Tag: foreclosure

The HOA Enlightenment Movement continues to spread: just legislation for homeowners

A review of new legislation being considered in many state legislatures clearly shows a growing trend toward justice and fair play for homeowners.  Substantive HOA reform bills can be found in Arizona, Colorado, Florida, North Carolina and Texas to name those are known to me.

Arizona. 

SB 2292 seeks to end mandatory HOAs for new subdivisions.

SB 1278 reasserts local municipality control of public streets in HOAs.

Colorado.  HB 1276 seeks to restrict HOA foreclosures by setting forth strict procedures for HOAs to follow if they seek to foreclose on a homeowner that include restrictions on the sue of collection agencies, the adoption of a formal payment plan, notice to delinquent homeowners stating the exact amounts owed, and the procedures to resolve issue before any action can be taken..

Florida.

SB580 places restrictions on management firms.

SB 596 creates a powerful, bona fide state agency to regulate HOAs and that can make rules, to investigate complaints and to seek penalties and restitution in civil court.

North Carolina.  HB 175 is another foreclosure reform bill that prohibits assessment foreclosure, but allows HOAs to obtain court judgments for the assessments owed.  It requires a notice of a claim of lien to be served on the homeowner before any action can be taken.

Texas.  HB 3803 seeks state oversight by allowing the attorney general investigation of financial wrong-doing by the HOA, with penalties.

Much, much more legislation dealing with substantive HOA reforms is needed.  This legislation would deal with fair and just due process procedures in HOA disputes, foreclosure reforms, clean elections procedures, meaningful enforcement against HOA violators, and ending the “consent to agree” misrepresentation in the sale of a home in a HOA.

 

For more information . . .

the age of HOA enlightenment is coming?

And the HOA Enlightenment Movement grows . . .

Court decisions: HOA Enlightenment Movement vs. the Dark Ages

new HOA book — Neighbors At War! by Ward Lucas

Amazon review By George K. Staropoli

This review is from: Neighbors At War! The Creepy Case Against Your Homeowners Association (Paperback)

Neighbors at War! is a refreshing description of what living in an HOA (homeowners association, property owners association, common-interest community or condo association) that the average person can understand. It is not another legal treatise, or academic journal or book, but the writing of an experienced and award winning investigative reporter.

It is a long needed book for prospective buyers of HOA controlled homes or those already living in an HOA. All those state mandated documents do not tell it all, as state legislators are pro-HOA and accept the denials of homeowner rights contained in HOA adhesion contracts.


Ward Lucas ranges far and wide, from questions of constitutionality and denials of bill of rights protections to more down-to-earth issues of HOA procedures and operations. Foreclosure, no fair elections, and kangaroo hearings on violations are examples of the cases and issues that are discussed in easy to understand terms.

I’ve been repeatedly told by legislators that complaining homeowners are trying to get out of a contract, should have read the CC&Rs, and should have gotten a lawyer. And not a word about misrepresentation and fraud.


Do not fall into the trap of Buyer Beware! Read this excellent book and discover what you are not being told by the special interest national lobbying organization formed to protect, not your rights, but the HOA status quo. Neighbors at War! is a must read for informed homeowners and state legislators

HOA foreclosure ratio of 36 times violates the 14th Amendment against cruel and unusual punishment

Matt Tomsic wrote an important article in the Charleston Region Business Review on HOA foreclosures with some revealing statistics.  SPECIAL REPORT: YOUR HOME, THEIR RULES.  For example, 68% of the foreclosures were for $5,000 or less in Charleston County, SC.

I wrote the author for some additional statistics. What he had available was just median values for debt owed the HOA and home value, which were $4,500 and $160,000, respectively.

 

That amounts to a punishment of 36 times the debt owed. The US Supreme Court in State Farm v. Campbell, 538 U.S. 408 (2003) set criteria of punitive damages exceeding 10 times actual damages constitutes a violation of the 14th Amendment against cruel and unusual punishment. In the jargon of today, HOA foreclosure is the iconic instance of cruel and unusual punishment. And the HOA did not advance any hard cash like a bank to justify foreclosure rights.

 

BUT, your elected representatives see no evil and continue to support the real estate industry’s business interests, with the people being the pawns and “marks” in the con game.

HOA foreclosure: an unconstitutional punishment

Writing on the Hindman-Sanchez blog (Colorado) in 2011, attorney Sanchez asks, “Is Foreclosure the Right Option?”  She offers 3 options: 1) just lien the property and wait, 2) get a money judgment on the debt owed and garnish money source, and 3) foreclose. Sanchez answers that option 1 is not quick; option 2 will not work if there is no cash available; so that leaves option 3, foreclose on the house.

However, working on behalf of the HOA and its supposed survival concerns, Sanchez fails to address the practical matter of 1) not enough equity in the home to for the HOA to collect its debt after the mortgage is paid off, or assumed, and 2) the moral and ethical question of a discriminatory, unethical, and inequitable option that amounts to a cruel and unusual punishment. It affects only those who have paid their mortgage and assessments obligations over many years. 

And remember, the HOA has not advanced any hard cash as a bank or lender to warrant a special foreclosure law, but is functioning as a state entity collecting on the failure to pay taxes.  Nor has it performed any services to warrant special treatment under a mechanics lien analogy.  Its services have been performed on behalf of the fictional but legal and separate person, the HOA.

