Tag: legislature

Case study on how ‘stakeholders’ create dysfunctional HOA communities

Please read this unfolding case study of how the “stakeholders,” those who have put forth HB 2371, dominate the members of an upscale HOA in Scottsdale, AZ. HB 2371 calls for unlicensed HOA managers to represent HOAs in small claims court and creates an exception to state UPL laws.

In the Terravita Community Association, a vote was held this past Tuesday to amend the CC&Rs to permit the HOA to assess attorney fees against losing homeowners in an administrative hearing. (See HOA democracy at work:  dysfunctional adoption of amendments by minority vote). The unusual wording only permits the petitioner who filed the complaint to be awarded attorney fees if the prevailing party. But, the administrative hearings do not award attorney fees by law, and attorneys are not required. Yet Terravita sees the need to use an attorney and use member fees for this unnecessary expense.

Furthermore, as called to the attention of the Terravita board, the wording of the amendment would strip the existing contractual agreement that attorney fees be awarded in civil court, a more expensive procedure and subjecting the HOA to increased litigation costs.

In other words, state law be damned! The members have declared that they have agreed to ignore the law and to charge attorney fees as stated. And for only a few administrative petitions that have been filed. There was no debate, no discussion, no opposing views presented to the members. Just, “Here’s the ballot. Vote YES and return it.” And the members, like Colonel Potter in MASH who signed anything Radar put in front of him, voted in favor.

It should be noted that the CC&Rs amendment was passed by a minority of the members, only 571 members out of 1380 voted, a minority of 41%, and the amendment passed with just 514 votes or 37% of the membership. Minority voting was approved by the members in 2010, making this mockery of democratic principles possible. In 2011, the legislature had voted down a statute, proposed by the “stakeholders”, that would allow all HOAs to implement minority control of the amendment process — an unthinkable procedure allowing minority adoption of amendments to constitutions and charters.

Well, what does that say about that unassailable, inviolate “contract” that the special interests, those “stakeholders,” have been shouting?  It is meaningless when others can amend your agreement with changes that reasonable persons would not anticipate or expect.  And now in Terravita, by a minority vote. Apparently, it’s not an issue with the members of Terravita.

Tearravita Community Association is an upscale “resort” type HOA in Scottsdale, AZ, with a golf course, community center, and a security guard entrance. It has 1380 members, has a CAI/AACM management company, and a CAI attorney.

Is Florida’s SB 596 a good bill? YES! Part 2

This post takes a closer look at some of the provisions of SB 596 with its intent “that the powers and authority granted to homeowners’ associations . . .  conform to a system of checks and balances in order to prevent abuses by these governing authorities.”  At the request of then Rep. Julio Robaina I testified at the Feb. 23, 2008 all-day legislative HOA hearing in Tampa, FL.  Public domain clips from this hearing, several of which can be found at the HOAGOV YouTube website, clearly show why checks and balances are sorely needed.

Aside from the introduction of effective enforcement provisions, the other changes of substance deal with regulating the conduct of what the HOA “can and can’t do.”  They are the payment of assessments, elections and proxies voting, and transfer of declarant control.

These substantive changes take the first 17 pages of the bill and is followed by non-substantive changes to 720.3024 creating the Ombudsman office and election monitoring, and HOA Study Council (720.3025). The other substantial changes include:  Section 720.3085, the “pay or die” section (my words), Section 720.306 dealing with meetings and substantial revisions to the elections and proxy voting processes, and changes to 720.307 relating to the transfer of power from the declarant that takes us to page 40 and the subsequent technical changes.

First, I will look at what I call the “pay or die” statutes regarding the continued payment of assessments even when payments are being disputed (720.3085(9)).  “Pay or die” meaning that if any homeowner doesn’t pay his assessments in a timely manner the HOA will die mentality.  I find this reprehensible, approaching an indentured servitude condition, and demonstrating a “close nexus” and a “symbiotic relationship” between the HOA and state, a “You do for me and I will do for you” relationship.  This statutory requirement to pay or else is sufficient alone to have the HOA declared a state actor!  Especially when the statutes also permit the HOA to deprive is member-residents of their rights, freedoms, privileges and immunities as citizens under the 14th Amendment.

However, the bill at least moves forward with checks on the unilateral foreclosure powers of the HOA.  It forces the HOA to prove the correctness of its claim, allowing the court to issue equity judgments that the HOA can’t add right, had sent the notices to the wrong address, refused to cash checks and/or held them past the deadline before cashing in order to demand late fees, just to name a few of the abusive practices.

