By Deborah Goonan, Independent American Communities
Wow. Every once in a while I read an article about association-governed communities that is really nothing more than marketing hype and public relations for the industry.
I hesitate to share these articles, because, in one way, it just spreads the propaganda. But, on the other hand, the only effective way to counteract the harmful effects of the industry’s agenda is to shed sunlight on it.
The following column in the Huffington Post was written by Jack Hanson, CEO of Melrose Corporation of Florida.
To put his views into perspective, the reader should know that Melrose Corporation consists of eight affiliated businesses that include property management services for common interest communities (primarily for large “influential” real estate developers), amenities management in master planned communities, providers of interior design and furnishings, as well as real estate acquisition and sales, maintenance, construction, and renovation services. Hanson has even franchised his property management model.
Jack Hanson, Contributor
Property management expert and CEO, The Melrose Management PartnershipHOAs Gone Haywire Part V: How To Use… And Not Use… Social Media As A Part Of HOA Or COA Communications
03/07/2017 03:55 pm ET
A homeowner in Nashville was threatened recently with legal action by her HOA for using the name of her subdivision on her personal Facebook neighborhood page.A $15,000 suit was filed a few years ago by a vacation-condominium owner over negative social media comments made by a guest.
The online airing of New York City co-op residents’ internal dirty laundry has boiled over into lawsuits and even coverage in The New York Times.
If I have communicated anything thus far in my HOAs Gone Haywire series, it’s that HOA and COA managed communities are in fact highly regulated businesses charged with protecting the property values of homeowners. The conflicts, unexpected costs and legal imbroglios — from the benign, like fines for putting out the wrong color trash can, to the serious, like being foreclosed on for late Association dues — that appear in the media regularly and that mar the intent of managed communities come about almost entirely from a lack of understanding on the part of homeowners as to how managed communities run.
More here:
According to Hanson, homeowners and condominium associations (HOAs and COAs) are businesses. Therefore he calls them association-managed communities.
And, in his professional opinion, communication among members of the Association must be strictly regulated by the HOA. After all, the only way to protect property values is to make sure the HOA or COA always “looks good.” In Hanson’s words:
The Association’s and the homeowner’s social media representations of the community should be considered marketing. If someone is looking at buying property in your community and Googles it, you want them to think it’s Leave It To Beaver meets the Brady Bunch… not the Real Housewives of Beverly Hills meets WWE SmackDown.
Well, that’s a blatant admission that there is no truth in advertising. After all, common interest communities are created primarily by and for the economic advantage of real estate developers.
Are HOAs and COAs nothing more than businesses?
Think about what this means, in terms of the social and political structure of residential communities.
Hanson and many others in the industry of building, marketing, and providing services to common interest communities want the public to buy into the concept that, when you buy a property subject one of these corporate associations, you are nothing more than a silent investor in a business partnership or collective.
If that is truly the intent of HOAs and COAs, then why are homes sold to buyers with emotional appeals?
Look at any major home builder’s website, and read the sales and marketing pitch. According to home builders, their planned communities provide “the perfect haven,” a place for you and your families to enjoy, offering “peace of mind,” active adult lifestyles with social events, safety and security behind gated entries, and so on.
If the intent were purely business oriented, developers would be selling buyers on the investment opportunity. They would be selling the consumer on the concept of a sound return on their real estate investment.
The truth is, the vast majority of buyers are looking for a primary residence, a second home for seasonal use, or a vacation getaway.
Even though 37% of homebuyers in 2016 do not reside in the homes they have purchased, 63% of homebuyers actually do live in the homes they purchase.
The root of conflict in many HOAs and COAs is the clash of priorities between owner-occupants and owner-investors.
And it is the latter group – the investors who are emotionally detached from the properties they own – who drive the prime directive of association-governed communities: protect property values at all costs.
Do Association-Governed Communities have higher property values?
The problem is, this mantra that restrictive covenants enforced by a corporate association somehow protects your investment in personal property has been repeated so many times that, unfortunately, too many home buying consumers actually believe it.
Of course, there is no convincing economic research that supports the marketing hype. And many owners only realize this is hype after they have bought into a residential association.
Do the vast majority of homeowners truly believe that their neighbor’s choice of mailbox, paint colors, or landscape plants have any meaningful effect on the appraised or resale value of their homes?
I seriously doubt it.
Instead, many harbor the irrational fear that, without HOA restrictions, the entire neighborhood would be ruined with weed-infested yards, junk on the front porch or condo balconies, and old rusty cars up on blocks. But of course, in any well-maintained neighborhood – HOA or not – these are exceedingly rare occurrences.
On the other hand, when HOAs or COAs defer maintenance, over time, blight takes hold despite all of the restrictions. (See this website for countless examples.)
What does the HOA industry really value?
Most homeowners I know are very concerned about getting their money’s worth from the fees and assessments they pay to maintain their neighborhood and its amenities. Homeowners also believe they have a right to open communication about how their money is being spent. They believe they ought to be able to see – with their own eyes – how every penny is spent, because it is their money!
But, according to Hanson, the HOA had better not post official records where owners might actually see them. No, the records need to be kept as paper copies and stored in boxes.
After all, if official records were posted online for members to review whenever it is convenient, how could the HOA restrict access and charge owners to see those records?
And, of course, also according to Hanson, the HOA must prevent owners from posting criticisms or complaints on social media. In fact, look at the caption on the photo in the article.
An HOA’s dirty laundry should stay behind the gates, not be aired on Facebook Live.
Really?
Is the HOA – member relationship equivalent to the employer-employee relationship? Are HOA managers to play the role of authoritarian parent, controlling the behavior of petulant children?
