HOA Risks: The Triple Threat of Homeowners Associations

Recent news reports reveal several HOA risks, what I call a triple threat to the safety of residents and financial security of homeowners. Although HOA living comes with many risks, these are the three of the most critical HOA problems:

  1. Homeowner face special assessments to pay for correction of common property deficiencies after many years of deferred maintenance.
  2. Owners cannot seem to obtain timely investigation of suspected HOA fraud, theft, embezzlement, and money laundering schemes — due to the lack of regulation to prevent criminal behavior in the first place.
  3. Desperate to enforce restrictions and collect much higher HOA fees, HOA boards tend to abuse their powers, often in tandem with HOA management and legal professionals.

By Deborah Goonan, Independent American Communities deborahgoonan@gmail.com

In my view, it’s no surprise that, in recent months, we are seeing multiple HOA problems. Reports of bitter HOA legal disputes. Arrests of HOA leaders on charges of fraud and theft. News about other aging and unsafe condo buildings, as well as crumbling infrastructure in HOA-governed communities. 

What’s causing this disturbing trend, an increase in HOA risks, the triple threat of homeowners associations? Why is the industry experiencing this downward spiral? 

This post covers two major themes. First, it explains the triple threat of HOA living. Second, it gets to the heart of the matter by exposing the root causes of HOA risks and pervasive problems. 

I’ll begin with a bit of recent history, and follow up with a look back to the flawed foundations of HOA-governance and common interest development of housing. 

COVID 19, masked face,

Recent history: the COVID effect on HOA risks

There’s no question that COVID-19 has led to some fundamental changes in HOA governance and management.

Many will recall that homeowners and residents of HOA-governed residential communities experienced a brief respite from aggressive HOA tactics during the early stages of the COVID-19 pandemic. 

In spring of 2020, the HOA industry trade group and government leaders joined together in a call for eviction and HOA foreclosure moratoriums. In 2020 and 2021, it put a damper on widespread media reports of HOAs fining homeowners thousands of dollars for trivial violations. It temporarily stopped HOAs from forcing owners out of their homes to collect a few thousand dollars in unpaid fees. 

For nearly two years, the media put these pervasive HOA problems on the back burner. 

However, another outcome of COVID-19 has wreaked additional havoc on HOAs. The HOA management and legal industries took advantage of pandemic lockdowns to endorse, essentially, a near-total shutdown of transparency in HOA-governed communities. 

Allow me to explain. 

Legislators passed laws allowing no-excuse virtual meetings and e-voting

In response to COVID-19 restrictions on public gatherings in 2020 and the first half of 2021, HOAs postponed many unit owner and board meetings. HOAs cancelled a lot of meetings and elections. If held, HOAs used virtual technology, avoiding in-person interaction with homeowners.

Predictably, as the country emerged on the other side of the pandemic, the HOA industry management/legal trade group (Community Associations Institute, CAI) lobbied for changes in state laws. New state laws would allow virtual meetings and e-voting to permanently replace in-person meetings and annual elections. Today, the trend is away from in-person interaction. Virtual HOA meetings are no longer limited only to declared state of emergencies. 

CAI promoted the move to virtual meetings and e-voting as a convenience for HOAs, and a way to increase member participation. But the real reason for the move is less noble. Certain HOA board members, many HOA managers and attorneys celebrate this appalling trend away from in-person interaction. Why? Because it shelters boards and managers from direct criticism from dissatisfied or unhappy homeowners.  

Champlain Towers South, condo collapse, Surfside, Florida, HOA risks, deferred maintenance, triple threat to safety

Surfside, FL condo collapse leads to more focus on risks of homeowners associations 

It seems like every crisis brings change that affects HOAs. Just as the country was easing COVID restrictions, another awful crisis happened.

In the middle of the night on June 24, 2021, in Surfside, FL, a 13-story condominium building suddenly collapsed. The building, known as Champlain Towers South, was about 40 years old. As a result, 98 occupants lost their lives. Additionally, surviving owners and heirs are picking up the pieces of their shattered lives. CBS 60 Minutes recently reported on the current status of the investigation into the collapse. Essentially, it’s still under investigation.

Although the collapse was an extraordinary event, it shed light on a perennial problem for common interest, common ownership communities in the U.S. 