Read the new subsection 720.3085(9) carefully.  A dispute of the amount would only require deposits of assessments during the legal action, and not the disputed amounts. The term “disputed” needs to be clarified to include abuse by the HOA as mentioned above and not limited to just amounts.  Of course, the justification for clauses (d) and (e), the HOA will die clauses, can be debated.

There are some issues with proxy voting (720.306), but the changes in the bill will serve the homeowners well. Subsection (9) deals with board elections and restricts members who are in arrears to the HOA cannot run for office.  That’s fair.  If a member cannot vote if he is in arrears, a member in arrears should not be allowed to hold office. Co-owners cannot both serve on the board, which give that unit excessive power.  I find the requirement to certify knowledge of the governing documents 90 after an election as preposterous and pro-HOA.  Want to be on the board?  Get educated first!

In regard to the transfer of power changes added in the bill serve to benefit the homeowner.  While not completely airtight, the term “in the ordinary course of business” would restrict the declarant from sitting on lots in order to retain control.  What is missing, as just occurred in Arizona, is the declarant’s modification of the governing documents before turning over its power to lock him in place for all practical purposes.  The usual introductory phrase, “notwithstanding anything in the governing documents to the contrary” should be added to the bill.

As for my views, the inclusion of effective enforcement authority overwhelming outweighs any concerns that I have mentioned above.

Is Florida’s SB 596 a good bill? YES! Part 1

This post is in response to several comments to Florida SB 596 creates a bona fide state HOA agency as necessary state oversight.   I read the 124 page bill and some general comments are in order. 

First, the bill contains just technical corrections, word changes, and division name changes in the last part, after page 40 or so.  The first part deals with the enforcement powers given to the division on condos and HOAs, and the next part deal with some regulatory changes – how HOAs are to operate. This is not a complete rewrite of Chapter 720 as occurred with California’s Davis-Stirling Act that regulates HOAs.

Second, as to changes in the law, opposing the bill because it does not contain a revision that you feel is necessary is not rational.  If the bill proposes changes that you do not like, try to get the sponsor to see it your way.  Others may not see it your way.  But this condition can be handled in subsequent bills.  However, if you feel that the bill’s “bad” seriously outweighs any “good,” then it is understandable that you may be opposed to the bill.

Third, as to some of the general objections made that the bill is too big and is not properly written legislation, I object.  I’ve read many bills from several states, and like law suit filings, the format and organization of the bills varies according to the existing structure and organization of a state’s statutes or code. 

The substantive changes in SB 596 deal with the new enforcement statutes, and some improved changes to the existing statutes.  They are not overwhelming compared to many pro-HOA bills that have been adopted by states.  I do agree that some changes really need to be fixed if they are to be consistent with the intent to protect homeowners, but not so serious as to oppose the bill. 

Fourth, it should be remembered, as Alexander Hamilton once said, “If there is no penalty [for] disobedience, the resolutions or commands which pretend to be laws will, in fact, amount to nothing more than advice or recommendation“ (Federalist Papers #15).  And that’s the overriding intent of this bill — accountability through enforcement. No more free rides for HOA boards. 

Homeowners should be concerned about a watering down of the enforcement provisions, as has occurred in other states, than with nit-picking other issues.  The enforcement is by the state, as it should be, and not out of the homeowner’s pocket.  Florida cannot say that not punishing violators of the law is good public policy.

And, in contrast to the “sky is falling” clamor, accountability will not do in HOAs.  This country has survived for some 230 years subject to the constraints and restrictions of the US Constitution. So can HOAs, but perhaps those who live off the unjust current state of affairs cannot?

Part 2 will contain some details of this bill.

Florida SB 596 creates a bona fide state HOA agency as necessary state oversight

As an alternate to making HOA governments a state entity, the creation and establishment of a bona fide, legitimate state agency established by an effective and meaningful enabling act will accomplish HOA reforms.  Couple the clear and precise intent to provide for checks and balances – meaning state oversight – with a dedicated head of the agency to carry out the agency’s mission, the independent HOA principalities will now be accountable to the state as they should be. 

Florida’s SB 596, sponsored by Senator Hays, proposes such a state agency over HOAs.  It proposes the following addition, among other things, to FS 720.302(2):

Having provided certain powers and authority to homeowners’ associations and in deed restrictions created by developers of mandated properties in residential communities, the Legislature recognizes that it is necessary to provide regulatory oversight of such associations in order to ensure compliance with federal and state laws and local ordinances. It is the intent of the Legislature to protect the rights of parcel owners by ensuring that the powers and authority granted to homeowners’ associations and in deed restrictions created by developers of mandated properties in residential communities conform to a system of checks and balances in order to prevent abuses by these governing authorities. (emphasis added).

