By Deborah Goonan, Independent American Communities
Legislative sessions are in full swing across the U.S. And some states are, once again, considering bills that are intended to rein in abuse and corruption of a virtually unregulated industry: association-governed, common interest communities, more commonly known as homeowners’ associations or HOAs.
As explained in a previous post Recipe for HOA abuse: too much power, no accountability, across the nation, housing consumers are fed up with HOA bully boards, often driven by predatory management agents and community association attorneys, all under the guise of “protecting property values.”
In response, over the past decade, homeowners and a handful of advocates have worked hard in various states to create some balance of power. Legislative efforts were intended to enable homeowners, residents, and shareholders of association-governed communities to hold their boards accountable.
See State Policy and Legislation under “Topics” on this website for numerous articles about efforts in various states.
For example, states have attempted to rein in the abuse and dysfunction with one or more of the following reforms:
- Establishment of an HOA Ombudsman
- Attorney General oversight of homeowner, condominium, and cooperative associations
- Administrative oversight of communities by business or real estate licensing boards and agencies
- Licensing of community association managers
- Enacting new laws requiring open records, open board meetings, and board disclosure of conflicts of interest,
- New laws mandating better buyer disclosure standards
- Laws to give homeowners more rights to display the American flag, install solar energy equipment, and drought tolerant landscapes
State regulations aren’t working
Unfortunately, most regulation of HOAs has turned out to be relatively ineffective. All the housing consumer has to do is observe the level of dysfunction and corruption in states such as California and Florida, where an extensive volume of laws exist under the pretense of regulation of association-governed common interest communities.
For one thing, many state laws are poorly written with input from well-meaning homeowners or Legislators who don’t fully understand the issues facing housing consumers.
And even well-written bills initiated by state advocacy groups are often diluted and amended — if not killed in the Legislature by lobbyists. It’s no secret that well-organized trade groups in the HOA industry contribute millions of dollars to Political Action Committees (PACs) and state officials willing to support their special interests.
At the same time, a plethora of laws are written by developers or real estate trade groups. (Among them, Community Associations Institute, Home Builder groups, Realtor organizations). Those laws often do consumers more harm than good, because they are written to benefit the bottom line for corporate interests in the real estate sector.
The anti-regulation political environment
One of the biggest arguments put forth by the HOA industry is that any and all regulation of their industry is unnecessary and bad. They claim that regulation either increases costs for homeowners (who, they argue, end up paying higher management fees), or prevents developers from building so-called “affordable” housing (housing that is cheaper to build, but more expensive to maintain in the long run).
The industry spins its rhetoric that problems with bully boards are “isolated,” that financial corruption is “rare.” Big corporate developers shift blame to owners for poor maintenance of common property and infrastructure, when property damage is actually the result of shoddy construction or a poorly-chosen site for land development.
Does anyone believe these unsupported claims of the HOA industry anymore?
Unfortunately, there are some state Governors and Legislators that do, apparently because it conveniently aligns with their long-held political bias against regulation and “goverment interference” of any kind.
Curiously, the same elected officials at the state level see no problem with granting Home Rule to local governments to enact arbitrary and onerous zoning regulations that make it difficult, if not impossible, to build new residential development without creating some level of common ownership and a mandatory HOA to maintain those commons.
And there’s even more irony.
Homeowners,’ condominium, and cooperative association-governed communities represent the most highly regulated environments in the U.S.
In these micromanaged, highly restrictive communities, owners and shareholders are not free to maintain, decorate, renovate, or use their private property as they wish.
Approval of a group of volunteer bureaucrats is necessary before homeowners can re-paint their house, replace floor or window coverings in their condo, or put up holiday lights on the front porch of their townhouse.
The association may restrict where residents can park their vehicles, and may even forbid parking of some types of trucks or RVs altogether.
The association can decide whether or not residents can own a pet and, if so, how much the pet can weigh.
The association can dictate whether or not owners can rent their homes to long-term or short-term tenants. Some even forbid the owner from sharing expenses with a roommate.
In a multi-story condominium, there might be rules about who can use the elevators or visitor parking areas, and under what circumstances.
The association can tightly control resident access to its club house, meeting rooms, swimming pool, fitness center, laundry facilities, golf cart paths, and more. The list of rules, restrictions, and required standards of good taste and behavior is seemingly endless.
The HOA Deregulation Priority List
The argument I put forth in response to policymakers that oppose all regulation is this:
If HOAs are businesses that do not need to be regulated, then they should not possess police powers reserved for government.
If meaningful regulation of the industry is out of the question due to political pressure from special interest groups, but you still want to help your constituents, then revoke excessive powers of association-governed communities.
1. Start by prohibiting the power of HOAs to unilaterally impose fines.
End the enforcement of covenants with the subjective purpose of eliminating perceived “bad taste” or “eyesores” that some believe will reduce property values. No homeowner or shareholder should have the right to impose fines on their neighbor simply because they disagree on what looks attractive and pleasing to the eye.
Likewise, do not allow HOAs to impose fines or sanctions upon owners and residents for minor disturbances such as the sound of a baby crying or children playing.
Require the HOA to engage in actual due process via a neutral tribunal — small claims court would suffice for most issues. Chances are, no judge will be willing to escalate a dispute over paint color or parking violations by enforcing daily fines of $25 per day, or $100 per month — plus unlimited late payment penalties and attorney fees — until the homeowner complies.
2. End non-judicial foreclosure by HOAs. Likewise, limit HOA power to foreclose on relatively small liens — often less than 1% of the home’s value. Put an end to policies, in about half of the states, that allow HOA liens to take priority over liens of mortgage lenders.
3. End the association’s authority to regulate traffic and maintain security within private communities – these duties are far more suitable for public officers of the law.
4. Limit CC&Rs that unreasonably restrict use of private property or civil liberties.
Legitimate restrictions apply only to matters that truly impact public health and safety, or circumstances that create an actual neighborhood nuisance.
It’s time to end HOA regulation of its members
No other type of business in the U.S. possesses such vast powers, authorities, or rights with regard to private property and civil liberties of U.S. residents, regardless of the existence of a “contract” between the parties.
To put it simply, it’s time to end excessive developer or neighbor-imposed regulation of homeowners, residents, and shareholders of association-governed common interest communities.