Decades of deferred maintenance has led to the gradual decay of multistory buildings and surrounding community infrastructure. Experts have been sounding the alarm on this inconvenient truth for the past 20 years. But lawmakers and housing policy makers in state and local government have largely ignored the problem. In fact, some HOA industry attorneys have, in the past, lobbied state legislators to oppose bills that would help prevent residential towers and community infrastructure from reaching the point of critical failure. 

New state laws mandate funding reserves

Following the tragedy at Surfside, the HOA industry trade group suddenly decided to push state legislation to fix the problem. (CAI — which once advocated for state laws allowing owners to waive requirements for funding reserve accounts needed for future maintenance —only changed their public policy on mandatory reserve funding in 2021, after the tragic collapse in Surfside. You can see here their previous policy was adopted in 2012.) Several states have already passed laws that mandate regular building inspections. Several states now require HOAs to fully fund reserves to cover the cost of essential infrastructure repair and replacement. 

There are two factors behind the industry’s apparent sudden change of heart. Let me be blunt: It’s partly HOA-industry reputation damage-control. But it’s also a response to mortgage lenders’ new unwillingness to finance condominiums and HOA-governed homes in communities that are aging and in decline. This is especially true for HOA communities that lack financial resources to make necessary repairs. 

For details, see my previous post Fannie Mae, Freddie Mac won’t buy condo, co-op mortgages in community Associations in need of critical repair

Today’s HOA triple threat to peaceful, happy community life

Now let’s take a closer look at three of the most pressing HOA challenges: 

  • Homeowner face special assessments to pay for correction of common property deficiencies after many years of deferred maintenance.
  • Owners cannot seem to obtain timely investigation of suspected HOA fraud, theft, embezzlement, and money laundering schemes — due to the lack of regulation to prevent criminal behavior in the first place.
  • Desperate to enforce restrictions and collect much higher HOA fees, HOA boards tend to abuse their powers, often in tandem with HOA management and legal professionals.

condo building, HOA, balconies, maintenance

HOA risks, threat No. 1: Failure of HOA to maintain the common property leading to HOA Special Assessments

Unfortunately, the precise cause or causes of the catastrophic condominium collapse in Surfside, Florida is still unknown. But most experts agree that deferred maintenance played a key role in deterioration of the building’s structure. They point to corroded concrete posts, beams, and steel rebar, all of which supported the weight of the tower. 

It’s a fact that housing advocates have been sounding the alarm about inadequate and inappropriate HOA maintenance practices for at least the past 2 decades. This frightening event has been a serious wake-up call for condo owners across the U.S. and Canada.

There are important lessons to be learned. 

Most people count on their HOA boards and management agents, if any, to ensure that multifamily buildings, community infrastructure (roads, stormwater ponds), and shared common amenities remain safe and usable as intended. However, property owners should not assume that their regular condo, co-op, and HOA fees are always sufficient.They may be inadequate to provide good maintenance and upkeep of the common property.

Unfortunately, most owners discover too late that their HOAs lack the necessary resources to keep their communities well-maintained. 

Why are so many HOAs broke?

Some say that HOA fees remain lower than they need to be, because owners balk at paying higher assessments each year. Others believe their HOA tends to waste money, spending it on less important redecorating or beautification projects. They assume that their HOA is saving up money for eventual big construction projects. Big projects include things like roof replacements, repaving of private roads and parking areas, and improving drainage. 

However, it’s a well-known fact that a majority of owners’ associations don’t set aside an adequate portion of HOA fees to cover the cost of future repair and replacement of common property. Additionally, most HOAs don’t have a financial plan for unforeseen emergencies. For example, a fire, flood, or explosion can destroy many dwellings in the community. That puts owners on the hook for their mortgage payments and HOA fees for months or even years, until the condos or homes are rebuilt. The HOA may not be adequately insured to cover losses. And homeowners can also find themselves underinsured following emergency situations.

HOAs sometimes misuse insurance as a crutch

But there’s another common problem. Sometimes, misguided HOA board members hope predictable damages will be covered by insurance policies. However, insurance companies routinely deny claims for damages due to normal wear and tear. In other words, HOAs cannot use insurance to cover the cost of major repair projects, necessary to reverse years of deferred maintenance.

Whatever the reasons for poor funding decisions, by the time most homeowners start to notice the effects of deferred maintenance, it’s likely that the HOA will require expensive repairs. 

