Richards: Challenging the status quo of HOAs

HOAs. The status quo should no longer be acceptable. When HOA boards use their power to unfairly seize control of all the playing cards, homeowners don’t stand a chance. Are you willing to help bring back balance and fair play?

David Richards

My name is David Richards. I am a 71-year-old disabled veteran who served his country when called upon. I was awarded a Purple Heart while serving in Vietnam. I was fighting to uphold the Constitution, to ensure freedom and equality. I am looking for some people willing to challenge the status quo of HOAs.

HOA general background information

HOA boards of trustees are unpaid, volunteer residents who are elected by the homeowners to oversee the finances and the management of the community. Sounds very democratic. But HOA boards of trustees have been given way too much power and have expanded their powers while in office by amending rules and practices on their own. They are not monitored like other corporations or companies where the government has put in place controls to protect the public. Would it not be fair to do the same when it comes HOAs?

HOAs have failed to evolve with the changing of time. What was good yesterday may not be good today. In general, HOA complaints typically involve the association denying residents their basic freedoms. HOA boards have seized control of the governing documents and change them to meet the individual board member’s needs while selectively increasing their spree of control without the homeowners’ involvement.

Other potential areas at risk include:

  • Conducting inappropriate elections by controlling key factors: vote counting, location of the election, bypassing the registration procedures and processes. Allowing non-residents to sit on the board.
  • Making it hard to obtain governing documents. The property-management answer is to refer homeowners to their respective website. They are assuming all homeowners have access to the web and have the know-how to use it.
  • Mishandling money.
  • Unfairly increasing fees.
  • Assessments due to poor management.

HOA communities have by-laws, covenants, conditions and restrictions (CC&Rs) that give all decision-making power to the board of trustees. They have manipulated the system to ensure they stay in office. As with any position of power the majority of people begin with the best intentions. Many, however, seem to find the power and sense of importance it renders intoxicating and have no desire to leave their positions. Most boards of trustees have no term limits.

HOA boards count on a form of intimidation to keep homeowners in line. The fact that homeowners will not challenge the HOAs is further indication of their fear. The HOA boards are aware that they have these behaviors in their favor:

  • Homeowners will avoid the high cost of trying to right a wrong.
  • Aggravation (no simple way to bring about quick fixes).
  • Homeowners simply shut-up out of fear.
  • Move out of the community.
  • Be forced to move by the board’s constant harassment.

If an owner elects to take on the HOA they’ll experience a double financial hit. They have their own direct legal cost plus they are require to continue to pay HOA fees, with a portion of those fees going to the HOA’s legal services counsel to fight or wear-down the respective homeowner. Is this fair?

What has happened to our First Amendment rights? Are HOAs above the U.S. Constitution, which provides these basic rights? No one purchasing or renting a home in an HOA community would assume that by signing their lease or deed they are giving up these inalienable rights.

I used my veteran benefits to purchase a home. As a homeowner I just recently became aware that the HOA can initiate a foreclosure on my home for failure to meet financial obligations or other unknown situations, which I believe is fair. Everyone should pay their own fair share. But what’s not fair is the HOA can sell the home for as little as what is owed in back fees, leaving the very strong possibility that an average citizen or veteran could find themselves without a home and still burdened with an outstanding mortgage. Does this sound like it’s fair? The American dream was to own a home, but we have made it too easy for it to be taken away.

Current system used to collect past due fees:

  • Home is sold to meet back fees and expenses only.
  • Homeowner continues to make house payments until they satisfy their original debt. If you are a veteran the VA takes this money from your compensation.
  • Lost their original down payment of 20 percent.
  • How is this a better system for correcting past-due fees?
  • The homeowner is left without a home.

Proposed change to the current system: When HOA’s foreclose they should be required to sell the home at fair property value. The funds realized after the sale of the home should be applied as follows:

  • HOA to cover past-due fees, their legal cost and other associated cost of selling of the home.
  • paying down the outstanding mortgage.
  • If there are remaining funds they would go to the owner.

Example:

  • Homeowner owes $5,000 assessment, attorney fees of $10,000, real-estate fees of $30,000 and auction fees of $24,000.
  • Home market value $450,000.
  • Existing VA mortgage is $250,000.
  • Home is sold for $400,000.
  • Payment of total fees due: $69,000.
  • Net remaining amount: $331,000.
  • Minus balance of mortgage: $250,000.
  • Final remaining amount to owner: $81,000.

Doesn’t this sound like a fairer system?

I have also been warned that the board will come down hard on me since I dared to question the status quo. I can only assume they are going to put me under a microscope and look for every little issue to force me out of the community. This type of behavior brings a new meaning to freedom. I didn’t realize that I was living in a Communist-controlled country. I can only hope I was misinformed because this would be a sad series of events. Does this sound like an act of an American?

In general homeowners are unaware of what it means to be a member of an HOA. They are not offered educational classes on what it means to be part of an HOA. Unfortunately, most HOAs are filled with apathetic homeowners. When closing on a new home, purchasers are overloaded with paperwork. They usually don’t have the time nor are they given time to read all the paperwork coming at them.

Homeowners place their trust in the government to protect their respective rights and to protect them from being bullied. Just like we have a police department to protect and keep citizens safe, we need an agency to protect the homeowners from these powerful HOAs.

Lack of government controls has enabled some HOAs to operate as a monarchy. Some board members feel they are the sole and absolute rulers of the community.

Proposed changes:

  • Board members would be limited to a maximum of six consecutive years.
  • They would be required to wait a minimum of three years before they could seek office again.
  • Board expenditures should be limited to a dollar amount and anything that exceeds that amount would require homeowners’ approval by vote.
  • When HOAs foreclose they should be required to sell the home at fair property value. The funds realized after the sale of the home should be applied as followed: HOA to cover past due fees, their legal cost and other associated cost of selling of the home, paying down the outstanding mortgage. If there are remaining funds they would go to the owner.
  • If you want to drive a car you must pass a safety test before you can obtain a driver’s license, so why wouldn’t we do a similar thing? If you are buying a home in an HOA community, the selling real-estate agents should be required to review a prioritized list of the roles the HOA plays in the community and the responsibilities the new homeowner is assuming. This would help avoid the conflicts that too often occur in HOA communities.
  • A third-party audit should be conducted routinely of the HOA to maintain the integrity of the organization.
  • Financial books.
  • Internal election processes.
  • Availability and easy access to information.
  • What’s the HOA board doing to encourage homeowners’ involvement?
  • Are real-estate agents educating new HOA homeowners?

David Richards
Scottsdale

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