PA Legislature approves weak AG oversight of HOAs

Will new legislation enacted in Pennsylvania hold developers, managing agents, and boards of association governed communities accountable?

Don’t count on it.

 

By Deborah Goonan, Independent American Communities

 

According to proponents of the bill, HB 595 will “help” residents of planned communities, condominiums, and housing cooperatives by encouraging Alternative Dispute Resolution (ADR) — arbitration and mediation — to resolve disputes between associations members and their HOAs. The claim is that HB 595 will provide Attorney General oversight of all types of HOAs, by allowing residents to file complaints with the Bureau of Consumer Protection.

Sounds like good news, doesn’t it?

(Screen capture, Rep. Rosemary Brown, Facebook page, dated April 17, 2018)

 

Well, don’t start celebrating yet.

Last year, PA HB595 was approved unanimously in the House and in the past several weeks, the bill sailed through committees in the Senate, also with unanimous approval.

Politically, the bill gives the appearance of consumer protection for property owners in association-governed communities. That explains why most Legislators voted YES.

Readers should know that, in Pennsylvania, association-governed communities are clustered in several eastern counties, but relatively rare and scattered in other portions of the Keystone State. Chances are, most House Representatives and Senators have never resided in or owned property in a condominium, cooperative, or planned community. And the vast majority of their constituents don’t live under HOA rule either. These Legislators, uneducated on the realities of HOA living, are easily swayed by industry lobbyists who authored and promoted HB 595.

Of course, House Rep. Rosemary Brown and co-sponsors from HOA-prevalent voting districts are another story. They should have known better.

Are state Legislators truly naive? Or do several eastern county Legislators have direct family ties or business investments in association-governed real estate? Or is this a matter of pure politics — “if you vote for the important bill I am sponsoring, I’ll vote for the bill you are sponsoring?”

Whatever the reasons for the state Legislature’s enthusiastic support, Pennsylvania constituents are likely to be disappointed if HB 595 is signed by Governor Tom Wolf, and the new law proved ineffective at reining in HOA abuse in the Keystone State.

 

 

By the way, if any reader happens to know who is a member of the “HOA Task Force”  co-sponsoring an upcoming event with Rep. Rosemary Brown, please get in touch with me through this website.

Rep. Brown hosted similar workshop in 2017, co-sponsored by members of CAI-Pennsylvania Delaware Valley Chapter.

Rep Brown PA HOA board member seminar with CAI May 6, 2018
Announcement of HOA seminar, Rep. Rosemary Brown, sponsor of HB 595.

 

 

Here’s what the HB 595 will do — and won’t do — for housing consumers

As explained in several prior posts here on IAC, HB 595 has been crafted by Community Associations Institute (Pennsylvania-Delaware Valley Chapter)  to serve the interests of its trade group’s membership, which primarily includes community association management companies and attorneys, HOA board members heavily invested in real state, and financial and community maintenance service providers to HOAs in the region.

The original bill proposed by Rep. Brown in 2016, HB 432, proposed that the AG would “investigate and mediate” complaints against HOAs made by housing consumers. That bill was promptly killed by HOA industry lobbyists tied to CAI.

In 2017, HB 432 was refiled, but then quietly replaced by HB 595.

On its website, CAI – PADELVAL admits to “convincing Rep. Brown to amend the Bill to narrow the scope of authority to complaints related to association meetings, quorums, voting and proxies, and association records.”

 

But, in addition, CAI attorneys rewrote the original draft of HB 432. They crafted HB 595 to require two conditions before an HOA owner/shareholder can file a complaint against their association with the AG.

The two conditions follow, as well as a brief explanation of the consumer protection barriers these conditions create:

Condition #1: the association member must be in “good standing.” Here’s how HB 595 defines “unit owner in good standing.”

“Unit owner in good standing.” A unit owner who is current
10 in payment of assessments and fines, unless the assessments or
11 fines are directly related to a complaint filed with the Bureau
12 of Consumer Protection in the Office of Attorney General
13 regarding section 3308 (relating to meetings), 3309 (relating to
14 quorums), 3310 (relating to voting; proxies) or 3316 (relating
15 to association records).