From a broader aspect on the nature of the “contract” between the homeowner and the HOA, the homeowner was not told that buying into the HOA corporation is like buying into a closely held business that has limited marketability (ease of selling out, which amounts to selling his home), and whose source of additional funds is very, very limited – increased assessments, special assessments, and obtaining a bank loan if possible.  That’s the bargain the homeowner made when he bought his home.  That is the hidden downside of HOA corporations kept hidden by the HOA, the developer, the real estate agent and the consumer protection agency, if any. 

The use of foreclosure focuses the members’ attention to the other guy and not on the nature of the contract.  It is an irrational attempt by an HOA attorney to “get blood from a turnip,” which after all, is just what one would expect when dealing with “deadbeats.”  It serves to intimidate and punish homeowners by taking away the homeowner’s home, leaving him nothing. 

Sanchez ignores the reality of the present economic situation, which she admits to. She speaks, however, of foreclosure as a “necessary tool” to punish and to intimidate.

While associations have other options available, foreclosure is a powerful and necessary tool in the association’s collection efforts arsenal. People take notice when there [sic] property is being foreclosed. Foreclosure may motivate those who have not been making assessments to bring their account current. More often than not once a delinquent homeowner gets notice of a pending foreclosure on their property, they make some type of payment arrangement or refinance.

If HOA covenants and statutes that allow the HOA to take a member’s home or money based on an HOA fine was held to be an unconstitutional punishment or penalty[i], so must foreclosure statutes be held as an unconstitutional preemption of government power.  The argument that foreclosure is just a legal collection method and not a punishment falsely states reality.

(Loura Sanchez and Hindman are Colorado attorney members of CAI  and members of its College of Community Associations Lawyers (CCAL)). 

[i]In  Unit Owners Association v. Gilman, 292 S.E.2d 378 (1982), the Virginia Supreme Court heldthat a fine was  “A pecuniary punishment imposed by lawful tribunal upon person convicted of crime or misdemeanor. A pecuniary penalty. It may include a forfeiture . . .” and that “The imposition of a fine is a governmental power. The sovereign cannot be preempted of this power, and the power cannot be delegated or exercised other than in accordance with the provisions of the Constitutions of the United States and of Virginia. Neither can a fine be imposed disguised as an assessment.”  

Dare oppose the Will of the HOA, you will pay for it!

Local Phoenix Ch. 3, azfamily.com, (HOA forecloses on Mesa homeowner) did an excellent job in bringing out what goes on in HOA-Land where HOAs are protected by public policy.   In this incident, a homeowner builds a wall for security, as she stated, and gets fined by the HOA.  In a default judgment for an injunction, the CAI HOA attorney obtained some $16,000 in fees for less than 9 months’ work.  This incident expanded to the HOA foreclosure for nonpayment of assessments.

In the foreclosure, a simple filing asking the judge to grant the sale — unlike other disputes over nonpayment of a debt, there are no justifiable excuses not to pay HOA dues — the HOA attorneys tacked on another $12,000 in fees, for a total of some $28,000 in fees.  The HOA got a total just $3,300, of which $1,700 were for unpaid assessments.

If this was in the public arena, and a fine was permitted, there would be no attorney fees paid.  If the state foreclosed for nonpayment of taxes, the equivalent of HOA-Land assessments, there would be no attorney fees.  But, the HOA attorneys are allowed to walk away with fees far in excess of the fines and unpaid “taxes.”  I call it legalized extortion.  

The extortion consists in knowing the homeowner does not have the funds or power to oppose the HOA, and the HOA is not punished under law for any wrong doing.  So the HOA sues, knowing that it has an  80% of getting a default decision, or the homeowner pays the money demanded.   Any different from banana republic justice?    The problem becomes out of control when the homeowner falsely, but innocently, believes  the HOA can’t do anything to him. He lets it go until sued for the typical amounts as involved in this incident.

The common pro-HOA, but  misleading, argument on the acceptance to be bound to the CC&Rs has no merit.  It  ignores the questions of fraud and misrepresentation when buying an HOA controlled home.    For example, is the buyer told that the “sacred” CC&Rs at his closing can be modified without his consent, making them a meaningless piece of paper?  That this ability means that his neighbors control what he still thinks is his private property?    Is the  buyer told that his house is collateral to the HOA, and he must pay no matter, even if  the HOA fails to perform or violates the CC&Rs; or that the CC&Rs are a binding contract whether or not he has signed or read them?  And what about the agent who makes the buyer sign the purchase contract and initial all the contract pages, but requires nothing equivalent from the buyer regarding that second, briefly mentioned in passing, CC&Rs contract?   Look up the definition of fraud and misrepresentation.

In the above AZFamily.com story, when  the homeowner appealed   the attorney fees, the judge approved them writing that, “The Court notes in passing that the short answer to defendant’s objection to the amount of attorneys’ fees is that they were caused by defendant’s intransigence.”  (Minute entry of 3/5/2012, CV 20120-12322).

“Intransigence” is a loaded word!   It denotes firmness and sticking to your guns, even stubborness.  What the judge has done here is to punish the homeowner for standing up for her rights and her home against the banana republic justice illustrated above.  Dare oppose the Will of the HOA and you will pay for it!   Big time!  And he rewards the attorney, without any discussion of the role the attorney played in the delays.  What about the 3 minute entries over 2 years that basically said, “nothing is happening for the past 150 days with the suit”, about which the attorney could have prevented by seeking a decision.  But that would cut his fees, wouldn’t it?  The unreasonable prolonging of law suits violates  R11(a) of civil procedure.

Is this the public policy of the State of Arizona?   Support the HOA and its attorney against the people of Arizona who have been misled about HOA-Land?  Four bills that would have held the HOA and its board accountable under penalty, and which would have provided for “clean HOA elections,” failed to become law this past session.