Since 2005, Jim Photiadis has owned a home, high up on hill and overlooking a ravine, in New Albany, Indiana. Jim and his wife enjoy the seclusion of their property, as well as great views.
The home is not, and never has been, governed by a homeowners’ association. Photiadis insisted that his Realtor, at the time, show only non-HOA homes. Following the purchase of their home, and over the course of seven years, the couple acquired several other adjacent parcels on and below the ridge. That has increased the size of their property to 21 acres, ensuring their great views won’t be spoiled by future development.
According to title searches they paid for, none of the land parcels they have added are subject to deed restrictions or an HOA — or so they thought.
As it turns out, the quiet, natural beauty of the Photiadis parcel is, in fact, overshadowed by onerous property restrictions imposed by the Canyonlands HOA.
Surprise HOA restrictions
You see, when Jim purchased the final available adjacent lot in 2012, he didn’t realize that he was purchasing a lot with Covenants and Restrictions tied to nearby Canyonlands HOA. That fact, he said, was only revealed after he closed sale on the parcel.
The property was offered for sale by the developer of Canyonlands. The land sits in a deep ravine, with steep slopes leading up to Canyon Rd on one side, and the ridge leading to Jim’s home on the other side. Like the other adjacent lots he had purchased, the parcel is clearly situated outside of the developed area of Canyonlands.
But the seller never disclosed the fact that this particular plot of land was indeed subject to CC&Rs and HOA fees. (At the time, such disclosure was not required by Indiana state law.)
Jim says the HOA has been charging him $600 annually for HOA dues ever since. That money was supposed to be used to maintain the unpaved, very steep trail that winds through the ravine, leading from one of the roads in the HOA community up to his house.
But the HOA has never maintained the access road. And when Photiadis complained, the HOA amended their CC&Rs to exclude maintenance of unimproved roads below a certain elevation — thus eliminating their contractual obligation to maintain a trail through the ravine.
Clearly, the HOA never intends to provide any maintenance of access “roads” to the Photiadis property. The homeowner sees no reason why he ought to continue paying HOA fees, when he’s receiving no service or benefit for his money.
Even more disturbing, the restrictions on this controversial land parcel allow the developer to buy back the property, at any time, for 82% of the sale price. Jim says that, had he known about these restrictions at the time, he never would have purchased the lot.
HOA won’t compromise or settle dispute with homeowner
Jim and his attorney have tried to work out an agreement with the HOA. Photiadis offered to continue to maintain access to his home, if the HOA would agree to pay him $200 for the laborious work, which requires heavy equipment.
The HOA refused. The most they’d be willing to pay: $100 per year.
Then Jim and his attorney sweetened their offer. They offered to pay Canyonlands HOA $20,000 in up-front HOA fees. In exchange, they’ve asked the Association to work with Floyd County to update the plat to forever remove his lot from HOA restrictions and future fee obligations. Photiadis says he asked that the restrictions be updated to keep the ravine parcel as green space.
Again, the HOA refused. The matter is pending in Indiana civil court.
Shocked and frustrated by Canyonlands HOA’s response, Photiadis has contacted State Sen. Ron Grooms and State Rep. Ed Clere, members of the local press, and IAC, with an interesting legislative proposal:
“In my case, I request something that should be inherent in HOA laws. That a home/property owner, be allowed to petition their county, to remove the restrictions of an HOA, if that home/property owner can demonstrate that the HOA is providing no service or product for the dues it is receiving, or the restrictions it is imposing on the property.”Jim Photiadis, New Albany, IN
Can a property owner get rid of restrictions on their property, when the HOA won’t live up to its responsibilities?
Jim wants to know if his proposed solution to his dilemma is feasible. And, if not, what other recourse should homeowners have to protect their property rights when an HOA doesn’t follow its own rules or add any value for the fees it charges?
Currently, home and land owners have no easy legal solutions, because state laws rarely, if ever, hold HOAs accountable.
The possible solutions, outlined below, won’t be easy to implement.
Don’t get me wrong. I’m absolutely in favor of holding HOAs accountable for providing tangible benefits/services in exchange for the money that property owners pay.
The problem is, even though HOAs are technically private organizations with contractual relationships to property owners (albeit one-sided contractual relationships), state and local governments view HOAs as de facto extensions of local government. In their view, the HOA handles neighborhood code enforcement on terms that are more strict than a government can legally enforce. Most HOAs are responsible for maintaining storm water infrastructure (ponds, swales, dry basins, underground culverts, etc.). And, depending on the community, HOAs also provide maintenance of “private” roads, too.