Should an HOA be able to restrict speech that it deems disagreeable, speech that it considers negative media coverage?
Should owner comments at board meetings be carefully restricted? Should the HOA collect all cellphones at the door, so that no one dares to livestream the board, manager, and homeowners in action during a contentious meeting?
Or do you believe that sunlight is the best disinfectant – a crucial guard against abuse of power and corruption of leadership?
Don’t residents of HOAs and COAs still live in a representative democracy, governed by U.S. and state Constitutions?
Nope. Not according to Hanson and industry driving forces behind association-governed communities. As members of these association “businesses” your rights are not valued. Only your property has value.
The Business of Governance
Let’s play along with the line of thinking that HOAs and COAs are pure businesses to be managed.
If that’s the case, I challenge the reader to provide one other example of a business arrangement that allows partners or shareholders to fine and otherwise penalize one another when they disagree about the company’s self-imposed rules. Mind you, in mandatory residential associations, these penalties are imposed without any genuine due process, the kind that requires disinterested third party intervention by way of the judicial process.
What other collective business arrangement, one in which you are an owner and/or investor, can take your personal property – your home – if you breach your side of the business contract? In fact, an HOA or COA can foreclose on your home based on a claim of unpaid assessments, even if that claim is questionable, and even if the debt owed to the association is negligible in comparison to the value of your home.
When it comes to HOA and COA disputes, the courts only get involved after the owner is subjected to a penalty or a removal of rights, not before.
What’s up with that?
Even a mortgage lender, the provider of financing with your home as collateral, has to jump through more hoops than your HOA before foreclosing on your home.
Note that a borrower is not a business partner with the bank, while a member of a mandatory association is considered a legal member of the business corporation.
BIG difference.
Management vs. Governance
In my opinion, if HOAs and COAs would stick to managing the common areas, there would be a significant reduction in conflict and litigation.
But typically, associations cross over the line from management to governance when they begin to manage use of personal property (your home) and personal conduct.
In general, the HOA is more than happy to collect and spend your money – in fact, they insist upon it – but there is social and legal pressure to suppress your rights, including your right to speak up and disagree with the way the HOA conducts its so-called business.
In short, a mandatory residential association is a business corporation that has been granted special legal powers and authorities ordinarily reserved for government.
The industry picks and chooses how to classify HOAs and COAs based upon its agenda of the day.
When the industry wants to restrict speech and prevent bad publicity, then HOAs and COAs are private businesses.
But when the industry wants to compel a homeowner-member to pay assessments, fines, and fees – no matter what – then HOAs and COAs are substitute local governments.
The question is, how long will we allow the industry to have it both ways?
Why the industry fears Social Media
It does not surprise me that a property management CEO would oppose the use of social media.
But the truth is, Hanson and others in the association-governed housing industry cannot stop homeowners and residents from using social media, no matter how many rules and restrictions they create, no matter what legal intimidation tactics they can come up with.
And while all new communications technology comes with its challenges, there is no going back to the days before the internet, smart phones, Facebook, and Twitter.
That would be like trying to put the toothpaste back in the tube.
Like it or not, blogs like this one will continue to circulate on social media, along with many thousands of print and video reports of dysfunction and conflict in association-governed communities. Homeowner and resident created groups will continue to operate on various social media platforms.
The industry – and housing policymakers – must decide if it is better to suppress the truth or change course and finally address growing public dissatisfaction, outrage, and criticism.
Thank you for sharing your comment about the “Consumer Review Fairness Act of 2016.” Since virtually all mandatory residential associations are corporations, it seems as though the CRFA should apply to these “businesses.”
And because many HOAs function as substitute mini-governments, the First Amendment of the U.S. Constitution should also apply, although most courts — with the exception of 2 cases in the state of NJ — have been unwilling to “go there” as it would open Pandora’s Box and require a great deal more public transparency and accountability from HOA boards!
There is a new law that prohibits interfering with consumers posting an honest review which President Obama passed in December 2016. Thank you President Obama! President Obama signed a number of bills into law on Thursday, most notably H.R. 5111, the “Consumer Review Fairness Act of 2016”. The legislation, which passed both houses of congress at the start of December, “makes certain clauses of a form contract void if it prohibits, or restricts, an individual from engaging in a review of a seller’s goods, services, or conduct.”
This is a big win for consumers. There have been a rash of incidents over the past couple of years in which companies attempt to stifle negative user reviews with “gag clauses” that threaten legal action and punitive monetary damages. The Union Street Guest House in Hudson, New York, for example, threatened a wedding party with $500 fines for every bad review the wedding’s guests left on Yelp. Now that the President has signed the bill, the FCC and states are empowered to take legal action against companies that don’t knock it off.
For their parts, the Better Business Bureau already requires its accredited members to not use such clauses and Yelp used to pop a warning screen before users visit a company that insisted on using those clauses. Though, the company won’t need to do that anymore now that it has the backing of the federal government.
“One of our top priorities has always been to protect the ability for internet users — everyone from Yelpers to online shoppers — to share their experiences online, whether they be positive or negative,” Laurent Crenshaw, Yelp’s Director of Public Policy told Engadget. “The Consumer Review Fairness Act gives Americans nationwide new guaranteed legal protections when it comes to sharing these honest, first-hand experiences. We will continue to advocate at both the federal and state levels for legislation to protect consumers.”
Deborah:
You are absolutely correct for two reasons. The more that a corrupt board shares or transmits the more they expose themselves to scrutiny and the more the other members of the HOA can be engaged.
Jim
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I do believe you have written your best article to date. Right on point and I totally agree.