Another state HOA study group concludes consumer protection is lacking

By Deborah Goonan, Independent American Communities

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Surprise, surprise. Yet another independent study of Association Governed Communities concludes that state law fails to protect private property rights.

The latest report to make headlines, just released according to the Miami Herald, was the result of a study conducted over 9 months by a Grand Jury from Miami-Dade County in Florida.  Their conclusion: Florida State Department of Business and Professional Regulations (DBPR) is “ill-suited” to investigate complaints and resolve disputes between condo owners and their associations.

And this is despite the fact that Florida has a voluminous amount of condominium statutes that are supposed to regulate the industry. As reported here for the past several years, however, those statutes are essentially toothless in terms of enforcement. The Grand Jury report came to the same conclusion that property owner advocates have known for years: DBPR is understaffed, poorly trained, and lacks specific authority to enforce laws that are weak and full of loopholes.

 

State fails to protect condo owners from board fraud, grand jury finds

Feb. 6, 2017

BY BRENDA MEDINA, The Miami Herald

bmedina@elnuevoherald.com
The Florida state agency that regulates condominium associations does not work to protect the tens of thousands who live in condos, resulting in extensive fraud, mismanagement and conflicts of interest among the boards and management companies that govern them, according to a Miami-Dade grand jury report issued Monday.

“Unfortunately, the [Department of Business and Professional Regulation, or DBPR] seems ill-suited to resolve, correct or prevent many of the recurring problems that have been brought to their attention,” the grand jury report said.

Read the report here

Read more here: http://www.miamiherald.com/news/local/community/miami-dade/article131156184.html#storylink=cpy

 

So many studies, so little progress

Florida is not the first state to undertake a so-called independent study of the Association-Governed Housing industry. And, in fact, this is not the first study of its kind in Florida. The Sunshine State and several other states have appointed Legislative or Judicial Committees to conduct similar studies of either condominium associations, or homeowners associations, or common interest communities in general.

Florida’s previous report was issued in 2008, with the same conclusions. Yet problems persist.

Other state reports have drawn similar conclusions. Among those states are:

North Carolina (House Select Committee report of 2012)

South Carolina (HOA study committee report of 2015)

Arizona HOA study committee report circa 2000, see here and here

New Jersey, task force of 1995 – 1996

Kansas (Judicial Council report of 2009)

 

NOTE: There may be more states that have conducted similar studies. If you are reading this article, and I have neglected to mention your state, please send me a private message or post a comment below.

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My point is, for all of the committees, grand juries, and judicial bodies that have studied conflict and protection of property rights, you would think that there would have been great strides in consumer protection for residents and owners of Association Governed Housing.

Unfortunately, not only have problems not been resolved, but living conditions have only worsened as private property rights continue to be eroded.

Why?

 

Organized influence of Association Industry Trade Groups

The root cause of persistent problems in Association Governed Communities is that local, state, and federal housing policies favor the special interests of real estate industry trades and professions:

  • Real estate developers and home builders (National Association of Home Builders, NAHB)
  • Real estate investors and sales agents (National Association of Realtors, NAR)
  • Urban planners, architects, and designers (Urban Land Institute, ULI)
  • Community Association professionals and service providers (Community Associations Institute, CAI)

 

All of these special interest groups are well-funded and organized across the country with numerous state and regional Chapters, Government Affairs liaisons, Legislative Action Committees, and paid lobbyists.

Yet, all four interest groups also cooperate at the state level in working groups. (See this example from Oregon.)

All four industry groups can agree on core common purposes and goals: maximizing profit potential and minimizing liability for their members. Those two goals drive every legislative proposal and amendment, as well as committment to defeat any consumer friendly legislative proposals.

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Diverse and Competing interests of homeowners and residents of Association Governed Housing

By contrast, owners and residents of Association Governed Housing hold diverse, often opposing interests. Therefore, agreement on universal goals is elusive.

For example, consider the following examples:

  • Large communities vs. small communities – the needs and financial risks involved for small vs. large associations differ vastly. Day to day operation and maintenance needs are not comparable. Large communities are likely to have professional management, while small communities are often self-managed.

 

  • Single family HOA planned communities vs. condominiums and cooperatives – multifamily ownership is qualitatively different from detached single family homeownership. Townhouses are hybrids that may either be governed as HOAs or Condo Associations, further confusing the issues. Condo owners don’t own private lots, single family owners do. Cooperative association members only own shares in the corporation. Economic risks differ significantly for each type of ownership. That is why some states have separate statutes that apply to each type of association.

 

  • Owner-occupants vs. absentee owners and investors – while owner occupants have an emotional attachment and vested interest in their primary or sole source of housing, investors or part-time owners are more likely to view their units purely as investments.

 

  • Developer-controlled vs. owner-controlled associations – obviously, owners and residents have very limited control over their communities as long as the developer is in control of the board and the finances.

 

Because of competing and diverse interests in the consumer base, State Legislators have been frustrated by the lack of consensus among private property rights advocates. That is why the same legislative proposals seem to get recycled over and over again, many of them killed by industry lobbyists, others amended beyond recognition to subvert the original intent of the law.

It is a classic tale of Divide and Conquer. The industry knows that it doesn’t take much effort to defeat a group of HOA or condo owners that have managed to get the attention of their state legislator. (And Federal Legislators defer to State Legislators.)

The HOA – Condo – Co-op industry is laser focused on its goals, but common citizen consumers are not.

And since your local government’s goals appear to be maximizing tax revenue and minimizing public responsibility and liability to taxpayers, it should be very easy to understand why state laws tend to favor the Association Governed Housing industry rather than individual taxpaying consituents.

Until a wide swath of civic leaders grasp these truths and demand that our elected officials act in the public interest, study groups are unlikely to lead to positive results for taxpaying housing consumers.

 

 

 

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