Tag: foreclosure

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

Using Bad Debt Accounting in HOA Budgets

My comments in the Northwest Condo & HOA Blog article, “Using Bad Debt Line Items in Association Budgets” is repeated here. 

The choice by HOA boards of the “cruel and unusual punishment” discrminatory foreclosure right, and  unjust transfer fees, coupled with the “free income” gravy money found in a policy to fine, fine, fine is dispicable.  It is a preying upon the weak and disadvantaged. 

My comments.  
 
“You provided very important info on failure to heed CPA advice on bad debts, and choosing to foreclose instead.  HOA boards are derelict in their duties to act prudently.  Foreclousre is unjust and discriminatory against those with high equity.  And foreclosure is a cruel and unusual punishment for the HOA that has not advanced any hardcash like a bank.”
 
In general, see my Commentary links below.
 
 

Understanding the New America of HOA-Land

I assembled several of my publications into this eBook format (5.5 x 8.5 PDF) to present a comprehensive view of the substantive issues relating to the HOA – planned community legal scheme.  The first 3 booklets represent 16 pages, and the “American Political Government” booklet  is a more detailed presentation of some 45 pages.

The cover reads:

“What you need to know about the political and social effects of HOAs on the American way of life.”

“Accepting authoritarian government over democratic government.”

Table of Contents

1. HOAs as an established institution

2. Proposal for muni-zation of HOAs

3. Is there an ideal HOA “constitution”?

4. American political governments

5. George K. Staropoli

Supplemental ebook material (not included):The Foundations of Homeowners Associations and the New  America.

 

Other publications and information can be found at the Citizens for Constitutional Government web site, http://pvtgov.org.

Do homeowner regulations go too far?

  So his homeowners association levied fine after fine and put a lien on his home though he’d coughed up nearly $50,000 to pay fines and other related costs. Eventually, his home was foreclosed because Darius still owed $24,591.

On Aug. 15 – after losing his one-story home and two days before he would be evicted – Darius’ next door neighbor heard an explosion about 2:20 a.m. Patti McCallister ran outside, saw Darius’ home burning and called 911.

Firefighters found Darius’ badly burned body lying on the floor of his living room in the back of his home.

Do homeowner regulations go too far?     By Matt Tomsic
Matt.Tomsic@StarNewsOnline.com

Sep 3, 2010

 

My Reply:  

HOAs will continue to have serious problems because:

1.  They are based on an  undemocratic authoritarian legal scheme that does NOT place the individual rights and freedoms of the members first, as does our Constitution, but the monetary goal of maintaining property values.

2.   Consequently, this un-American private government  exists outside the Constitution and its protections of the people.  All the legal court battles are attempts to restore those lost rights.

3.   The misleading claims of agreement by homeowners is superficial and would not stand up to judicial scrutiny for the valid surrender of one’s rights.  The mere filing of CC&Rs with the county clerk is sufficient to legally bind lot owners, sight unseen, and is a mockery of both Constitutional and contract law.

4.  Then there is the unspoken alliance of local governments, state legislatures, consumer protection agencies, and public interest firms who shout “individual rights” and “no government interference”, but see no problem with private government interference.  And that also includes CAI.

5.   Community Associations Institute (CAI) was formed back in 1973 to address these problems with the HOA legal scheme, yet these problems continue to exist in spite of all that “education” provided for board members, managers, and legislators.  Would you hire a training firm with that record?  State and local governments seem not have a problem and hire “the failure to get results” CAI.

6.   CAI is on record in its amicus brief to the NJ appellate court in the Twin Rivers case, cautioning the court about the “unwise extension of constitutional protections to homeowners” in HOAs.   The common law synopsis of court decisions regarding covenants takes a decided editorial opinion rather than a neutral summary of the cases when it states, for example, that if there’s a difference between servitudes law (covenants) and constitutional law, servitudes law should apply (§ 3.1, comment h).

6.  The media, even in this article, takes the premise and presumption that the  HOA unquestionably has the right to act, and that its motives are pure and for the benefit of the community.  None of the above substantive issues are ever delved into.

In order to avoid another 40-odd years of continued injustice and discontent, government authorities and legislatures must address the above issue of substance, and stop their participation in the unspoken alliance of “No negatives about HOAs”.

HOAs in the punishment business

I have argued that the HOA is in the punishment and intimidation business, especially with respect to foreclosure “damages”  and fines under failed due process procedures —  the kangaroo courts.  Here’s a recent NJ case that addresses penalties as a punishment.  In this instance, the HOA had a covenant that granted it the right to access a flat 20% charge as liquidated damages rather than attempting to determine just what were the actual damages incurred by the HOA.

Let me clarify.  When seeking damages, the damaged party must submit to the court the actual damages it incurred.  For example, what are the damages to the HOA if your grass height violated the arbitrary rule for well kept lawns?  Or you painted an unapproved house color?  Anybody?  Well, that gets down to simply attorney fees and court costs of which the HOA sees nada.  That’s why there are no actual damages to the HOA itself submitted by the HOA.  So, are these actions by the HOA really a punishment rather than a recovering  of damages inflicted on it by the homeowner?  Hell yes!

The NJ opinion contained,

As we have previously noted, the 20% payment was not “interest.” It constituted a liquidated damages provision established in the By-laws of the Association in lieu of an assessment of counsel fees in instances in which legal action on the Association’s behalf was required.

A clause is a liquidated damages provision if the actual damages from a breach are difficult to measure and the stipulated amount of damages is “a reasonable forecast of the provable injury resulting from [the] breach.  Such clauses are deemed “presumptively reasonable” and therefore enforceable, and “the party challenging [a stipulated damages provision] should bear the burden of proving its unreasonableness.”  Because the harm is necessarily incapable of accurate estimate, “`reasonableness’ emerges as the standard for deciding the validity of stipulated damages clauses.  The amount fixed is unreasonable if it serves not as a pre-estimate of probable actual damages, but rather as “punishment,” grossly disproportionate to the actual harm sustained.

We are certain that if counsel submitted an accounting of the time required to prepare for and conduct the two-day trial held in this matter, the resultant counsel fees would have been substantially higher. However, as the result of the By-laws, the Association has waived the right to that higher award.

Mazdabrook Commons HOA v. Khan, No. A-6106-08T3, (N.J. App.,  Sep. 1, 2010).

That about says it all when a $200,000 home is lost for a $2,000 fine, plus $3,000 in attorney fees.  The homeowner loses everything after building up his equity over 10 -30 years.  This ratio of 40 times the $5,000 is far in excess of the 10 times standard set by the US Supreme Court for punitive damages in product liability cases.  And yet, the HOA had not been damaged as it had not lost a penny of its own! 

It’s called punishment, pure and simple!  How else can an authoritarian regime like an HOA obtain obedience and acceptance of its rules and regulations (“laws”)?

Note that the attorney has no say in the matter, because unlike its erroneous attitude — you owe me $nnn in fees  — in all those dunning letters, it is not a party in the issue, but just a hired hand of the HOA.  So, why are HOAs being so nice to attorneys?  They undoubtedly agree with the attorney that how else can they coerce compliance except through  punishment?  And if lawyers refuse employment because the fees are so low, no coercion.

And, while we are at it,  doesn’t a flat fee of even 20% sound nice?   The above $2,000 foreclosure amount would cost only an extra $400 and not $3,000 to the attorney.  Now that sounds like a leveling of the playing field without HOA attorney fee churning — we need to make a living — obstructing  justice.