All of these realities lead to the same ending. Home and apartment owners are on the hook to pay thousands, perhaps tens of thousands of dollars to the HOA. It’s considered their “fair share” of the cost to repair or rebuild a livable community. Special assessments almost always become necessary. But many owners aren’t prepared for the steep added expense in their monthly budgets.

Want more details? Read dozens more posts on the subject of deferred maintenance on IAC.

HOA risks, triple threat, No money empty pockets poor, high HOA fees

HOAs often impose Special Assessments for non-essential projects

It’s worth noting that not all HOA special assessments are issued for essential repairs. Sometimes, a vocal group of owners — or a statistical majority of voting owners — will push through special assessments for purely recreational or prestige projects. 

The proposed special assessment could include anything. It might be upgrading to more luxurious siding and roofing material. Or spending many thousands of dollars to replace pool deck furniture. Or maybe the HOA wants to re-do landscapes throughout the most visible parts of the community. In resort communities, an influential group of owners on the board can push through multimillion dollar improvement projects. Owners share stories of expensive remodels to their clubhouse, restaurant, swimming pool, or HOA-owned golf course. Often these projects benefit the relatively small minority of owners who regularly use the common amenities. 

It doesn’t matter to some HOA boards whether their pet projects are essential. Some HOAs will intentionally downplay structural decay. Instead they will focus their attention and the homeowners’ collective money on “nice-to-have” renovations on their wish list. Determined owners on the HOA board will often succeed. The result: all owners will be forced to pay their “fair share” to improve the common property, whether they agree with the Big Spend or not.

Needless to say,  it can be difficult to get support for special assessments for truly essential structural projects, after owners have already been tapped out by paying for these “bling” projects. 

CAI lobbies Federal officials to ease up on condo lending requirements for structural stability and adequate reserve funding

Money is a finite resource for most of us. The challenge is, where will HOAs find huge sums of money they need? Either the HOA must raise homeowner association fees and issue special assessments, or the HOA must take out a loan, which homeowners must then repay, with interest.

Borrowing money doesn’t relieve homeowners, it simply prolongs their financial pain. 

Apparently, Community Associations Institute thinks maintaining homeowner borrowing power is the answer to this dilemma.  Earlier this year, CAI made a formal request to Fannie Mae and Freddie Mac, asking them to rewrite their mortgage lender questionnaires for multistory condominiums and cooperatives.

So far, neither Fannie nor Freddie appear to be interested in letting condo boards off the hook. The GSEs are not inclined to allow new buyers to obtain mortgages for potentially unsafe buildings and financially unstable condominium associations.

CAI has also drafted a federal bill (HB 7532), which attempts to procure HUD financing of up to $55,000 per unit owner. The money would be used to pay for repairs, following decades of deferred maintenance. Congressional Rep. and former Governor of Florida, Charlie Crist. sponsored the bill.  

As of the date of this post, the bill, which was introduced in April 2022, has not progressed. In my opinion, it’s unlikely to garner Congressional support. 

Source links: Recent reports of HOA governed communities dealing with many years of deferred maintenance, and turning to special assessments to pay for construction projects.

Resident points to HOA for answers regarding street flooding concerns WBRZ By: Brittany Weiss July 18, 2022 7:30 PM(Louisiana)

Fishers community approves $25K per homeowner special assessment — The Conner Creek Homeowners Association is responsible for providing exterior maintenance of the homes and buildings Kara Conner, WRTV, Posted at 7:08 AM, Aug 31, 2022 and last updated 5:29 PM, Aug 31, 2022 (Indiana)

Gwinnett County HOA forcing homeowners to remove trees as neighbors fight back — Some residents are disturbed with large, majestic trees being cut down and replaced with new, tiny ones. Author: Dawn White, 11alive, Published: 11:44 PM EST November 12, 2022 Updated: 12:38 AM EST November 13, 2022 (Georgia)

Horizon West Condo owners express frustration almost one year later — City filed a petition for an order to raze building, By Karen Pilarski – Freeman Staff Nov 4, 2022 (Wisconsin)

Miami Beach condo building evacuated near deadly collapse Associated PressOCTOBER 27, 2022 (Florida)

Residents allowed to return to evacuated Miami Beach condo after temporary fix By Aaron Liebowicz UPDATED November 14, 2022 1:41 PM

Hundreds Of Honolulu Residential High Rises Fail To Meet ‘Acceptable’ Fire Safety Standards

