for alleged transgressions of the governing documents. Even as the homeowner might be protesting the supposed violations and subsequent fines, the association could effectively begin foreclosure proceedings on their home. This is no way to live the American Dream. The decades old concept of Homeowners Associations is quickly becoming the black sheep of housing choices. Conflicting servitude's of HOA attorneys, big ticket insurance companies, management companies and various contractors seek to make their meal ticket off of the association and the homeowner soon becomes their waste. The homeowners (through their dues) pay for the association attorneys that can turn around and sue them - even for flying the American Flag. The homeowners (through their dues) pay the premium for the liability policies that might defend even a rogue board of directors. While insurers have a duty to defend, do they have a duty to defend obvious violations of the law? Of course, raising the HOA's premiums for liability policies insures that the insurers meal ticket is now paid, but again, the homeowner pays the ultimate price. The homeowners (through their dues) pay for the management companies who are not required by law to be licensed by the Department of Real Estate and/or certified. The life investments of many homeowners depend upon a management companies knowledge of real estate business, financials and accounting, contracts and various governing documents. While licensed realtors are only involved in the sale of the home, unlicensed and uncertified management companies are pushing the paper and running the daily business and complexities of multimilion dollar real estate holdings. They could do this quite literally, out of the trunks of their cars. The homeowners (through their dues) pay for the contractors who service the associations facilities. They may or may not have been secured through multiple sealed bids but rather referred by the management company who likes to use 'preferred' contractors. The management companies may receive a fee for job referrals. The 'preferred' contractors may consistently underbid other proposals. As a result, 'you get what you pay for' and again, the homeowners pays the ultimate price when work has to be redone - and likely, by the same contractor. HOA's have been referred to as a legalized housing scam. This defacto fourth and lowest level of seemingly unregulated government and the deep pockets of the association (read - homeowners pockets) are attractive money machines. It behooves us all to be concerned when governments can take private property or restrict a persons right to use their property as they desire. Nowhere else are private property rights being uneccessarily restricted more than in HOA's across the nation. While the CCR's are contractual in nature, again, the interpretation of the contract is left wide open. Eminent domain by government pales in comparison to the 'eminent domain' and micro management of lives of HOA members. Whether such micro management is necessary to maintain property values - has yet to be proven. In fact, it would appear to be backfiring in HOA's across the country. Members are sometimes asked why they don't just move? Unfortunately, many have been out priced by the housing market and can not afford to move. It is cheaper to fight the transgression in the courts, even refinancing their homes, to stand up for their rights rather than live as political puppets. Members become apathetic and turn a blind eye or are afraid to stick their necks out for fear of getting their head lobbed off in the process. And who can blame them? Home is where one should be relaxing, rejuvenating and spending time with family. While there may be some HOA's that are successfully applying this new housing model, most are failing miserably. It is no surprise that nearly 80% of HOA's have been or are involved in pending litigation. Litigation is a required real estate disclosure issue and is often not properly disclosed. This opens yet another chasm of potential litigation that leaves the seller, the buyer, the realtor, the association and the management company all pointing the finger at one another. Especially if the litigation results in a large special assessment levied upon the owners. The current HOA concept is inherently flawed and goes against everything we as Americans hold dear - our home, our privacy, our property, our freedom of expression. None of this was given a second thought when devising this new housing model. Those conflicting servitude's mentioned above are the only ones with a vested interest in ensuring some degree of success and attempt to do so with a heavy hand. However, the American people are not likely to succumb and give up these freedoms so easily. |
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P. O. Box 97 San Juan Capistrano, CA 92693 Telephone: (949) 366-2125 Website: http://www.ahrc.com Email: ahrc@ahrc.com |
