Tag: board of directors

HOAs operate under a cloak of secrecy

My excerpts from the Abstract of an excellent Memphis Law Review article.

Homeowner associations (“HOAs”) operate under a cloak of secrecy where innocent and unwitting owners have money extracted from their wallets, and then are subjugated to the dominion of potentially wasteful and extravagant expenditures authorized by condescending HOA board members.

In the modern era, HOAs are marketed as establishing desirable communities through the imposition of covenants, conditions, and restrictions (“CC&Rs”) and rules in a neighborhood, with the purported outcome of enhancing quality of life and property values. To help accomplish this unsubstantiated and unproven utopian vision, buildings or neighborhoods controlled by HOAs are subject to the imposition of HOA dominion via CC&Rs upon the underlying property as well as ad hoc rules and regulations.

This exercise of dominion and control, administered by a Board of Directors or Executive Board (“Board of Directors”) is purportedly undertaken in the interest of fulfilling the goals of the HOA. With the powers vested in the HOA Board of Directors to regulate behavior, impose sanctions, and assess fees, the HOA is tantamount to an omniscient, omnipresent, and omnipotent deity.

Source: “The Homeowner Association: A Descent Into Dante’s Inferno Palliated By A Summons To Improve The Hate-Hate Relationship Through Transparent Disclosures,” The University of Memphis Law Review Vol. 54, p.43, Bradford P. Anderson.

Will Transparency Act chill HOA survival – no board volunteers?

Community associations were not given one of the twenty-three (23) exemptions under the Corporate Transparency Act (“CTA”).  CTA requires  businesses that meet certain criteria must submit a Beneficial Ownership Information (BOI) Report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), providing details identifying individuals who are associated with the reporting company.

CAI filed an amicus brief seeking HOA exclusion from reporting under CTA. (CAI Amicus Curiea, National Small Business United v. U.S. Treasury,  No. 24-10736, 11th Cir. (Ala.) 2024.) In sum CAI argued, “Homeowners will no doubt be reluctant to volunteer in light of the potential Orwellian consequences imposed by the CTA.”

In  researching the CAI brief, I do not address the issue of CTA and HOAs; CAI makes that argument.  My analysis addresses 2 aspects of the CAI brief:

  1. CAI’s candor to the tribunal (Code of Professional Ethics, R 42, E.R. 3.3 violation) in regard to misrepresentations as to what CAI is and what it does (Section I), and as to what HOAs are and do.
  • An implied defect in the HOA governance model relating to the need for unhindered, unpaid, volunteer boards of directors without whom HOA governance fails.

CAI  CANDOR

CAI continues to make broad, unsupported, half-truths as to it nature that can be found in many of its amicus briefs.  CAI claims (my emphasis):

“The Community Associations Institute (“CAI”) is an international nonprofit research and education organization formed in 1973 by the Urban Land Institute, the National Association of Home Builders, and the United States Counsel of Mayors to provide the most effective guidance for the creation and operation of  condominiums, cooperatives, and homeowners associations

“an international organization dedicated to providing information, education, resources, and advocacy for community association leaders . . . . CAI is the largest organization of its kind, serving more than 75.5 million homeowners who live in more than 365,000 community associations in the United States.”

“CAI submits that there [sic] experience in representing and supporting community associations . . . and understand the make and needs of the various community associations.”

“The primary role of community associations is to manage the common areas of the community, i.e. fix the roofs, maintain the lawns, shovel the snow, insure the buildings, etc”

Not mentioned is CAI as an IRS 501(c)6 business trade group that does not and cannot have HOAs per se as members, and was formed to combat growing problems with the HOA scheme back in 1973. In 1992 CAI dropped its education tax-exempt status to become a trade group so it could lobby more effectively. See Stable’s Community Associations and McKenzie’s Privatopia on origins of CAI.

HOA SURVIVAL — UNPAID VOLUNTEERS

“CAI submits this amicus brief on behalf of its members who recognize that the sustained health of the community association form of ownership in the United States depends in large part upon the willingness of owners to continue to serve on their associations’ volunteer boards to make their homes and communities better places to live.” 

“Volunteerism is the backbone of every community association. Board

members are not paid for their service. CAI respectfully submits that volunteer homeowners will be less likely to serve in that capacity if they are required to file a beneficial ownership report with the Government.

