Tag: bad debt

HOA home is security against HOA failure

On a FB advocacy group, a member offered advice to another who was in a late payment dispute with their HOA and being sued. She said pay in protest, which is nice but leaves loose ends and can be, and will most likely be, rejected by the HOA.  I replied:

Interesting and I hope it works. Way back an aggravated homeowner in dispute who refused to pay assessments was sued. Rationally, and applying a fair, just and acceptable solution to debt disputes, told the judge that she would place the owed money in escrow until the case was resolved. The judge said, NO! That was way back in 2003 and things are a little bit better now, and there is another judge. Make the plea to the judge and not the HOA.

I’ve come to believe that state legislatures regard HOAs as a state security interest – in contrast to a national security interest– and can impose what amount to martial law that allows the curtailment of your rights and freedoms. In short, it seems that the HOA could not be allowed to fail so pay up or die. At the cost or your home and all your equity in foreclosure. Talk about intimidation!

YOUR HOME HAS BEEN PLEDGED AS SECURITY TO THE HOA, without saying so in your “fully agreed upon’ CC&Rs!

HOA foreclosures and unclean hands

I’ve come across a few cases involving the markedly low HOA auction price as compared to the market value of the home. Previously, I compared this situation to the US Supreme Court’s finding that punitive awards more than 10 times the damages violates the 8th Amendment and constitutes cruel and unusual punishment. (See State Farm v. Campbell, 538 U.S. 408 (2003)). But other decisions pertaining directly to foreclosures, which did not address the 8th Amendment, are also to be considered.

In the 1984 Tennessee Supreme Court non-HOA case, Holt v. Citizens Central Bank (688 S.W.2d 414), the court reversed long standing doctrine regarding foreclosure sales.  The view that “a price of ten percent of the fair market value would probably shock the conscience of any court” and “that inadequacy of consideration so great as to shock the conscience of the court, standing alone, was sufficient to warrant voiding the sale” was thrown out.  In place, the court held, along with decisions in Texas and North Carolina, that

If a foreclosure sale is legally held, conducted and consummated, there must be some evidence of irregularity, misconduct, fraud, or unfairness on the part of the trustee or the mortgagee that caused or contributed to an inadequate price, for a court of equity to set aside the sale.

The question for homeowners in foreclosure is whether or not the HOA comes with unclean hands[i]?  Are there elements of “irregularity, misconduct, fraud, or unfairness” on the part of the HOA?

In the Tennessee 2011 appellate case, Brooks v. Rivertown (No. W2011-00326-COA-R3-CV memorandum decision[ii]), the court upheld the denial of an HOA foreclosure because the HOA could not specify an exact amount owed. It upheld the Holt decision since it found irregularities in the HOA’s bookkeeping; and the HOA also failed to follow its required 30-day notice in non-judicial foreclosure, amounting to unclean hands.

For those in foreclosure, you need to ask for an accounting by the HOA, which must show your legitimate challenges to the HOA’s recordkeeping, like I paid but the HOA ignored me, etc.

Notes

[i] “The principle that a party cannot seek equitable relief or assert an equitable defense if that party has violated an equitable principle, such as good faith.” Black’s Law Dictionary, 7th Ed.

[ii] A memorandum decision means that no new law was made, and that just old law was applied.  Consequentially, there is no reason for binding precedent status.

CAI admits desirableness of HOAs on decline

Now that hard times have come upon us, the weakness and high risk of living in an HOA has become readily apparent, and too late for all those living in HOAs. The coerced acceptance under false pretenses, and the all too eagerness for people to believe, hid the reality that HOAs are like privately held small businesses and partnerships that expose the owners to high financial risks not of their own doing.

As I wrote,

The pro-HOA supporters’ reason for the need for foreclosure rights can be found in the defective HOA legal scheme that is similar to a partnership. In partnerships there are a limited number of financial supporters, the owners, who are jointly and severally responsible for all the HOA debts — those with the money pay for those without the money. A legality. And like a privately held small business, the financial base is relatively small and limited to the homeowners who have very little practical means to escape their obligations by leaving the HOA. (Call for HOA action: “Occupy Wall Street” vs. Occupy the Legislature).

Like those caught in privately held businesses and partnership “gone south,” there is very little that can be done for homeowner-investors in HOAs. HOA foreclosure is unjust and lacks any evidence to salvage an HOA. Those very same laws that gave the image of safe investments and a happy community are at the heart of the problem. You know, like the banks giving away all those almost free mortgages.

