Wednesday, June 22, 2011

Homeowners’ Associations Becoming Unavoidable and Quasi-Governmental

Homeowners’ Associations (“HOAs”) are losing money due to the high numbers of foreclosures and are scrambling to make up for it by assessing additional fees on the remaining homeowners. Banks are taking longer to foreclose on homes, leaving homes in limbo for months on end with no monthly fees coming in to the HOAs. 13 percent of homes nationwide are vacant, and in some states the vacancy rate is as high as 22 percent. To compensate, HOAs are acting like private investigators, even peering into homeowners’ yards daily until one weed pops its head up, then nailing homeowners with fines. Some HOAs are backdating letters, then dishonestly mailing them out later telling homeowners they have only a couple of days to respond to the backdate when the law actually says the time runs from the date the homeowner received the letter (this recently happened to me). Most homeowners do not have enough time nor knowledge to figure out how to respond adequately within a couple of days, so they end up paying extra fines. Another ploy of HOAs to generate money is to send letters to homeowners telling them the paint on their home must be redone, when the paint looks fine (this also happened to me).
Meanwhile, HOA rules, known as Covenants, Conditions and Restrictions (‘CC&Rs”) are being selectively enforced. In many cases, the homeowners who sit on the HOA boards have much more egregious violationsof the HOA CC&Rs that are overlooked. At least once a week there is a car illegally parked in front of my home, but the HOA does nothing about it, probably because it is not an easy revenue generator.
The recent level of aggressive policing by HOAs is grossly unfair to the remaining homeowners who have regularly complied and paid their bills and mortgages on time. Their home values have massively decreased due to the homes foreclosing around them, and around 30 percent are underwater. Many are hurting economically, so it is a callous blow to get hit hard with excessive and unfair fines and fees due to no action of their own.
Some free market conservatives and libertarians defend HOAs because they are ostensibly “private;” homeowners voluntarily choose to buy homes within the jurisdiction of an HOA. However, an HOA lobbyist testified to the Arizona legislature this year that approximately 90 percent of the new homes in Maricopa County are located within an HOA (HB2140). Local governments have made so many deals with housing developers it is becoming increasingly difficult to buy a new home outside of an HOA. Since HOAs own vast developments in prime communities, it is virtually impossible to buy a home in a good neighborhood close to schools and other necessities that is not part of an HOA. 20 percent of homeowners reside within an HOA, an estimated 50 million Americans. In 1970 there were only 10,000 HOAs. Now there are around 300,000, with 9,000 to 11,000 new HOAs forming every year.
Living in an HOA development is like being under a very socialist form of government. HOAs create regulations most people would think violate property rights, such as restricting political signs, pets, or home businesses, but since homeowners have agreed to join the HOA, they have no recourse. About the only areas HOAs cannot interfere with are state and federal fair housing laws regarding age (except for senior living facilities), race and handicapped access. By joining an HOA, homeowners are essentially signing away their constitutional rights and many other legal rights. CC&Rs carry more weight than the U.S. Constitution. The HOA has powers beyond that of local, state and federal government. This becomes even more unfair when the HOA makes new regulations or interprets existing ones that homeowners never agreed to when the home was purchased. HOAs make up rules as they go. Many are arbitrary, petty or personal.

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