What can be done about HOA problems and dysfunction?

By Deborah Goonan, Independent American Communities

Enough griping and complaining! Homeowners seek solutions to HOA problems and dysfunction

Finally, concerned readers are starting to discuss possible solutions to HOA dysfunction, including alternative housing models.

When I first began participating in HOA discussion forums, most were merely gripe sessions, sometimes resulting in adversarial exchange. Generally, it was nonproductive conversation.

A few years ago, the most ”news” reports about HOAs, condominiums, and cooperatives were press releases (advertising) or “horror” stories. Furthermore, most of the reports were about disputes over display of the American flag, holiday decorations, or paint colors.

These days, the media is paying attention to more important issues. Serious matters affect HOA communities — theft and embezzlement, fraud, crime and blight in failing associations. Other sources of trouble for community associations include fair housing violations, selective enforcement and discrimination, and HOA collections and foreclosures.

But now the discussion has reached the next level. What can be done about HOA dysfunction?

As more consumers request “No HOA, please!” Or seek to put an end to their HOAs,  the question becomes, where and what are the alternatives?

Several readers have asked me these questions over the past few months. Many have offered concrete ideas and suggestions on private forums.

The following list combines many good ideas discussed with knowledgeable readers. See what you think about it.

Repeal and outlaw the power of the Association to fine association members.

Require the Association to resolve disputes or enforce governing documents by filing complaints with the appropriate judiciary court. Better yet, set up a state-level consumer protection and mediation service, to help homeowners resolve minor complaints without epensive litigation. It’s critical that a truly neutral third party assists in finding resolution to HOA disputes.

This isn’t such a radical idea. This is how disagreements were handled before management companies and HOA attorneys lobbied for the HOA’s right to fine. It’s how neighbors settled their disputes, before the power to fine gave rise to HOA kangaroo court. Current state laws grant too much power to HOA board members. The same people who have the power make HOA rules also get to decide who’s in violation. HOAs possess rela unchecked power to enforce rules. One solution, in other words, is to bring back true due process and separation of powers.

End local government mandates for common interest development and HOAs.

Require that at least half of all new construction be fee simple with NO common interest, and no HOA. Local governments should strive for a development plan that includes a diverse array of housing sizes and types.

Match housing types to local demand. For example, where I live, first time home buyers and single adults want modest homes space for entertaining and hobbies. Retired seniors want ranch homes with living all on one level and a lots that’s easy to maintain. For buyers who hate yard work, but still want privacy, a separately owned row house — on that does not share a wall or roof with neighbors, would be ideal.

Local governments to rethink and rewrite their land use and development regulations and requirements, with and eye toward reducing construction costs, without compromising on safety standards.

Create an expiration date for all HOAs – so that they cannot be perpetual.

If homeowners want to renew the mandatory HOA, they must vote unanimously to do so. Otherwise, participation becomes voluntary, and the association becomes more like a civic group or a social club.

Abolish developer control of common interest communities – restore private property rights of homeowners for their own units and parcels.

Create an owner-resident controlled co-op to manage common property or a membership club to manage common recreational amenities. Homeowners should not have to subsidize the developer’s investment risks, especially since they cannot share in any future profits. And they should have the right to use and maintain their private property with the least possible restriction.

Phase out private association funding of construction, maintenance and management of “public works” infrastructure.

Untrained, uneducated volunteers have no clue about what is necessary and developers have inherent conflicts of interest. (Private roads, storm water management, water and sewer utilities, etc.) Most homeowners discover that long term infrastructure costs are unaffordable – especially in small associations. Spread out the cost in the public sector to achieve economies of scale. For example, establish a special tax district, annex a community to a nearby municipality. Large scale communities can incorporate as a city, then dissolve the mandatory HOA.

Curb speculation and investor ownership of housing. Set limits on the number of units or percentage of association interests any one person or entity can own.

Also…limit foreign (non-citizen) investment. Excessive speculation artificially inflates prices, makes housing less affordable, and increases the risk of hostile takeovers of mandatory associations.

Forget about private security guards and gated entries. Police, fire, and emergency services need to be fully integrated within all communities.

Private security guards, especially armed guards, are simply a bad idea. Gated entries offer little – if any – additional security. But they are costly to staff and maintain, and they only serve to divide HOAs from the community at large.

All CC&Rs and ByLaws for residential housing should be subject to state review and compliance with Constitutional law.

Right now HOA governing documents serve as community “constitutions.” However, they are essentially one-sided contracts, written to benefit developers. Enforcement of restrictions are often exploited to get around Fair Housing laws.

Separate recreational amenities from property deeds.

For new development, manage amenities through public tax districts. Alternatively, allow private commercial investors to purchase and manage the facilities, covering the costs with private membership fees. Existing communities all over the U.S. currently struggle with how to dispose of or redevelop underused amenities.

Some practical solutions and alternatives for developer-built “modern” condominium and cooperative associations

Some people are comfortable with living in a multifamily setting. Residents of heavily populated urban areas often have no other alternative.

Solving or preventing chaos or adversity in common interest development in the form of condos or co-ops is very challenging. But here are some thoughts to consider.

Owners-shareholders need simple, explicit disclosure that lets them know it is a collective arrangement where all share in costs and liabilities.

Too often, associations members do not understand or even buy into this very basic concept of common interest housing. In general, unless units are owned by fairly affluent people who can afford maintenance and improvement costs as they escalate over time, most condominium associations will probably struggle financially.

To maximize the chances for social cohesion, communities should be kept small – perhaps less than 50 units.

And if you’re sharing costs for living space, it only makes sense that you should know your co-owners or co-investors before they purchase and become members of the Association. Cooperatives already pre-screen new residents, but condominium associations rarely do. The big challenge here is how to pre-screen new buyers for a good fit, without engaging in housing discrimination.

Do away with the strict management hierarchy that dominates over remaining members.

Instead of empowering a small group of neighbors on the board make most financial decisions, co-owners, shareholders should have the opportunity to discuss important matters with all of their neighbors.

Also important: members should not be forced to allow a developer to call all the shots. Nor should weak or lazy HOA boards delegate all decision making to management companies!

Owners need to take a much more active role in making financial decisions. They should not assume they are merely silent investors. Follow the example of co-housing communities and co-ops that manage by consensus, without a Board of Directors. But be aware that this cooperative governance model requires a high level of participation and commitment.

Another possible solution is to require that each owner take turns serving on a board or on various work committees. In this way, everyone plays a role in the decision-making process, and no one clique becomes entrenched, entitled, or corrupted.

Planners and developers need to decide on a single use for multifamily housing.

Will the condominium or cooperative be built for owner-occupants or for other purposes such as seasonal housing, vacation housing, or real estate investment?

The key is to have one clearly-defined land use plan, and then govern and manage accordingly. An owner-occupied condo association is more of a shared housing arrangement. By contrast, owner-investors in a resort community are akin to co-owners in a business. Different, laws, rules, and tax policies should apply, according to the designated type of property ownership.

Common themes in these proposals to end HOA dysfunction:

  • Consumer-focused housing policies that reduce financial costs,
  • Mitigation of risks and liabilities for owners, shareholders, and residents,
  • Equal rights protections for individuals.

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