Critical need for consumer-friendly HOA disclosure

By Deborah Goonan, Independent American Communities


Yesterday I read two very important articles on the subject of disclosure documentation and information made available to home buyers of property in Association Governed residential communities. (Homeowners, condominium, and cooperative associations.)

Both articles addressed the need for home buyers to perform due diligence when evaluating not just the home itself, but also the association governed common interest community.

The Washington Post article by Ilyce Glilnk and Samuel J. Tamkin focuses on one particular issue brought up by a reader in the midst of considering a home purchase – the very real possibility of a $2,500 increase in annual assessments to repair the community’s privately maintained roads. The home buyer is frustrated to learn that standard disclosure documents required by law in the state of Virginia provide few details on the issue. The authors recommend knocking on doors and talking to current homeowners and even the HOA Board President.

John Cowherd’s article delves into the specific requirements of Virginia disclosure law, and his personal experience representing homeowners in real estate transactions and HOA disputes. From his perspective, Virginia’s state disclosure requirements are weak: the required documents fail to tell the whole story, are written in complex legalese that a lay person may find difficult to decipher, and the three-day window to review disclosure documents and cancel a sales contract is far too short to allow for thorough and professional review of the facts.

My own personal experience confirms Attorney Cowherd’s assessment of reality.

Several years ago, when our family moved to another state, we purchased a home in an HOA. Having never lived in an HOA prior to that time, we did ask to see a copy of “the rules” as a condition of the sales contract, to be certain we could live with them.

You see, most home buyers don’t even know what they should be asking to see, in terms of disclosure documents, particularly if they have never lived in an HOA.

At the time, the state in question (not Virginia) had no disclosure statutes. I recall that it took several days for the seller’s agent to provide our buyer’s agent with a copy of the governing documents. I was stunned to receive a thick stack of paper – more than 100 pages in all. And at that point, we had less than 48 hours to review said document before the sale recision deadline.

I recall reading the 4th or 5th generation photocopy and thinking it must have been written by an attorney. It was  not written in what I would call plain language. Although I scanned the remainder of the document, I was only able to glean a cursory understanding of what I was reading. There was no time for a full legal review. After skimming through the headings I finally found the section on covenants and restrictions. Reading through those, my spouse and I agreed we could live with those, so we went through with the sale and purchased the home.

However, after about a year of living in the home, we noticed that some of the common areas adjacent to our home were not being properly maintained. When we contacted the management office about it, our inquiries were repeatedly ignored. Our neighbors had similar experiences. When we collectively reported the problem to the HOA Board, we were barely acknowledged, and encountered great resistance to addressing the problems.

It was as this point in time that I and other homeowners realized a fact that is never disclosed to buyers: although a homeowner is absolutely required to pay assessments in full and on time No Matter What, the HOA is not similarly required to actually deliver the services ostensibly promised in the Declaration of Covenants and Restrictions (CC&Rs).

The next step was to consider getting some new volunteers on the HOA Board. However, upon reading about membership voting rights and election procedures in the governing documents, it became clear that the system was convoluted and rigged in favor of keeping the incumbent board in control. Only like-minded allies of the current HOA Board were likely to be successfully elected by a handful of Voting Representatives at the Master HOA level. We compared the governing documents with current state laws on voting and elections in HOAs, and found that, in our case, state law deferred to procedures set forth in the governing documents. It was another dead end.

The documents were so confusing on the issue of allocation of voting rights to the developer that, at one time, the matter had to be decided in Arbitration by the state regulatory board. The State agency found in favor of the developer.

My story illustrates that current HOA disclosure laws – to the extent they exist, and considering they vary from state to state – are woefully inadequate in terms of educating home buyers as to the complexities of Association Governance.

What’s more, most state disclosure laws do not even require that the buyer be provided with a reference to current state laws governing homeowners, condominium, or cooperative associations.

Furthermore, to the extent that financial documents are provided at the time of purchase, the buyer is merely getting a snapshot of current conditions in the Association – and one that may be incomplete.

Following purchase, most state laws provide no mandates for regular financial disclosure of the Association. While there may be a general right for homeowners to request access to financial records, there’s no requirement for the HOA to proactively provide regular reports, with the possible exception of providing an annual budget summary and occasional audit.

There are few states that require HOAs to maintain timely and accurate minutes for board meetings. Because few homeowners attend board meetings, it’s even more critical that homeowners receive regular communication from their Association, so that they are not later shocked when they receive a letter demanding thousands of dollars for a special assessment,  or an announcement of a major increase in monthly, quarterly, or annual assessments.

In our own HOA, residents were not even informed about the candidates running for the Master HOA board. Not that it mattered, because the incumbents always “won” anyway. New blood was only elected to the Board if an incumbent decided to step down. In fact, I recall getting a newsletter announcing the “retirement” of one of our long-time Board members. What does that tell you?

Of course, none of these realities were disclosed to us prior to purchasing our home.

Recognizing this critical need for Consumer Protection, I founded the IAC blog in 2014. Slowly, along with other like-minded, consumer-focused bloggers, we are educating housing consumers, one reader at a time.

Thanks for reading Independent American Communities, and please keep on sharing this “full disclosure” HOA blog. 



Why you should look carefully at an HOA’s plans for that community before buying a home there

By Ilyce Glink and Samuel J. Tamkin September 14, 2016 (Washington Post)


Does an HOA Disclosure Packet Effectively Protect a Home Buyer?

BY JOHN COLBY COWHERD September 14, 2016 (Words of Conveyance blog written by a Virginia Attorney)




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