By Deborah Goonan, Independent American Communities
Yesterday’s post provided quantitative data – statistics and surveys from the real estate industry and the U.S. Census – that suggest that association governed communities are falling out of favor with housing consumers.
Today I share with readers a report that provides qualitative evidence of a governance model that is in market decline. Unfortunately, homebuyers in one particular Utah community have been duped into buying into a Phantom Homeowners’s Association – one they were never told about when they purchased their homes, although it exists on legal papers filed with the County Recorder.
Grantsville neighborhood surprised to learn homes are in HOA
by Matt Gephardt and Cindy St. Clair, KUTVWednesday, September 6th 2017
Grantsville, Utah — Gaynel Cromwell has owned a home in Grantsville for about a year and a half. One of the major selling points: it’s not in a homeowner’s association, she said.
So imagine her surprise when she got a letter from a neighboring community’s HOA telling her that she needs for plant a few more bushes, trees and put some rocks along the street.
“[The letter is] saying we’re not in compliance and we have 10 days to get our stuff in order,” Cromwell said.
Cromwell was also told she needs to start paying the association $30 per month for dues. She says she protested that nobody told her anything about an HOA when she bought. The real estate listing has no mention of an HOA and the seller clearly marked, “no,” when asked if there was an HOA.
Read more (video):
Did you catch all the details? The HOA was created in 2005, but for 12 years, nobody enforced the restrictions or collected assessments. Furthermore, real estate agents and homeowners were under the impression that there was no HOA.
And, in fact, Gaynel Cromwell went out of her way to avoid an HOA, only to find out 18 months later that she and her neighbors have fallen into the Phantom HOA trap.
I repeat, Cromwell reports that she and several of her neighbors do not want an HOA, and purchased their homes in South Willows Phase 2 because they were told it would not be burdened by HOA restrictions and requirements for assessments.
If homebuyers are actively seeking out HOAs, then why doesn’t South Willow Phase 2 prominently advertise that each home purchse comes with HOA restrictions and monthly fees?
And why do we now see more and more home for sale ads promoting NO HOA?
Was this a case of bait and switch?
Legally, these homeowners are stuck, but they shouldn’t be.
Yes, the existence of the HOA was noted on the title insurance report. But no one pointed that out to Cromwell or any of her neighbors who were also unaware of the HOA.
Who actually reads their title insurance report? And who would understand the complex legal language, even if they did read it?
Isn’t that why consumers hire a real estate attorney or title company in the first place – to represent their interests as homebuyers?
So why was there no open and specific disclosure of this material fact about the property?
Why is there no protection for consumers and their private property rights? How does tricking homebuyers into buying HOA liabilities serve the public interest?
Homeowners could attempt to fight this injustice in civil court, but it is likely to be a lengthy and costly legal battle. It would be easier and more cost effective to sell and move – if they can find willing buyers.
But why should anyone in the U.S. be faced with this dilemma, complicated by the fact that, in some real estate markets, it has become darn near impossible to avoid an association-governed, common interest community?
State and federal law must prohibit the Phantom HOA, by requiring each and every mandatory association to register with the IRS and their State. Consumers should be able to easily search a federal or state database by property address, to see if the property is subject to one or more mandatory homeowners’ associations.
What about inactive HOAs?
Want more evidence that HOAs are unpopular among homeowners?
In his report, KUTV’s Matt Gephardt also points out that there are quite a few “dormant” or inactive HOAs in Utah.
If consumers truly value HOA restrictions, then why don’t they eagerly participate in self governance and actively prevent the association from becoming inactive or defunct?
If an HOA remains dormant for years, at some point, state law ought to consider the association and its restrictions null and void. This is an area ripe for legislative action.
Beware of political spin by promoters of HOAs
Unfortunately, the real estate sector that promotes association-governed common interest development is not interested in common sense analysis of the market for their product. One industry trade group continues to refute Census data and home builder marketing surveys that clearly indicate waning demand for HOAs, condominiums, and homeownership in general.
Community Associations Institute (CAI) is always quick to cite their own “authoritative research” and “independent surveys.” CAI insists these surveys prove that most people are satisfied with the Association-Governance of their communities. But here’s what is not revealed to the general public: CAI’s Research Foundation is entirely funded by contributions from its own members and affiliates, who happen to be major financial stakeholders that build, finance, and manage community associations.
Common sense says that consumers should be wary of HOA satisfaction reports funded by the trade group that benefits from the creation, care, and feeding of HOAs.
When the industry has to resort to dirty tricks to get consumers to buy into HOAs, you know they must be getting desperate to unload excess housing inventory.