A new report on the results of comprehensive safety evaluations was recently shared with the Honolulu City Council. Very few high rises have fire sprinkler systems.By Kirstin Downey / Honolulu Civil Beat, November 23, 2022 (Hawaii)

HOA risks, Arrest handcuff fraud theft, triple threat of HOAs

HOA risk, Threat No. 2: Embezzlement, misuse, or fraudulent theft of the HOA’s money

If you’ve been following IAC for more than a year or two, then you know HOA fraud and theft has been an epidemic in the HOA sector for many years. Prior to COVID, I published regular “Roundup” posts summarizing arrests, prosecutions, and lawsuits. The embezzlers and fraudsters can be either HOA board members or community association managers. Most eventually admit to stealing money from their neighbors or clients for months or years before getting caught. 

With the focus on the pandemic for the past few years, we didn’t see as many public reports of HOA fraud and theft.

Also, CAI’s recent push for online voting and virtual meetings have further decreased HOA transparency. In my opinion, current laws in many states, which no longer require in-person meetings and HOA elections, only further embolden fraudsters. After all, they know it is now easier than ever to hide their misconduct from disconnected, disaffected homeowners. 

Below I have featured several recent reports of HOA fraud and theft, everything from embezzlement to money laundering schemes. One of the favorite criminal tactics: HOA board members or managers create fake invoices for services never performed in the community. Another common example of trouble is when the fraudsters create bogus bills that grossly overcharge for materials or services. Perpetrators funnel portions of the ill-gotten money as kickbacks to their personal accounts. 

States rarely investigate HOA fraud and theft

Keep in mind that what we see reported in public represents a mere fraction of actual cases of HOA fraud and theft. HOAs hide the vast majority of cases from public view, and, in many cases, file no criminal charges. Bad managers are fired, and dishonest board members are removed from office. The HOA may attempt to get their money back by filing complaints in civil court. 

States Attorneys and Attorneys General rarely intervene in HOA investigations.

A few states, such as California and Florida, do require that HOAs carry insurance policies to cover loss from theft. Known as a fidelity bond, there are often limitations on the amount of each claim, and denials for claims deemed uninsurable. 

In most, if not all, cases, stolen money is gone forever. Homeowners must pick up the slack. That usually means the HOA must raise regular fees or impose a special assessment to cover the budget deficit. 

Source Links: Recent reports of HOA fraud and theft. See IAC link to more examples here.

California Woman Indicted for Embezzling More Than $1 Million from Employer(United States Attorneys Office, District of Minnesota)

Local realtor breaks down HOA scheme by: Rob Hagan, Western Slope Now Posted: Nov 18, 2022 / 11:54 PM MST Updated: Nov 18, 2022 / 11:54 PM MST (Colorado) 

Residents of several communities express outrage with same property management company Amy Viteri, Investigative ReporterLocal 10 News Published: November 14, 2022, 11:57 AM (Florida)

HOA Criminal Probe Widens as Records Seized By David Ovalle, Florida Realtors, Nov. 23, 2022

Prosecutors: HOA board members stole millions from residentsAssociated Press News, November 15, 2022 (FL) 

Leaders of Kendall homeowners association face fraud charges | BY DAVID OVALLE, LINDA ROBERTSON AND CHARLES RABIN, Miami Herald, UPDATED NOVEMBER 19, 2022 9:50 AM

Hammocks Association board allegedly hid documents under floorboards at main office CBS4 Miami, Wed, November 23, 2022, 6:26 PM 

handshake, rules, enforcement, penalties, governance

HOA Risk, Threat No. 3: HOA board’s abuse of power (collection practices, fines and foreclosures)

Many of you reading this post may be homeowners or home buyers. You probably already know that HOAs come with all sorts of rules and restrictions. But you may not be aware that a legal document attached to your property’s deed or title is considered a legally-binding contract. The contract is a legal agreement between and among homeowners and their governing body, the HOA. 

This document is commonly referred to as Covenants, Conditions, and Restrictions (CC&Rs), or Declaration of Covenants, or Declaration of Condominium. 

Perhaps you are also unaware that private restrictions on the use of one’s property have been around for generations. It’s true. CC&Rs were commonplace many years before the real estate industry decided it was necessary to have an HOA to enforce them.

In fact, when “deed restrictions” were first conceived, property owners relied on a more democratic mutual enforcement system. Any individual, aggrieved property owner could sue any other owner in court. A judge or jury would decide the outcome of neighbor disputes over CC&Rs. Specifically, the court could rule if Covenants should be enforced based upon hard evidence. If so, the court would then determine just compensation for actual damages.  