Many HOAs also purport to provide some level of neighborhood security (think gated communities).
Condominium and townhouse communities are also responsible for maintenance of common property, which includes shared walls, utility lines, exterior building envelopes, land owned in common, insurance costs, etc.
HOAs of communities with recreational amenities can more easily justify their fees as providing “benefit” to each owner — even if an owners rarely or never uses those facilities. Unlike a gym, pool, tennis, or golf membership that is separate from your property deed, the owner cannot “opt-out” by cancelling their membership. The HOA collects fees in perpetuity, which creates an endless revenue stream for management companies and maintenance vendors. (At least up until the time that the facilities fall into such a state of disrepair that they have to be liquidated and demolished.)
Due to political inertia and HOA-industry resistance, change won’t be easy. But the day is rapidly approaching where the majority of Americans will no longer see the value in property restrictions and HOAs.
Therefore, like Jim Photiadis, an increasing number of property owners in the U.S. will seek to either escape or even eliminate HOAs and underlying property restrictions that provide no value — especially when poorly performing HOAs and overbearing CC&Rs actually reduce their property values.
In that light, here are some policy changes I propose.
4 ways to hold HOAs accountable
Here are four general legislative proposals that would go a long way toward improving dysfunctional and abusive HOAs.
1) Equitably apply contract law to HOAs as well as homeowners
Since HOA are supposedly based upon CC&Rs/Declarations that are a contractual agreement between the HOA and owners, and among all owners, HOAs ought to be held the same Contract Law standards as other organizations. Therefore, if the HOA fails to provide maintenance service, security, or other service that it is supposed to provide in exchange for HOA fees and dues, the owner should be able to withhold payments — or at least put them in escrow — while filing an administrative complaint and/or legal action against the HOA for nonperformance of the contract.
2) When the HOA fails to perform, grant owners the right to provide their own services, then deduct the cost from future HOA fees.
Especially in condominiums and maintenance-provided HOAs (such as townhouse or“villa” communities), when the Association fails to respond to requests for maintenance, after notice and a reasonable wait period, the property owner should at LEAST have the same rights as any tenant in America. An owner should have the right to hire their own contractor to make necessary repairs, and then should be able to deduct their out-of-pocket costs from their future HOA/condo fees/dues.
In an emergency situation, such as a leaky roof, or localized flooding due to plumbing or stormwater failures, the owner should expect an immediate response from the Association, and should NOT be expected to wait days or weeks for action from the HOA. The same logic should apply when a condo owner experiences a failure of heating or AC systems, in cases where the Association maintains a system that serves everyone in the building in common. This is a prevalent problem in older communities that have been converted from rental properties to condominium, and it disproportionately affects low-income households.
3) Give home and property owners an HOA Escape Hatch
In general, property owners in planned communities should have greater rights to amend and/or terminate the underlying CC&Rs that, in effect, created the Declarant’s or future property owners’ rights or obligations to create an HOA.
After a period of time — say 20-30 years after the development is established — the CC&Rs should expire, and HOA membership should become voluntary. At that point, the property owners effectively end their contractual relationship with the HOA — and with each other — in terms of maintenance and/or code/standards enforcement.
If the HOA expects to continue to exist, it must provide something of value to its members. If no value is provided, no one will pay dues, and the HOA will disappear.
Keep in mind, this kind of institutional change — though long overdue — will be a huge challenge. Allow me to explain why.
The following applies to HOA-governed Planned Communities, not condominiums.
The HOA back story
Before HOAs were ubiquitous for most new construction, prior to the 1980s, most CC&Rs were written with an expiration clause after 30 years. At that time, in order to reinstate the CC&Rs (and the mandatory HOA fees subject to property lien), all of the property owners would have to agree to extend the restrictions.
When the HOA industry trade groups realized that a significant number of homeowners would be unwilling to keep the HOA-party going beyond 30 years, they began writing CC&Rs to omit the automatic expiration date! And they also lobbied hard in many states to make it easier for the HOA board to automatically renew CC&Rs prior to expiration. In some states, such as Florida, that can happen without a vote from HOA members (all property owners). Look up “MRTA” on this website, and on the web, for details.
