By E. A. Roberts
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Do you live in a residence governed by a homeowners association, also informally know as an “HOA”? Then I would strongly advise being afraid - very afraid. The powers it can arbitrarily wield against a property owner are downright frightening. The result may be the loss of what is most people’s only major asset - their house - over a disagreement involving as little as $10.
A local 78 year old disabled resident made the fatal mistake of reporting to her HOA she smelled smoke after a security light burned out. A $300 special individual assessment was levied against her for the cost of electrical work to the common area. The irate woman rightfully refused to pay, yet the HOA is threatening her with liens and foreclosure. The illegitimate claim is she should have called the fire department instead of management.
A second individual governed by the same HOA was fined $200 - because her tenant said something the HOA President overheard and didn’t like. Another resident was twice fined $50 for having items resting on her patio peeping just above the fence. $190 was charged to a homeowner because he did not remove a satellite dish fast enough.
This identical HOA hired a management company to run day-to-day operations. Suddenly new subcontractors from far away where management resided were hired to perform services at exorbitant rates. Annual lawn work previously costing $14,000 was raised to a whopping $22,000. Yet local subcontractors could have been employed for considerably less money.
A substantial loan of six figures was borrowed by the Board without homeowner approval. How will it be paid back? Through emergency special assessments, and increases in the $240 per month regular assessment. What happens to the low income homeowner on fixed earnings who cannot afford such a sudden fee escalation? As much as a 20% per year increase is allowed in California. Senior citizens with reverse mortgages or those with adjustable rate mortgages are particularly vulnerable.
It is not uncommon for two factions to form within a HOA housing complex. One side will push for ornamental changes to raise the value of the property if they can afford the additional costs to spruce things up. However, low income seniors or families with young children who barely get by cannot pay for such fripperies. Fancy retaining walls, elaborate fences, expensive landscaping can run into the tens of thousands of dollars.
Meanwhile leaky roofs go untended. More money is squeezed from already strapped homeowners to carry out basic repairs. The low or middle income homeowner is priced right out of their home. How? Assessments creep up in price, those who cannot pay have liens placed against their homes, which are foreclosed on if not paid off within a certain time limit. More affluent neighbors have been able to rid the housing complex of what they consider “riff-raff”.
Even the more prosperous eventually become financially overburdened. Many have refinanced their homes to the maximum extent possible, shelling out for repeated superficial upgrades to the common area. At some point the gravy train stops, and no more refinancing is possible. Nevertheless roofs leak, security lights don’t work, basic lawn services are left undone. The Association starts to operate at a significant loss.
The final straw comes when homeowners learn there is less money on the company books than anticipated, even with costs for aesthetic enhancements taken into account. By now Management has disappeared, some on the Board have resigned their positions. Curious homeowners begin looking at financial records, horrified to uncover evidence of embezzlement.
In Virginia, theft of two million dollars was exposed by a management company serving HOAs across the country. The state of Florida just cracked down on Board members who stole four million dollars thus far. More criminal indictments are expected in the coming weeks.
There is little redress for cheated homeowners. Here is how the system works. If a HOA deems an infraction of the governing documents has occurred, three very powerful weapons are at their disposal to force compliance: fines; liens; foreclosure. The only redress a homeowner has is paltry in comparison: meet and confer with a biased Board member to resolve the dispute; ask for community mediation geared more toward settlement than fairness; or pay the fine and hope to recoup the loss in small claims court.
I’ve watched a full Board convene a “kangaroo court”, where those accused must confess their sins in public. The final decision is made in secret, behind closed doors. Fines can actually become a lucrative stream of income to an enterprising Board backed by a Manager who is a bully. Any homeowner who objects to the process is either ignored or intimidated into silence.
I actually sat through a hearing where a homeowner was falsely accused of being a “peeping Tom” while on his roof fixing an air conditioner. Hurt deeply at such hideous accusations, the indignant fellow was fined $50. Rather than contest the fabricated charge, the poor man felt compelled to pay. Otherwise he would incur further fines, along with more innuendo which could have damaged his reputation.
Elections or changes to governing documents are frequently illegally rigged by the HOA to obtain the desired result. It is not uncommon for the Board or Management to not follow their own rules. Yet almost never are they brought to book for wrongdoing. But God help the homeowner who so much as leaves a dead leaf hanging from a potted plant in plain view!
A housing complex in Davis was informed that signs supportive of a particular political campaign had better not appear anywhere on site before election time. Apparently there were those in power who believed Constitutional rights ceased to exist at the property line. When I legitimately asked to inspect corporate records of a HOA, I was told by Management to “come alone”. Subsequent letters demanding copies of documents sent certified mail were refused.
The address for a HOA can be nothing more than a rented UPS drop box, located in a completely different state. More and more municipalities are turning over government tasks to homeowners associations. That way city government can collect taxes, without having to incur costs of providing services. If homeowners are having to send hefty assessment checks outside the state, how will they ever be able to track down misappropriated funds?
What can be done to cope with an out of control HOA? Here are some tips:
- If your housing complex does not have a HOA, do not start one.
- Discourage legislators from requiring HOAs for new housing.
- Dissuade municipalities from turning over governmental functions to HOAs.
- Go to every HOA meeting. Speak up, raise objections. Don’t allow decision-making in secret.
- Do not permit the Board/Management to levy fines - set up an independent Review Board.
- Demand a clear financial audit from the HOA every year.
- Basic repairs should be a HOA’s top priority. Cosmetic improvements should require approval of no less than 85% of the homeowners, with assistance for those who cannot pay.
- Keep copies of all HOA documents, minutes, letters, notices.
- Keep any copies of correspondence you sent to the HOA.
- Require a significant supermajority to amend any governing document.
- Make sure governing documents limit increases in regular assessments to no more than 5% a year, unless an extensive supermajority of homeowners approve larger increases.
- Do not go to a HOA disciplinary hearing alone. Bring a witness; tape recorder; video camera.
- Respond in writing to every letter from the HOA threatening disciplinary action.
- Amend governing documents to prohibit the HOA the power of foreclosure.
- Demand the HOA mailing address be in the same county where the housing is located.
- Levy fines against Board members/Managers for failure to follow their own rules.
- Check out the following websites: www.onthecommons.us; www.calhomelaw.org
Elaine Roberts Musser is a practicing attorney who concentrates her efforts on elder law and aging issues, especially in regard to consumer affairs. She also serves on CA state, county and city commissions and legal clinics advocating for the protection of seniors and the disabled. If you have any observations, particular questions, or topics you would like to see addressed in this column, add your comment at the end of this column.