To this day, although it is somewhat uncommon, it is still possible to buy a home that is subject to deed restrictions, but NOT subject to any HOA governing regime. (I have owned two such homes personally.) Where no HOA authority regime exists,  it is exceedingly rare for one neighbor to sue another. 

HOAs can be hard to avoid

However, across the nation, HOAs govern the vast majority of single family properties that are subject to CC&Rs. This includes both detached homes and attached townhouses. Additionally, state law always requires an owners’ associations to manage and govern properties sold as condominiums and housing cooperatives. 

One of the biggest complaints I hear from homeowners is that they find the covenants, restrictions, and rules to be unreasonable. Even worse, CC&Rs may be intrusive, oppressive, or downright petty.

Documented examples of HOA rules include everything from:

  • dictating exterior paint colors; acceptable siding, roof shingles, and door materials;
  • fussy landscape standards; prohibitions on parking on the street in front of one’s home;
  • requirements to park only in one’s garage or assigned parking space;
  • weight or breed restrictions for pets,
  • and much more. 

Of course, some rules are necessary to ensure a safe and healthy living environment, or to deter owners from creating serious nuisances. But many HOA rules focus primarily on aesthetic standards. They are purely based upon the physical appearance of dwellings. And, more often than not, HOA board Covenant violation citations can be either subjective or selective, or both.

Rules restrictions hand written, enforcement
(Pixabay.com free image)

Unreasonable, unconstitutional HOA Covenants, Restrictions, and Rules 

Many homeowners consider certain HOA rules to be unconstitutional. For example, owners often complain that HOA rules violate their First Amendment rights. Examples include restrictions on

  • religious holiday decorations,
  • restrictions on display of American, state, or military flags, and
  • various rules setting limitation on display of political signs.

In recent years, state legislation and case law have tended toward recognition that owners and residents don’t totally surrender their Constitutional rights within the boundaries of their HOA-governed communities.

Nevertheless, some HOA boards seem to enjoy wielding their power to suppress free expression and political dissent. This is particularly true when the HOA and property owners don’t agree on important community association issues.

HOAs face tremendous financial pressure.

We have inflation. We also see new state laws and lender requirements to maintain the structural integrity of building and community infrastructure. HOAs need money. And, as a result, some HOAs are cracking down hard on enforcement of restrictions. 

We’ve seen aggressive and desperate HOA enforcement and collections before. It was a common side effect of the Great Recession following the housing market bust in 2007-2008. Critics say that HOAs abuse their powers to impose fines, and that they use them to create a revenue stream for the association.

But with COVID-era foreclosure moratoriums lifted, HOAs are also filing assessment liens more swiftly. The apparent goal is to quickly foreclose on the homes and apartments of owners who have fallen behind on their HOA fees. 

With the likely increase in special assessments, more homeowners will be either unwilling or unable to pay their HOA fees. This, too, will most likely lead to more HOA liens and foreclosure auctions.  

HOA industry trade group influence

The HOA industry obsesses over enforcement of covenants, restrictions and rules. Don’t take my word for it. Just visit this link to view a running list of articles and commentary. Much of it is written by HOA attorneys and management CEOs. 

Likewise, the HOA industry floods the media with articles attempting to justify its staunch support of an HOA’s right to aggressive HOA collections, up to and including foreclosure of liens. In practice, CAI supports foreclosure, even when the “debt” owed represents a mere fraction of the appraised value of the property sold. I use the word “debt” loosely. For the typical HOA lien, the amount of past due fees owed to a community association often pales by comparison to exorbitant, exploitative attorney fees and collections costs. For examples, refer to this link.   


Source Links: recent reports of HOAs using draconian methods of collecting fines and foreclosing on homeowners.

Green Valley Ranch homeowners say unfair HOA fines are displacing residents “We hear about people living in fear … and there seems to be really intense targeting of folks,” said Kevin Patterson. Author: Courtney Yuen9News Published: 6:17 PM MST November 10, 2022 Updated: 3:20 PM MST November 11, 2022 (Colorado)

Facing fines, lawsuit, father of slain Kirkersville Police Chief takes down ‘thin blue line’ flag After more than five years of flying the thin blue line flag outside of his house, Tom Disario had to take down the flag that he put up to honor his son. Author: Bryant Somerville10 WBNS Published: 6:23 PM EST November 16, 2022 Updated: 6:23 PM EST November 16, 2022 (Ohio) 

North Carolina homeowner claims her house was foreclosed and sold by HOA without her knowing By Samantha Kummerer via 11ABC News Thursday, November 17, 2022  

Risks, risky investment, word game
(Pixabay.com free image)

Connecting the dots: What causes HOA risks and the triple threat of HOAs?

