By Deborah Goonan, Independent American Communities
Advocates for reform of – and alternatives to – homeowners and condo associations have been saying for years now that industry trade group Community Associations Institute (CAI) does not represent the interests of homeowners.
Too many state and federal policy makers have turned a deaf ear to that basic truth.
Why do so many Legislators keep drinking the HOA Industry Kool Aid, despite near epidemic reports of theft and fraud in the industry, as well as an utter lack of failure to maintain infrastructure? Almost daily I read reports of dilapidated condo buildings, crumbling HOA roads, and failing storm water systems, in communities large and small, all across the US.
The HOA industry trade group, CAI, is most interested in creating and maintaining endless revenue streams – everything from transfer fees to document processing fees, from collection costs to super priority liens. And when you get right down the nitty gritty, almost none of that revenue benefits Associations, let alone its individual member homeowners. On the contrary, steep home buyer fees, as well as draconian measures for collecting property assessment liens heavily inflated with legal fees and collection costs, actually hurt the individual homeowner.
The latest example of how CAI does not represent the interests of home and condo owners is its opposition to proposed legislation in Illinois, three bills sponsored by Rep. Scott Drury, D-Highwood.
Legislation would give more rights to condo owners in association disputes
…Drury said a trio of bills he filed last month would level the playing field for property owners in disputes with their homeowners associations.
Among other things, they would enable unit owners who withhold their assessment fees to defend themselves against an eviction suit by offering evidence of the board’s failure to address major problems with the common areas all owners share, or other significant breaches of contract. They would also allow unit owners to collect attorneys’ fees from their associations if they prevail in court, and would bar associations from simply tacking on legal bills to the unit owners’ assessments without an order from the court.
The legislation is written in response to a 2014 Illinois Supreme Court ruling that Association members have an absolute obligation to pay assessments, no matter what. The Court reasons that dissatisfied owners can pay assessments now, and file suit against their Association later!
Of course, the vast majority of homeowners cannot afford an expensive and protracted legal battle against their homeowner or condo association. So they are stuck with paying for lousy or non-existent services, unless they are in a position to sell and move out. Many cannot afford to move, or are unable to find buyers because the of the poor condition of their condo building or common grounds of their HOA community.
CAI’s reported counter argument against empowering owners to hold their Associations accountable:
“I think (our) position is that the Supreme Court made the right call,” said attorney Patrick Costello, who co-chairs the legislative action committee for the Community Associations Institute-Illinois. “If the unit owner believes the association is breaking any of its obligations, there’s nothing to preclude the unit owner from pursuing those claims in court.”
Gael Menneke, executive director of the Association of Condominium, Townhouse and Homeowners Associations, said that while she sympathizes with unit owners who have unresponsive boards, the proposed legislation will encourage disgruntled owners to withhold assessments, starving the association of the funds it needs to cover shared expenses.
“If every owner, or a majority of owners, decided to act in that manner and not pay their assessments, you don’t have any money coming in to support the community as a whole,” Menneke said.
Note the use of the code words “disgruntled owners,” the catch-all label for any homeowner who would dare to question or challenge their HOA board.
Why does CAI not want to make it easy for you to hold your Association accountable?
Allow me to help shed more light on the situation, by pointing out how CAI flip-flops on its viewpoint and rhetoric to fit the agenda of the day.
For instance, let’s revisit the age-old debate: are Owners’ Associations businesses or mini-governments?
Community Associations Institute has been “educating” home and condo owners that an Association-Governed Residential Community (aka a “community association” by CAI) is a business, and not at all akin to government.
Here’s an excerpt from an article published in 2013:
Whether you are a brand new board member serving for the first time or a seasoned veteran or property manager, you need to understand one very simple but vital concept about your community association – it is a business and needs to be run like one. It is no mistake that the association is formed as a corporation. Like any corporation, the association has officers and directors who are responsible for running the corporation in a professional manner and who can be held accountable to the members or shareholders for failing to do so. Granted, your corporation is not in the business of making a profit or issuing dividends to the members, but like any non-profit corporation it is still responsible for operating a significant budget and maintaining and preserving the value of its assets – namely, the property itself. The most successful and well-run associations are those that understand and embrace this concept.
Source: Running your association like a successful business (Hellmuth & Johnson PLLC)
And here’s another article written by a CAI attorney from Florida, in October 2015:
A vital yet often overlooked fact that association leaders must keep in mind is that their association is a corporation – with officers and directors who are elected by their membership to govern and run their corporation effectively. Albeit categorized under the non-profit sector, associations are still responsible for preserving the association’s budgets and bank accounts. They are also accountable for maintaining and hiring vendors, management, and staff, increasing (or at least preserving) property values and sustaining the community’s quality of life.
Source: Run Your Association Like a Business (Michael E. Chapnick)
Can you name one business that is absolutely entitled to collect fees for service,no matter how poor – or nonexistent – that service is? Of course you cannot!
In fact, financial and consumer experts will tell you that it is in your best interests to withhold payments and terminate services when you feel you are being ripped off.
So if a “community association” is a business that is to be held accountable to its members (consumers), then why not empower homeowners to have some control over their own money when they are being exploited?
All of a sudden, HOA and COA assessments are more like taxes
CAI’s more recent argument is that assessments are, in many respects, like property taxes, because they are used to pay for essential maintenance and repairs. And CAI mega management company giant Associa has even gone so far as to proclaim that its various disclosure and home sale transfer fees amount to a “home tax.”
Here it is in a very recent news release, regarding proposed legislation in New Mexico, aimed at capping management company fees for seller HOA disclosure documents.
SANTA FE, New Mexico – February 5, 2016 – Associa, the industry’s leading community management company including offices in Santa Fe and Albuquerque, joined other industry partners and New Mexico homeowners in opposing legislation approved today by the House Government, Elections and Indian Affairs Committee. House Bill (H.B.) 129, if it becomes law, would increase the dues paid by homeowners living in community associations.
Under current New Mexico law, homeowners’ associations (HOAs) are required to provide prospective buyers a disclosure packet that details the financial health of the association, the rules of the association, and any current money owed or violations on the property they wish to purchase. This information is critical for home buyers to ensure that they are fully informed about the rules and costs of living in a community association. Associations or their managers are permitted to charge a reasonable fee to produce this information. H.B. 129 would establish an arbitrary fee cap that would prevent recovery of the costs of preparing disclosure packets. As a result, associations will have to raise their dues on all their members, essentially a tax increase for homeowners.
In other words, CAI wants the right to charge home buyers and sellers unlimited fees. And if those fees are “arbitrarily capped,” then management companies will simply pass that cost onto all Association owners as though it were a “tax” rather than a fee charged for a business service.
So, let me make this crystal clear:
CAI wants the absolute right to collect maximum assessments and fees for service, regardless of the value of that service, but…
at the same time…
CAI wants to deny home and condo owning consumers the conditional right to withhold payments in extenuating circumstances when they can offer evidence of failure to maintain the common areas or breach of contract.
That is blatantly unfair and consumer unfriendly.
Let’s hope that misguided state and federal Legislators reading this article will put down the CAI Kool Aid now, and start voting in support of owner-occupants in homeowners and condo associations.