HOA justice: dues must be paid no matter what!

This Pennsylvania case explains why homeowners cannot withhold HOA payments even when in a dispute. Understand that while a dispute over a credit card charge may be put on “hold” by filing a certified letter, this FDCPA protection does not apply to HOAs. (Nor can your unpaid assessments be wiped out by bankruptcy).
The trial court’s Opinion correctly sets forth why the substantive and procedural law supports the grant of the Motion [summary judgment for the HOA], and cites Mackenzie [PA case] for its legal explanation that: assessments are due and payable by the homeowners; the issues raised concerning the propriety or legality of those assessments are neither properly litigated in a suit for the collection of those assessments nor properly withheld for such reasons; and the homeowners contesting the assessments must seek remedies other than self-help or non-payment, such as a declaratory judgment action. [In short, a “must pay” no matter what rule.] As a matter of settled substantive law, the Opinion explains why these ancillary issues raised by Appellants cannot be used as a defense against non-payment.

Footnote 8, in part, further explains, “Although Appellants’ ancillary [not directly related to the case] issues allege improprieties and/or illegalities of the assessments, such issues are not a defense for non-payment and cannot be used to delay payments that are due as a matter of law to the Association.”

Fawn Ridge Estates HOA v. Carlson, (Pa. Cmmw., No. 1462 C.D. 2010, July 25, 2011. (Not for precedent).

Why isn’t this very serious legal doctrine, one with important issues of a surrender of one’s rights to the HOA — one that the average person would expect to be just, fair and therefore a valid law — not  disclosed to the potential HOA home buyer? This disclosure is made more important because the HOA obtains its powers under an adhesion contract that suppresses the rights and freedoms available to the people who do not live in an HOA.

It will be made part of The Truth in HOAs Disclosure Agreement.

Comments on CAI opposition to FHFA ban on HOA transfer fees – Notice 2010-N-11

Community Associations Institute, CAI, distributed its Oct 10, 2010 release in opposition to HOA transfer fee ban by the Feds — disguised as a generic appeal for the desperate need for property transfer fees to help mismanaged HOAs.    That’s “mismanaged” and mis-educated by the national educator of HOA boards, homeowners, government and everybody else — CAI.

It’s surface argument, designed to create fears in the minds of unknowing readers, is that the transfer fee gives HOAs much needed income, and the ban will take away what is a right of the private business HOA. The proposed Fed regulation would ban mortgage lenders from dealing with property sales subject to transfer fees.  Implied is that the HOA, like public government, must not be allowed to fail.

Here are a number of questionable statements from the national educator, controlled by lawyers.

1.  For HOAs to comply with the ban on fees in order to get mortgage lenders, CAI claims that the CC&Rs would need to be modified by the “standard” 2/3 vote, a near impossibility.  Well, not so. Most HOAs just take this on as a board decision, defending themselves by declaring that the CC&Rs allow the board may charges fees.  Period.  And if the CC&Rs were modified to include the new transfer fees, what’s the problem?  What say you, CAI?

2.  That these fees have been helped to fund reserve accounts is another CAI claim.  I say, What reserves?  I say, What “reserves for bad debts” standard AICPA procedures has been taught by CAI and used by HOAs to protect against income shortfalls?  None!  (See Using Bad Debt Accounting in HOA Budgets).  So, poorly managed HOAs by boards with defective and incomplete education resort to “socking it to them,” the sellers who will receive no consideration for the fee,. It goes to the HOA and the seller receives no benefit, except for the “payoff” to be able to sell his home.  Furthermore., some HOAs have been advised to stick it to the buyer by placing this payment as one that the buyer must pay into the sales agreement.  WOW!!  Where does the HOA get the nerve to impose on third-parties a cost of buying into the HOA, when there is no contract beyond buyer and the HOA?

3.  And CAI offers the “carrot” to existing homeowners, as if they are not subject to the fee.  CAI states that it will help “financially strapped community associations keep monthly assessments low.”

4.  With this release, CAI continues to promote the New America of HOA-Lands with its authoritarian, undemocratic private governance operating outside Constitutional protections for homeowners.  See Understanding the New America of HOA-Land.

5.  CAI should be investigated for a pattern of activity that supports subversive local governments that deny constitutional protections, sold under questionable methods —  the lack of informed consent and information about life in HOAs.

Ref:  

Notice of Proposed Guidance on Private Transfer Fee Covenants (75 FR 49932) 

Notice 2010-N-11 10/15/2010