Let’s review. Homeowners and residents of HOA-governed housing communities face a triple threat to their safety and security: 

  • Homeowner face special assessments to pay for correction of deficiencies after many years of deferred maintenance of the common property.
  • Owners cannot seem to obtain timely investigation of suspected HOA fraud, theft, embezzlement, and money laundering schemes — due to the lack of regulation to prevent criminal behavior in the first place.
  • Desperate to enforce restrictions and collect much higher HOA fees, HOA boards tend to abuse their powers, often in tandem with HOA management and legal professionals.

These threats to individual homeowners (and, to a lesser degree, non-owner residents) in HOA-governed communities are both real and pervasive.

Now let’s explore the underlying causes of HOA risks and the triple threat to homeowners. 

Healthy communities, property values, human values, HOA risks, HOA triple threat
Healthy communities value people, not property. Photo and quote by Deborah Goonan

HOA risks, Cause No. 1: Property values override human values

Today’s corporate homeowners association is built upon a faulty foundation. That foundation breeds mutual distrust, and invites corruption and abuse of power.

For starters, Covenants, Restrictions, and rules are based primarily on protecting property values vs. rather than human values. HOAs are the authoritarian enforcers of these “values.” The underlying stated goal is maximizing the future sale price of each home or condo or co-op apartment.  

This foundation of maximizing return on investment does not create true communities. True communities consist of people with similar values. In real communities, people strive to behave in ways that are cooperative, nurturing, and helpful to one another. 

But HOAs don’t work that way!

HOA risks, Cause No. 2: HOAs operate like corporate communities

During the initial construction (or redevelopment) phase of a common interest/common ownership community, real estate developers call all the shots. They control the homeowners’ money collected as HOA fees, and do so without any input from owners. Sometimes the developer-control period lasts for many years. Again, it’s not about true community, it’s about protecting the developer’s investment, and creating a healthy profit from home sales. 

Later on, the real estate developer sells all the properties, and hands over control to volunteer homeowners on the board. However, the fundamental values of the HOA do not change much. HOA board members are expected, by a vocal minority of owners, to follow and enforce HOA Covenants and Restrictions. HOA industry pros often pressure the HOA board to to do so, on behalf of all members. 

According to the industry trade group managers and attorneys, this is one reason HOAs “work.” Because owners who are NOT on the board do not want to confront their neighbors directly.

Homeowners buy into the false notion that someone else will do the dirty work of enforcing rules. They mistakenly believe that this ensures the value of their personal property investment. In other words, owners are led to believe that, for a fee, they won’t have to be active in their community. In essence, homeowners think they can be passive real estate investors. They expect a great return on their investment when they sell or pass on their property to heirs. 

Nothing could be further from the truth. 

HOA cul-de-sac, aerial view,

HOA risks, Cause No. 3: Strangers sharing property

The size of a homeowners association can be as small as 2 members (a duplex divided and sold as two condos). Or a common interest development can be as large as a small town, with thousands of housing units and property owners. In very large communities, each property owner might even have to pay fees to more than one HOA. 

However, many HOAs consist of a few dozen to a few hundred dwellings. 

Large or small, or somewhere in between, size of an HOA does not change this basic fact. From the beginning, each HOA is comprised of virtual strangers sharing property and the financial burden for all of its maintenance. Owners also share the costs of any and all unforeseen liabilities!  

Put simply, owners of HOA homes or apartments have little to nothing in common with their co-owners and neighbors. With the rare exception of co-housing communities, there’s no intentional mutual commitment and no shared values. HOAs only force a commitment to obey the governing documents, by way of a legal mutual “contract.”

In fact, in HOAs, there are plenty of conflicting interests among co-owners and residential neighbors. 

HOA Risk, Cause No. 4: Conflict over HOA fees

Tensions run particularly high over the money that is collected as HOA fees. 

