Category: Opinion

It goes without saying that property values will increase with an HOA. Since there are restrictions on what must be done and what cannot be done to your property, and since there is a duly elected board that is charged with seeing that the restrictions are complied with, property values just have to rise.

That’s my paraphrasing of the view promoted by the real estate special interests over the years to justify to the policy makers and home buyers why HOAs are a benefit to everyone. This view also argues that these benefits outweigh any concern for fundamental rights, liberties and freedoms of the homeowners under the law. “Just follow the money.”

Now, a study of some HOAs in Virginia reveals a different picture. Rather than shouting a broad, generalized, unsupported statement, researchers Laura Langbein and Kim Spotswood-Bright asked if the assessment fees paid to maintain property values actually did that. Are homeowners geting a benefit from their payment of assessments? In short, the answer is NO: property values show a negative affect — loss in value — as fees and services are increased.

The study was the result of the broader, public policy question relating to the efficiency of privatized governments as compared to public government. This approach looks at the costs of any additional benefits from services provided to the community by the HOA to determine if the benefits outweigh the costs. That is, as a result of the regulation and control by either the management company or by the HOA board. These types of studies are studies in economics, in the broad application of governmental approaches to the public in general — to the masses of people — and, contrary to the US Constitution, do not consider principles of democratic government and the affect on individual liberties in the attempt to achieve governmental goals. As the results show, the HOA scheme even fails to produce automatic and pervasive benefits for all planned communities.

See Laura Langbein and Kim Spotswood-Bright, Accountability and Private Governments, Regulation, Spring 2005 (Cato Institute 2005). Regulation.

A survey of the number of appellate HOA lawsuits was taken from the files available on Lexis-Nexis. Six states were initially looked at: AZ, MD, VA – the small states — and CA, FL and TX – the large states. Not surprising, the percentage of cases has grown for 5 of the 6 states, and overall, with California showing a huge jump in cases. Florida shows a minor drop.

As I wrote the California Law Review Commission in March 2005, what makes you think the future will be any different? Steps must be taken to introduce a democratic form of government, with the protections of rights afforded to the people that is inherent in our system of government, and sorely lacking in the state approved and recognized private homeowner association governments.

See Appellate for a PDF file with details.

How did planned communites come to pervade the American landscape over the past 40 years? Who helped form and promote them?

Urban Land Institute (ULI), formed back in the 1936 (originally named the National Real Estate Foundation) by the National Association of Real Estate Boards (now the Nat’l Assn of Realtors) . It’s a nonprofit organization pushing land usage and planning. They are not a political science or government organization, which explains the lack of meaningful public governance concerns within these associations. Reading its joint book with CAI, Community Associations, it clearly states their profit motive and the need for mandatory membership with compulsory dues in order to make planned communities work.

ULI published the original concepts and framework for planned communites in its FHA funded, The Homes Association Handbook in 1966. In 1973, FHA, ULI and the National Association of Home Builders formed CAI because of problems encountered in trying to sell this concept to American home buyers. With growing complaints and published research by political scientists during the early 1990s, CAI revised its objectives and became a business trade organization with the goal of protecting this legal scheme or plan by heavily engaging in lobbying in almost every state legislature.

References:

Donald R. Stabile, Community Associations: The Emergence and Acceptance of a Quiet Innovation in Housing (Greenwood Press 2000)

Evan McKenzie, Privatopia: Homeowners Asociations and the Rise of Private Residential Governments (Yale University Press 1994)

Robert J. Dilger, Neighborhood Politics: Residential Community Associations in American Governance (New York University Press 1992)

The following uses Arizona laws, but most states have an Admin Proc. Act and an Office of Admin. Hearings (OAH).

The APA provides for rulemaking and adjudication procedures for state agencies. State agencies get their authority from the enabling statute and cannot exceed its authority, although agencies are granted broad powers (to be dealt with as a separate issue). Sound familiar to a private government HOA?

OAH is an independent “tribunal” that hears complaints filed with certain agencies. A simple, relaxed adjudication procedure, not requiring an attorney, is applied so the average person can get heard in an independent manner.

In regard to justice:
Essentially the “common” CC&Rs has a provision for a notice to the homeowner and an opportunity to be heard. No specifics are given as to the process, leaving the impression it would be, at least, like a muni or JP court proceeding. The homeowner may or may not get a citation as to the rule being broken, but usually no evidence is provided.

Here’s Arizona state law, ARS 33-1803B: “After notice and an opportunity to be heard . . . .” That’s it. There is no provision as to the mechanism for the judicial procedure. No statement that such HOA proceedings must follow the OAH Code (AAC §§ R2-19-101 to 122), for example.

Summary of OAH trial procedures AAC §R2-19-116, Conduct of Hearing

A. Public access
B. Judge to state nature of violation, parties involved and witnesses.
D. Opening statements.
E. Presenting of evidence.
F. Examination of witnesses and disclosure of all relevant testimony and information.
G. Closing arguments.

Why do the state legislatures feel that this adjudication process to which it holds various state agencies is not applicable to private HOA governments, denying a just and fair procedure to homeowners?

The courts hold you to the governing documents as a binding contract. Arizona statutes, A.R.S. 33-1806 and 33-1256, ask you to sign a statement that you agree that the C&RS, bylaws and Rules &Regulations are all indeed binding contracts.

DO NOT SIGN THIS AGREEMENT. Know what you are buying into, because you may face the loss of your equity or need to move to some other location.YOU MAY BE SURRENDERING YOUR CIVIL AND CONSTITUTIONAL RIGHTS. SEEK ADVICE FROM A COMPETENT ATTORNEY. Have your attorney explain your rights to you. The Arizona Assn of Realtors preprinted form will now be 11 – 18 pages!

Arizona home buyers, protect your rights by asking your licensed Realtor about:

1. Are you protected from HOA lien foreclosure by the $150,000 homestead exemption? This would protect the first $150K of your home equity.

2. Since your assessments pay for the HOA attorney, will the attorney respond to your complaints about the actions of the board? What remedies are available to you if you contest an action or decision of the board?

3. To what government agency you can file a complaint about your HOA board, as you can with doctors, lawyers, contractors, etc.?

4. If you contest a fine for an alleged violation of the CC&Rs, will you be given a notice and an opportunity to be heard by an independent tribunal and allowed to confront the accusers, demanding the evidence in support of their claims? Will this procedure be similar to the state Office of Administrative Hearings procedures for state agencies?

5. Are the HOA elections held in accordance with the same oversight procedures as are the general elections? Does the HOA follow its governing documents, or are they largely ignored?

6. Why did the Arizona Association of Realtors supported a bill that removed buyer notification of his loss of homestead protection, saying that it did not want agents explaining homestead exemption? (Licensed agents are required to pass an exam covering agency, contract and real estate law, and are required to take continuing education courses in these topics every two years).

7. Can the association foreclose on my $200,000 – $700,000 house for as little as a $200 or $500 late assessment payment? Will you get a “work-out” plan as the dreaded IRS offers those who have not paid their taxes?

If the Realtor cannot or refuses to answer these questions, ask them of the Arizona Department of Real Estate’s Consumer Affairs. Call 602-468-1414 x-225.

If the ADRE will not or cannot answer them, call the Arizona Attorney General’s Office’s Consumer Protection and ask them. Call 602-542-5025.