At the same time, the HOA-industry trade groups convinced state Legislators that property values would fall off a cliff if CC&Rs and their respective mandatory memberships would be allowed to expire. They lamented, if HOAs could not continue to collect mandatory fees, how could they maintain neighborhood infrastructure and services? They reminded lawmakers that local governments would undoubtedly have to actually provide public services to formerly-HOA-governed communities. That’s why state Legislators voted overwhelmingly in favor of keeping CC&Rs and HOAs in place as long as possible.
4) Strip HOAs of inappropriate powers, which they often abuse
As private organizations, HOAs should not be endowed with powers of “real” government. Therefore, state laws should repeal and prohibit powers of HOAs (including condominium and cooperative associations) to impose monetary fines on owners, and should eliminate the HOA’s right to foreclose on property liens.
An HOA that seeks to enforce restrictions and rules should have to file a claim in small claims or civil court, and should be required to document actual damages to justify monetary compensation from a property owner.
And an HOA should have to petition the court to intervene in cases where an owner has abandoned the property. It should be up to the County or the hard-money lender to foreclose on property. But, to be fair, the HOA should be first in line to recover all of its assessment liens for essential services that would otherwise be provided by local government.
If state and local governments are going to allow double taxation of HOA property owners, then the must also allow HOAs to recover liens for those double-taxed services.
Any legislative change with regard to recovery of HOA liens must also set a reasonable cap on attorney fees and collection costs in relation to the size of the assessment lien. As it stands now, predatory HOA collection practices lead to HOA liens that often include attorney fees and costs far exceeding the principal balance owed to the HOA for unpaid fees.
The HOA rarely considers a cost-benefit analysis in these cases, because the collection attorney assures the HOA that all legal costs will be recovered from the owner.
On the other hand, when a property owner prevails in a lawsuit against their HOA, many states don’t allow the court to award the homeowner’s attorney fees.
For example, in Illinois, when the HOA prevails in court, it can collect its attorney fees from the owner. But when the courts rule in favor of the homeowner, the court cannot order the HOA to reimburse the owner’s legal costs.
Norman J. Lerum, a Chicago attorney who has advocated for condominium homeowners, argues that “there should be an attorney fee shifting provision in every state statute that shifts attorney fees to the HOA, if the HOA loses in litigation with a condo owner in a case where the condo owner proves that the HOA breached a statutory obligation, a contractual obligation, or a director has breached his/her fiduciary duties. This will go a long way toward motivating condo boards to adhere to their obligations.“
By contrast, in Virginia, the prevailing party — be it the HOA or the property owner — can petition the court for recovery of attorney fees.
Attorney John Colby Cowherd, who practices in Virginia and District of Columbia, points out how fee shifting helps homeowners. “If the defendant [HOA] can simply outspend and exhaust their opponent [the property owner], they don’t need to be in the right. If obstructionist tactics are rewarded in how attorney’s fee awards are determined, then the specific obligations of the HOA or condominium covenants can be made of no effect.” He adds, “If a lot owner is forced by their board to litigate a case out to the bitter end, then fee shifting provisions ought to make them whole.”
Homeowner involvement key to implementing solutions to HOA problems
If they truly want to level the playing field between property owners/residents and HOAs, property rights advocates across the nation must effectively organize themselves to stand up against their own HOA boards, as well as the HOA industry.
Dennis Legere, founder of Arizona Homeowners Coalition (AZHOC), understands the frustrations of homeowners who pay assessments and do not see and value in return for those assessments.
According to Legere, “the answer to these [HOA] issues must focus on empowering the homeowners to take action to make their communities what they want them to be, by first removing indifferent or abusive boards or organizing and taking control of their associations. Most CC&Rs have provisions that allow the members to cancel the CC&Rs. You do not need some outside agency to do the work for you, when you have the power to do it yourself.”
Legere also says that property owners must be prepared to “organize on a statewide basis to balance the playing field…and hold the board accountable to their actions for the good of the entire community.”
Above all, Legere points out that, “Far too many people want to depend on the government to do stuff for them when they have to power to do that for themselves.”
Floyd County property owner in dispute with homeowners association, BY DANIEL SUDDEATH firstname.lastname@example.org (Jun 4, 2021)
Condo Owner Prevails on Her Request for Attorney Fees BY JOHN COLBY COWHERD (APR 28,2017)