(Note: The same language is repeated for condominiums, cooperatives, and planned communities with HOAs.)

How are association members supposed to prove that their delinquent assessments and fines, deeming them not in good standing in the judgment of their HOAs, are “directly related to a complaint filed” with the AG, in relation to the four specific sections of state law?

This language is vague and certain to create an environment where the HOA accuses the homeowner of being disgruntled or unreasonable, while the homeowner accuses the HOA of retaliation.

How likely is the BCP to take a complaint, under these circumstances?

In practice, the “good standing” condition creates a perverse incentive for a rogue board or manager to fabricate retaliatory covenant violations, imposing steep fines and other penalties against the whistleblower. Another out—of-control HOA strategy is to misplace or claim to have never received assessment payments. (Plenty of documented examples of this kind of misconduct appear on this website.)

 

Condition #2:  the owner must participate in the HOA’s own internal ADR process ( if available) and wait 100 days to see if the HOA will cooperate or compromise on the “dispute” with the homeowner. Remember, the scope of authority is very narrow. The Bureau of Consumer Protection (BCP) will only take complaints on 4 specific issues listed above: “complaints related to association meetings, quorums, voting and proxies, and association records.”

But, think about it. What is there to mediate or arbitrate when the HOA breaks state law with regard to meetings, quorums, voting and proxies, and association records? Isn’t it the job of the AG to investigate and determine the merits of a legal complaint?

Apparently, not in Pennsylvania, at least not with regard to association-governed common interest communities, and according to HB 595.

The AG can merely take a complaint, but only after the owner jumps through the ADR hoops created and designed by HOA attorneys for the benefit of the HOA. That’s going to cost aggrieved HOA members hundreds, perhaps thousands of dollars in filing costs and attorney fees, and prevent the member from filing a valid complaint for 100 days.

And, once the BCP / AG receives a member’s complaint, it has no authority, under HB 595, to actually investigate the matter, let alone intervene in the “dispute” or enforce state law against the HOA board, its developer, or its management agent.

The single exception: the AG retains its current authority to investigate alleged financial crime, but only if presented with solid evidence of substantial financial misconduct.

It’s rather difficult, if not impossible, for member at large (non board members) to obtain evidence of wrongdoing when the HOA refuses to provide access to official records, including, for example, bank statements, official vendor contracts, or ballots and proxies.

As designed, the system touted by proponents of HB 595 will undoubtedly discourage or prevent owners from filing complaints.

And, in my opinion, that’s precisely the intent of the industry attorneys that crafted HB 595.

READ HB 595

 

It should be noted that, while HB 595 does not absolutely require existing associations to create an ADR process in the community bylaws, the bill nevertheless creates a huge incentive for HOAs to adopt an ADR process as soon as possible.

By instituting ADR, the association creates an additional corporate shield against accountability, and helps to prevent potential bad publicity for the community, or, more precisely, the community’s potentially corrupt leaders.

Likewise, HB 595 does not require the homeowner-member to participate in ADR, but, if the homeowner refuses to participate, then no AG consumer complaint can be filed.

See how cleverly the legislation is written?

 

Lobbyists and campaign contributors in Pennsylvania & the U.S.

 

For readers who may be curious as to which trade groups and organizations influence HOA legislation and housing policy, check out the following links. Millions of dollars exchanging hands!

 

Pugliese Associates is an active lobbyist in Pennsylvania, and works with CAI.

https://puglieseassociates.com/clients/who-we-work-with/

Follow this link to see how much money Pugliese has contributed:

https://www.followthemoney.org/search-results/SearchForm?Search=Pugliese+associates

 

Pennsylvania Builders Association

https://www.followthemoney.org/entity-details?eid=4239

 

National Association of Realtors

https://www.followthemoney.org/entity-details?eid=4453

 

Pennsylvania Bar Association (Attorneys)

https://www.followthemoney.org/entity-details?eid=8417

 

Community Associations Institute’s  list of 190+ lobbyists in the U.S. Do you recognize any names?

https://www.followthemoney.org/search-results/SearchForm?Search=Community+associations+institute

 

 

 

 

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