Should there be federal standards and regulations for HOAs?  

By Deborah Goonan

My colleagues and I have posed this question on several occasions in HOA discussion forums frequented by Community Associations Institute (CAI) members – mostly community managers and attorneys, with an occasional Board member.

Of course, the knee-jerk HOA industry reply is “NOOOOO!” The standard mantra is that HOAs do not want or need more government control. Why would Association members want some bureaucrats in far-off Washington DC telling communities how they ought to govern themselves? They reason that members of HOAs are quite capable of choosing their own destinies, within their own “form of democracy.”

In theory, perhaps. In reality, perhaps not.

I find it curious that, while HOA cheerleaders abhor government interference in any form, they see nothing wrong about the excessive and often petty interference of HOAs over the property and lives of its owners and residents.

Typical HOA-manager/attorney/developer reasoning is along these lines, “We all know how very important it is to establish rules about what you can put in a flowerpot, how long your dog’s leash can be, where your children are NOT allowed to play, and what colors are acceptable for your front door. For these types of decisions, you, American HOA resident, are incapable of clear thinking and sound judgment. Therefore, the developer’s attorneys have crafted a legal contract detailing every aspect of your limited rights to dwell in your HOA, subject to swift and sure penalty should you fail to conform.” In practice, you may be subject to swift and sure penalty simply in order to keep you in line.

For the official party line on government regulation of HOAs, see page 47 of CAI’s Public Policies: (emphasis added in italics)

Community Associations Institute supports effective state legislation–when it is deemed necessary for consumer protection, conversion limitations, protections for ongoing operations or other additions to existing statutes or common law to ensure that community association housing is developed and maintained consistent with legitimate public policy objectives and standards that protect individual consumers, balancing the legitimate rights of the development industry.

Local legislation concerning the creation or governance of community associations is antithetical to a balanced, well-considered assessment of all issues and interests affecting community associations. It also encourages a patchwork of regulations within an individual state and is, therefore, better dealt with at the state level.”

According to CAI, if you live in an HOA, your legitimate rights come secondary to the rights of the corporate HOA – which is, in fact, the creation of a Developer.

Read this policy between the lines: municipal level legislation would make the HOA’s job too inconvenient, potentially limiting where and how HOAs can be built. However, at the state level, developers can pretty much call the shots to “balance” their legitimate rights.

And how does CAI justify its encouragement of “a patchwork of regulations” within the US, on a state-by-state basis, when their own public policy strongly discourages differing regulations within each state? That stance defies logic. Why is it that owners and residents find vastly different HOA laws in each state? The HOA industry lacks federal consumer protection standards that exist for virtually ever other major market sector in America.

What makes the HOA (i.e. Development) industry so special, that it should be deserving of less scrutiny and oversight than, for example, insurance, banking and financial services, healthcare, or public and private education? By now it’s old news: HOAs are obviously vulnerable to financial mismanagement, corruption, and white-collar crime. Money crosses state lines and with over 65 million taxpaying residents nationwide, these issues certainly rise to the level of general public interest.

Therefore, there most certainly is a need for federal level legislation and regulation of HOAs.

Link to CAI Public Policy


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