Rethinking HOA voting rights

Should HOA member votes be based on residency instead of property ownership?

 

By Deborah Goonan, Independent American Communities

 

Several readers have contacted me, wondering if I am aware of any association-governed community establishing a bylaw that stipulates One Person, One Vote.

One condo owner pointed out that allocating votes to actual people who own condos, as opposed to tying the voting interests to the condo units, could end the abusive practice of hostile condominium association takeovers by real estate investors or developers that acquire or hold onto multiple units within an association.

Very good point.

In elections that happen outside of the HOA governing scheme, it does not matter how many homes or condo units one owns. In fact, any citizen age 18 and up can register to vote, and need not own property at all. Each registered voter gets but ONE vote per elected office or ballot referendum, regardless of personal wealth or investment in real estate.

But changing status quo for association-governed communities is complicated, because almost all HOAs are structured as private organizations, primarily non-profit corporations. Thus they are built on the foundation that each association member is entitled to one vote (or a proportional vote) per unit for which assessments are paid.

Therefore, I am not aware of any specific example of an association-governed community allocating one vote per association member or resident vs. one vote per unit of property.

 

Cooperative housing associations

Cooperative associations tend to have governing documents that limit the percentage share of the association that can be held by one person. A group of shareholders in the cooperative generally must approve applications from prospective buyers, carefully reviewing a buyer’s credit history, among other things, to make sure the new shareholder will understand all obligations and be a good fit for the association.

To prevent any one shareholder from having too much influence in the association, a co-op association will usually not allow an LLC or any other corporate entity to buy shares in the association. As a result, speculative investors and absentee landlords are discouraged, preventing the likelihood of hostile takeover.

Think about it. Have you ever heard of a hostile takeover of a cooperative association? Probably not. Now you know why.

 

Amending condominium covenants and restrictions

Some condo associations have amended their covenants and restrictions to limit the number of units any one person can own. Others have enacted rental restrictions to make the association less attractive to investors. For example, a new buyer may have to own the condo one or two full years before requesting approval to lease the unit with a minimum term of 6 or 12 months.

But rental restrictions tend to be controversial, and, from my observation, not very successful. Because condo associations cannot review and approve buyers, it becomes difficult, if not impossible in this day and age, to prevent and consistently enforce restrictions on short term rental of units through Airbnb, VRBO, and HomeAway.

If the vast majority of units are owned by owner occupants (a fairly rare circumstance), it will be easier to enact rental restrictions. But as condo members’ needs and priorities change, they may later regret the inability to lease their unit.

 

Two-layer voting sytem in HOA planned communities with Development Districts

On the HOA front, the best conceptual framework for voting according to residency is a Community Development District (CDD), or similar multi-function Special Districts created for the purposes of developing planned communities.

For example, read FL statute 190, and pay attention to the sections regarding voting rights of CDD residents. Although a CDD still has a period of developer control (another big problem for owners that I won’t address in this article), and assuming that development has progressed to the point where there are sufficient number of non-developer owners, control shifts to “electors” after 7-10 years. At that point, the CDD board of supervisors is elected by residents – not necessarily homeowners – in a regular election with One Person, One Vote, just as registered voters would elect a school board or any other municipal or county official.

This is because a CDD is a unit of government, and not a private corporation.

 

So consider this: if CDD residents can vote for their board of supervisors — leaders who are responsible for infrastructure maintenance, often including recreational amenities — then why can’t all residents of an HOA vote in the same fashion?

After all, safe roads, good stormwater drainage, parking policies, and neighborhood security affect all residents. Why should owners of multiple properties – especially absentee owners and foreign owners – have the right to case more than one vote for board candidates that will be responsible for making important decisions on how and when to maintain the community that all residents share?

All residents must also abide by the rules and restrictions, so why shouldn’t tenants and other non-owners have a voice in amending or repealing those rules?

A CDD charter recognizes that the best way to hold elected supervisors accountable is to conduct a fair, closely monitored, democratic election, where everyone affected has equal voting rights.

But residents of a CDD are almost always bound by a Property Owners Association (POA) – two layers of governance and two entirely different voting systems.

As POA / HOA members, votes will be allocated corporate style (one vote per unit owned), to elected members of a board with the duty to review applications for exterior home improvements, and to enforce aesthetic and architectural rules and standards.

 

Why do some people oppose One Person, One Vote?

I have discussed and debated this issue with dozens of professionals who provide services to the HOA industry, including members of trade group Community Associations Institute (CAI). For the most part, they are opposed to reforming the way people vote in association-governed communities.

According to trade group experts, the basis for one vote per unit is that the owners are the ones who must pay for maintenance and repair, therefore non-owners should have no right to vote.

And, by the same logic, an owner who has to pay assessments for more than one unit should get votes for each unit.

You can see how this thought process is favored by owners of more than one dwelling in an association, especially condominiums. For example, the owner of three condo units is obligated to pay three regular assessments and three special assessments when applicable, and therefore feels entitled to three votes to compensate for his increased level of investment.

Keep in mind that quite a few owners of property in an association-governed community are not full time owner occupants. They may be seasonal residents. Or they may be landlord-investors. Many live in another part of state or the country, and some are citizens of a foreign country. So…these “homeowners” that view their units as primarily investments are the ones that feel most entitled to one vote per unit (or proportional by size of condo unit), because they view the association as the governance body for a business community. The more units they own, the higher their investment, and, in their minds, the greater their voting rights should be.