From first glance, this bill creates a typical regulatory agency to make laws, set rules, investigate, handle complaints and enforce the law in courts. Among the provisions in this lengthy 124 page bill are penalties, fines, HOA cease and desist orders, and restitution enforceable in the courts by the agency, FBPR, and not having to be brought by the individual homeowner.  The proposed agency is not a “let’s study the problem” typical political tactic to do nothing by creating just an investigatory agency, which insults homeowners with its “we don’t believe you” attitude.    SB 596 is a very good step short of making HOAs state agencies.

It should be obvious to all that what will be argued as government involvement has been brought about precisely because of the abuse within the industry.  It is the failure of those “stakeholder,” specil interest moneyed vendors to police the industry.  It is the failure of the homeowners themselves to police their boards. And consequently, it falls to state governments to promote the general welfare and protect its citizens against abuse by a stronger faction within the community.

Furthermore, making this bill law will help keep the legislature from hearing HOA reform bills year after year.

In order to establish justice and fair play for all homeowners, it remains to insure that the laws are themselves fair and just. The pro-HOA laws must be amended or revoked.  The misguided doctrine that permits CC&Rs and servitude law to supersede constitutional law and contract law must stop. 

Arizona’s HB 2371 empowers unlicensed HOA property managers to avoid UPL

In short, HB 2371 would allow untrained and unlicensed HOA property managers to represent HOAs in small claims court, but does not allow the homeowner to be represented.  Yet, real estate agents, who are required to take continuing education courses in agency, real estate, and contracts law, are not allowed to represent others in court.  And even licensed paralegals cannot represent others! Why allow untrained and unlicensed HOA managers to represent a special class of nonprofit entities?  What legitimate reason is there for this provision except to provide income for the special interests?

The only justification for this bill, which was by offered by the Sponsor, was that it was not controversial and it was agreed to at a meeting of all the stakeholders. However, the stakeholders did not include any homeowner advocacy group, and this bill is very much not only controversial but un-American as well.  This is the second such bill brought by a state representative in the past 3 years, the other being HB 2441, the “minority control” bill in 2011, that was rightfully defeated in the Senate.

In January of last year HOA managers were put on notice by the AZ Supreme Court opinion (UPL Advisory Opinion, 12-01) on the Unauthorized Practice of Law, and one firm in particular, a member of two HOA special interest trade organizations, was found to have engaged in the unauthorized practice of law (in RE: Board of Legal Document Preparers v. AAM, LDP-NFC-09-L094 and LDP-NFC-10-L026). 

So, it appears, the problem of managers engaging in UPL activities is to be resolved by introducing a bill to “make it all good without any requirement for training and licensing!  This is a disgraceful bill! A bill that treats the good people of Arizona, who are subject to unregulated HOA private governments, as second-class citizens.  It insults the good people of Arizona!

Furthermore, HB 2371 goes on to allow “contractors” (that can not only be managers, but landscapers, pool maintenance people, etc.) of HOAs to represent HOAs before the Office of Administrative Hearings. It allows attorney fees to be awarded only for the Petitioner if he wins. Under the law, OAH is not permitted to award attorney fees, so this bill is needed to make it happen.

 But, it is only for HOA adjudication hearings and not for any other agency hearing!  With HB 2371, the unlicensed and untrained manager will get fees paid by the Pro Se homeowner who turns to OAH because of no attorney fees.   Records show that some 90% of the homeowners were Pro Se not using an attorney, while the HOAs were almost 90% represented by an unnecessary attorney. (Based on detailed OAH records for the first 66 cases in 2006-7).

 The purpose of OAH adjudication was to provide an increased level of judicial protections for homeowners in HOAs without the need for an attorney in an informal setting, and without the need to understand the rules of court.  The HOA attorneys have been trying for years to turn OAH into civil court proceedings under 100 rules found in some 200 pages of legalese. But, the bill does not require that the HOA manager learn and understand the civil rules or the law.  

Once more the citizen, the whole reason for the existence of a democratic system of government, is smashed down to the bottom of the food chain by an unconscionable bill.  A disgraceful and insulting bill!  The Senate committee cannot allow this bill to pass in good conscience.  It must be soundly thrashed.

HB 2371 will be heard in the Arizona Senate Government & Environment Committee on a Monday to be determined.