“Homeowners will no doubt be reluctant to volunteer in light of the

potential Orwellian consequences imposed by the CTA”

The above is a major defect in the HOA scheme based on an unreal requirement for active volunteerism that is not supported by the lack of involvement in public government.  It’s a call to utopian ideals and behavior.

REALITY CHECK

Question:  If CTA applied to HOAs, would you serve on the board?

The loss of American spirituality: a lesson for HOA leadership

Institutionalized religions have failed the people, focusing on bible interpretations and ritual; government has failed the people, adopting “God is dead” public policy. What has become of the Golden Rule? “In everything, do to others what you would have them do to you.” (Matthew 7:12).

“When someone has been given much, much will be required in return; and when someone has been entrusted with much, even more will be required.” (Luke 12:47-48).

The Gospel of Wealth (1889), Andrew Carnegie,* a lesson for HOA leadership and boards of directors.

“This then, is held to be the duty of the man of wealth: To set an example of modest, unostentatious living, shunning display or extravagance . . . to consider all surplus revenues which come to him the man of wealth thus becoming the mere trustee and agent for his poorer brethren . . . which, in his judgment, is best calculated to produce the most beneficial results for the community . . . doing for them better than they would or could do for themselves.”

It is easily demonstrated that the HOA legal scheme has not created a better community or a better America.

* Andrew Carnegie was an American industrialist and philanthropist. Carnegie led the expansion of the American steel industry in the late 19th century and became one of the richest Americans in history. He became a leading philanthropist in the United States. His 1889 article proclaiming “The Gospel of Wealth” called on the rich to use their wealth to improve society, expressed support for progressive taxation and an estate tax, and stimulated a wave of philanthropy.

AZ bill automatically removes BOD if law not followed

Some good news for restoration of homeowner control of the boards failure to act in violation of state law.  Arizona bill HB 2607, Sess. L. Ch. 111 added this subsection regarding the removal of the board of directors.

Section 33-1243 for condos and 33-1813 for PUDs:

“(d) If all of the requirements of this subsection for calling a special meeting are met and the board of directors fails to call, notice and hold a special meeting within thirty days after receipt of the petition, the members of the board of directors are deemed removed from office effective at midnight of the thirty-first day.”

Of course, the homeowners must have a set of directors ready to take over and establish the election/appointment of the new board as party of the BOD’s records.

Thanks to Dennis Legere for his many efforts before the Arizona Legislature.

HOA defect: volunteers & boards of directors

There is a serious defect in the HOA model of local governance based on a private contract that requires a board of directors to manage the association through the use of unpaid volunteers. It seems as though the framers ignored the old truism: you get what you paid for. Now don’t get me wrong, there are qualified directors and those with an honest belief in volunteering and pitching in to make their HOA a better place. But the legal structure to often prevents them having any real impact. A topic to be addressed elsewhere at another time.

The framers of the model were well aware that to ask homeowner/members to fork up assessments that included director/officer salaries or compensation would never fly. It would not even fly today. Recourse then was made to the utopian concept, the private commune, where everybody chipped in and did what they were capable for the benefit of the commune. And that required individuals who believed in the model to volunteer their time. Without this above and beyond call for volunteers the mass merchandising of HOAs would have failed.

In order to explain my opinion, I must take members back to 1964 and the framing of The Homes Association Handbook that became the HOA declaration of CC&Rs “bible.”  All HOA declarations flow from this Handbook and constitute the vast boilerplate found in all CC&Rs over the past 58 years.

This topic was addressed in the Handbook. And since the growth in size of HOAs led to incorporation of the associations, the need for a board of directors was mandatory and a solid and necessary requirement. The answer was solved, they thought, by unpaid volunteerism. Further reaching out in order to make the HOA legal scheme work, the demand for involvement in the affairs of the HOA, especially for directors, ran against the national data on citizen involvement in government. (Just check the number of voters in presidential elections as a percent, not of registered voters, but of voter age people, shows on average a 35% turnout.)

As it has become apparent, many HOAs have resorted to “conscripting” members just to sit on the board to meet the statutory and governing document requirements. They are generally YES men, going along with the power clique or president’s wishes. This has led to anyone, qualified or not, to get him on the board.