And, of course, developers rely on their special weighted voting rights for each undeveloped parcel within the association. After all, the ability to cast multiple votes on proposed amendments or budget increases creates huge economic and political advantages for them.

So the industry is in favor of governing documents that create a legal framework for what amounts to a corporate voting method. State law enables the creation of these governing document “contracts” for association-governed communities, because, under the law, they are private, non-governmental organizations.

The Big Picture vs. the narrow view

But, consider this: Owner-landlords invariably pass on maintenance costs (and assessment increases) in the form of increased rent. Therefore, in reality, tenants pay indirectly for maintenance and repair.

Also, if this twisted HOA industry logic were to catch on as a new way to govern at the local level, then in the next city council or mayoral election, the owner of more than one home or rental unit would be able to cast mulitple votes – one for each unit owned. After all, the owner is paying property taxes on more than one home, right?

Can you imagine what would happen if seasonal residents were permitted to vote for Mayor or President in both Florida and the state of their primary home?

Does that make sense? Does that seem fair?

Or should housing consumers demand equal voting rights in association-governed communities?

Let the comments begin.

 

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3 Replies to “Rethinking HOA voting rights”

  1. This is a most intriguing post. My imagination has now slipped into overdrive. WHAT IF government was run corporate-style and your voting rights were attached to ownership of property instead of citizenship? WHAT IF the POA/HOA component layer of governance was dismissed from the picture and infrastructure was conveyed to a CDD? WHAT IF the Members themselves decided to take back control from the vendors and other status quo interests and killed off their HOA and set up a CDD?

    Have any HOA’s whose Covenants have been expired,either through an intention of non-renewal or operation of MRTA converted to a voluntary civic-type organization and maintenance of common property turned over to a CDD?

    Could HOA’s agree to remove all deed-restrictions and operate the common property via CDD’s? The remainder of community functions could return to the “old ways/days” where neighborhoods acted as civic associations for the benefit of people instead of psychopathic cabals of bullies.

    Thank you for this fascinating post.

    Like

  2. There are many possibilities. A CDD is a special district created by original landowners – for all practical purposes, a developer or affiliated parties. An existing planned community could explore using different types of special districts to shift maintenance of infrastructure and amenities out of the jurisdiction of the HOA or POA.

    In Florida, for example, here is a list of types of Special Tax Districts http://www.floridajobs.org/community-planning-and-development/special-districts/special-district-accountability-program/an-introduction-to-special-districts

    Nationwide, see the following sources explaining the roles and types of Special Districts in the US:

    http://www.govtech.com/biz/What-Are-the-Most-Common-Types-of-Special-District.html
    https://www.britannica.com/topic/special-district
    https://en.m.wikipedia.org/wiki/Special_district_(United_States)

    Another option could be annexation of an unincorporated planned unit development to a nearby municipality.

    https://independentamericancommunities.com/2017/03/25/years-following-omaha-annexation-owners-consider-dissolving-hoa/

    https://independentamericancommunities.com/2017/05/07/west-virginia-hoa-seeks-annexation-to-city/

    Some large scale planned communities have incorporated as independent municipalities – Google Diamondhead, Mississippi and Columbia, MD as two examples. However, both of these cities still maintain a Property Owners Association to enforce standards. But…for all practical purposes, the mandatory POA in these cities serves no essential function, and theoretically, could be dissolved by supermajority vote of owners.

    CC&Rs in Diamondhead MS are nearing their expiration date, and many owners seem to be happy about that. The POA board, however is looking for legal loopholes to keep the party going by trying to make sure the restrictions and therefore the POA can never expire.

    There have been similar legislative attempts in Florida to amend MRTA statutes to ensure that HOAs and restrictions can never expire. Do a keyword search on this website under ‘MRTA’ for more information. Here is one article on the topic – https://independentamericancommunities.com/2016/01/08/florida-legislation-would-ensure-that-hoas-can-never-expire/

    This year’s failed legislative effort by a notable HOA lawfirm is summarized here, under Florida
    https://independentamericancommunities.com/2017/05/17/hoa-condo-co-op-legislation-updates-may-2017-az-co-fl-hi/

    HOAs with expired covenants do indeed become voluntary particpation organizations, if not totally inactive. A recent article in the real state classified section of Orlando Sentinel highlights a few older HOAs that have expired and chosen not to reinstate the HOA.

    http://www.orlandosentinel.com/classified/realestate/os-bz-hoa-fees-20170410-story.html

    Keep in mind that this article appears in the same section of the paper as real estate ads of homes for sale, thus the headline emphasis on ‘decline’ in non-HOA neighborhoods. However, many active HOAs and COAs are in far worse physical condition, and are financially insolvent. You do not see as many reports about those, at least not in the Real Estate section.

    Like

  3. This is a valuable primer for those who are in anguish over what to do about the unwanted burdens of an HOA imposed by forces without any interest in neighborhood building. Rather, these laws are designed to relieve municipalities and line the wallets of special interests.

    Homeowners in associations feel powerless to “right the wrongs” practiced daily by management, the attorneys and the industry special interests. Perhaps when the frustration level “goes postal”, owners will educate themselves about the alternatives and thereby either find some peace with a situation of their choosing or set about changing it.

    MRTA could be the HOA’s best friend and open up possibilities for homeowners by opening a door to reform of their community. Of course,it is the nemesis of special interest seeking to cost shift the burdens of neighborhoods and/or seeking to enrich their own pockets!

    Thank you for this terrific overview of CDD’s and an alternative that relief from abusive HOA’s that many owners are not yet aware of.

    Like

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