Highlights of new and pending state legislation as of Feb. 2019, featuring Arizona, California, Idaho, and South Carolina.
HOA would get paid last with new priority of payment proposal
SB 1531 is a bill proposed by Arizona HOA trade group attorneys, sponsored by Senator David Farnsworth. It would change the priority of payment terms for both condominium and planned communities, to the advantage of HOA management companies, attorneys, and collection firms.
Currently, Arizona statute applies unit owner payments to past due assessments first, then late fees, attorney and collection fees, and, finally, other monetary penalties (fines), in that order.
This bill proposes that the HOA would apply payments to…
Any unpaid amounts in the order debt was accrued if those charges, costs, fees, or other amounts are specifically authorized in the Declaration to be charged to the unit owner.
In plain English, this means the HOA can collect attorney fees, collection costs, management fees, and fines ahead of its past due assessments. This consumer-unfriendly, HOA-dead-last priority of payment scheme is becoming the norm in states across the U.S.
In practice, when attorneys and management agents get paid before the HOA, it can create perverse incentives to pile on excessive collection fees, making it nearly impossible for a homeowner to ever catch up and repay the common expense assessments it owes to the HOA.
The bill would also allow management agents to collect unnecessary junk fees, which the crafters of the bill call “payment plan establishment fees,” “reasonable satisfaction of judgment fees,” and “convenience fees.”
Worst of all, SB 1531 would allow third-party collection agents to set up unit owner payment plans, solely for their fee recovery. This would only further encourage the abusive practice of collection firms engaging in “no-cost” collection contracts with HOAs, where a collection agent bills costs directly to the alleged delinquent unit owner.
The main problem with this approach is that HOA boards have absolutely no motivation to keep collection costs low. At the same time, the collection agent may be motivated to rack up virtually unlimited fees and costs to be paid by the unit owner. AZHOC opposes the bill as currently drafted.
HOAs would have to allow homeowners to install energy-saving evaporative coolers
HB 2138 Introduced by Representative Fillmore, would prohibit a homeowners association in a planned community from denying an owner’s installation of an evaporative cooler, subject to reasonable HOA restrictions on placement. If the HOA unreasonably denies the homeowner’s request, the owner can take the matter to court, and collect attorney fees if the court rules against the HOA. The bill is supported by Arizona Homeowners Coalition (AZHOC).
Older associations seek exception to the Planned Community Act
HB 2374 Introduced by Representative Payne, represents the HOA industry’s sleight of hand to selectively exclude a particular type of mandatory common interest association from the provisions of the Arizona Planned Community Act.
The bill arises out of a lawsuit in Maricopa County, Bolton Anderson, et. al vs. Recreation Centers of Sun City, Inc. (RCSC)
In that lawsuit, several property owners requested and received a court ruling that the AZ Planned Community Act (APCA) applies to RCSC. Owners also allege that, beginning in 2009, RCSC charged transfer fees and began charging unequal assessments, both actions in violation of the APCA.
In its defense, RCSC attempted to argue that it does not meet the requirements of a mandatory association, and, therefore, does not have to comply with the terms of APCA.
The court disagreed with the Defendant, citing the fact that the recreation association demands all home buyers must sign an agreement to pay assessments to operate and maintain the amenities, even if homeowners do not use the facilities. Furthermore, in the event of an owner’s nonpayment of RCSC assessments, the association can place a lien on the home, and foreclose that lien to collect past due fees and assessments.
HB 2374 would exclude from the APCA, all planned communities and association that were incorporated in or before 1973. It also changes the definition of association as follows:
ASSOCIATION DOES NOT INCLUDE AN ORGANIZATION THAT IS CREATED OR INCORPORATED FOR THE SOLE PURPOSE OF SUPPORTING RECREATIONAL ACTIVITIES IN A REAL ESTATE DEVELOPMENT.
It’s probably no coincidence that these proposed amendments to the APCA would exclude RCSC, opening the door for the Defendant to ask the court to reverse its ruling that the recreation association must comply with APCA.
Mediation “informed consent” applicable to HOA disputes, too
I often hear from homeowners who are surprised to learn the can only mediate (or arbitrate) disputes with their HOA, if they agree to keep the entire process confidential.
That not only means neither the HOA nor the homeowner can blab about the nature of the settlement, or any evidence or information discussed during mediation.
In California, it also means that the homeowner has virtually no recourse against his or her attorney for a poor outcome, even if the homeowner suspects malpractice.
In 2018, after 6 years of unsuccessful attempts to carve out a malpractice exception to mediation confidentiality, California Legislature passed a bill that requires full written disclosure of confidentiality restrictions that apply to mediation.
In other words, a mediator must explain to a participant that, with very few exceptions, he or she cannot be held accountable for conflicts of interest or poor negotiation skills. Think about this in the context of HOA disputes, where industry attorneys dominate the available supply of mediators.
On Sept. 11, Gov. Jerry Brown signed SB 954, which goes into effect Jan. 1, 2019. It will require attorneys to inform their clients of the confidentiality restrictions related to mediation and to obtain their clients’ written acknowledgment that this disclosure was made to them, and they understand it.
Read the same disclosure form:
As is the case with most disclosure statutes, the new law offers minimal protection for Californians who use mediation, either by choice or court mandate, to settle legal disputes.
In the HOA context, a homeowner’s sole remedy against an unethical or incompetent attorney mediator is filing a report with the California Bar.
Protecting homeowner rights to install solar panels
House Rep. Ilana Rubel introduced legislation that would prohibit HOAs from denying a homeowner the right to install rooftop solar panels, as long as the homeowner follows local building codes and safety requirements.
The bill was prompted by solar panel industry, after many of their customers were unable to get HOA approval for installation. This bill applies only to rooftop panels.
Bill introduced to keep HOAs from banning rooftop solar panels by SAVANNAH CARDON Jan. 31, 2019
Read and track House Bill No. 82 (2019) (LegiScan)
In 2018, South Carolina established new transparency and disclosure requirements for HOAs. Each HOA must now provide written notice of all rules and regulations to its homeowners and residents, and file a copy of its Bylaws with its County public records clerk.
Although homeowners and home buyers now have the right to know about the restrictions and rules they must follow, the state does not actually review or approve HOA policies. Therefore, state laws do not prevent HOAs from enacting or enforcing petty, unreasonable, or unconstitutional rules.
By: Tori Gessner, WBTW
Posted: Jan 01, 2019 04:34 PM EST Updated: Jan 01, 2019 07:17 PM EST
Last year the State also authorized the Department of Consumer Affairs to collect, investigate, and report on Homeowner Association complaints.
The first report spans only 7 months. During that time, the DCA collected 89 complaints. Homeowners complained mostly about the HOA’s failure to maintain the common areas and make repairs; inconsistent enforcement of Covenants, Restrictions and rules; and the HOA placing liens on properties.
Get out your magnifying glass to read the report. Take note that most of the complaints came from professionally managed association-governed communities. The report contains names of HOAs and Management companies, which is a step in the right direction for transparency and protection of future HOA housing consumers.
View tips on how to search the HOA report
HOA complaint report, WCBD News 2 Posted: Feb 07, 2019 05:09 PM EST
Updated: Feb 07, 2019 05:09 PM EST