How much should the HOA collect in fees? Should the HOA strive to keep HOA fees as low as possible? Should the HOA maintain a healthy reserve fund? How should the HOA spend the homeowners’ money? Who should pay for maintenance, amenities, or services that are not equally enjoyed by all members?

To make matters worse, the HOA board holds the pursestrings. It is the HOA board that creates the annual budget that determines HOA fees. 

In a very small HOA, one or two owners might make financial decisions without consulting other co-owners.

In larger HOAs, 5 to 9 owners on the board decide how to manage the affairs of the association. Many times, the board seeks zero input from homeowners, who are the ones required by law to pay HOA fees. 

In many ways, HOA fees are comparable to taxes imposed by the government.

Owners at large have minimal input on HOA board decisions.

It can be difficult to stop the HOA from spending money. In some cases, owners cannot legally prevent the board from making emergency or structural repairs to common property.  

Even when owners can agree that repairs are necessary, they often disagree on the best course of action. For instance, they cannot agree on the scope of work or the size of the budget. 

When owners disagree on the goals of the community, it breeds distrust and animosity. 

HOA Risks, Cause No. 5: Secretive HOAs breed distrust and animosity

When HOA boards operate without transparency — in secret meetings, in a way that keeps co-owners out of the loop — it breeds even more distrust and animosity. 

More and more reports of HOA fraud schemes and outright theft by board members and managing agents, lead to more distrust of, and animosity against, the HOAs in general.

lawsuits, court room, legal battles,

HOA Risks, Cause No. 6: HOAs are contentious, often litigious environments

Because HOAs do not create true communities, neighbor against neighbor and HOA versus owner conflicts are the norm.

An owner who fails to live up to the HOA’s subjective standards of beauty and uniformity is often treated badly. HOAs often target, shame, socially shun, harass, fine, sue, and push the owner out of the “community.” Most victims of HOA scorn sell and move in disgust. Others stay and fight until the bitter end, which sometimes leads to HOA foreclosure or personal bankruptcy.

The more the owner challenges HOA authority, the more aggressive the board, management, and HOA attorney behave. It’s quite common for HOAs to ignore owner requests for information. Boards and managers may gaslight residents. The HOA attorney will often send cease and desist letters to discourage challenges to board authority. Some HOAs even hire private security guards or a local Sheriff to attend board and unit owner meetings. They hope this will intimidate dissident homeowners. It also appears that physical violence against homeowners or HOA board members is increasing in frequency.

Regulation of HOAs is weak or nonexistent

Because U.S. states tend to have weak or nonexistent regulation of HOAs, lawsuits between homeowners/residents and HOAs are quite common. 

Typically, the HOA attorneys will keep filing motions and appeals, hoping to outspend the homeowner. 

That’s why few property owners that end up in a lawsuit with the HOA come out ahead in the end. Even the owner who “wins” in court pays high legal fees that will most likely never be recovered. The HOA litigation process seldom makes homeowners whole. More importantly, HOA lawsuits — regardless of who initiates them — are emotionally, physically, and spiritually draining.

HOA Risks, Cause No. 7: Too many owners are unwilling to support and fully fund the community reserves

Think about it. 

When you do not like or trust the HOA system — board members, management, or attorneys — and when you do not like or trust many of the co-owners, you will look for ways to spend as little as possible on HOA fees. 

That tendency, in turn, leads to deferred maintenance and poor levels of service, even as fees increase. 

When the condition of the community declines, co-owners are less likely to be interested in investing tens of thousands of dollars to reverse the ill effects of years or decades of neglect. 

In a nutshell:

Distrust of the HOA. Animosity between HOAs and homeowners. No mutual interests among co-owners. No true commitment, and few strong bonds to one’s neighbors. HOA boards and homeowners are always at odds over enforcement of rules and collection of HOA fees.

All of it leads to the same endgame for homeowners. HOA risks, posing a triple threat.

It’s why we often see a very weak homeowner commitment to maintain buildings and community infrastructure. Distrust is the root of general decline of the safety and desirability of many HOA communities. Also, persistent conflict and disagreement breeds HOA lawsuits in the community. That eventually leads to much higher HOA fees. Lack of transparency and homeowner avoidance of meetings result in HOA corruption and theft.

My view: The downward spiral of the HOA model of housing is plainly evident.  And there is little we can do to stop it, unless we change the foundational value of what community living is all about. 

Related post:

10 reasons first-time homebuyers should avoid the HOA, condo, or co-op

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