Friday, April 6, 2012

Reform Community Associations?

After all of the rhetoric, what's really at the end of the rainbow? 

          There is a documentary film entitled "HOAX" which, according to the filmmaker,  Rodney Gray, "follows an investigative reporter, homeowners, and HOA reform activists as they reveal shocking evidence of financial and psychological hardships experienced by people throughout Texas and Nevada. A few of these people, including the filmmaker, have been the subject of adverse actions from the very HOAs created to help them."

The blogosphere has picked up this film and especially those sites which champion the rights of individual owners, have trumpeted it as revealing and a blow against injustice. I've looked at  the link to the teaser for the film and it appears that the producer has chosen several large gated communities as his subjects. While not agreeing with the premise of the film (i.e. that there is widespread abuse of owners by management companies and boards of directors) it is clear that there are problems out there. Some of the problems stem from very conservative (or liberal, depending on your point of view) reading of governing documents and the ensuing enforcement. We have all read the accounts of fines and foreclosures over  minor infractions. As the complaints mount and the blogs come alive with indignation over these stories, like everything else, the real question boils down to: "What, if anything, can you do about it?"

      I've heard everything from the rational--increase state oversight of common interest developments, to the irrational--ban them! Increasing state oversight would be a radical solution since there is little or none right now. (Oh yes, there are statutes galore, but no one in authority to enforce them--and no state agency likely to arrive any time soon.) This leads to everything from the alleged abuses mentioned above to a serious failure to properly fund for long-term survival. Every year the California legislature, and the legislatures of other states tinker with the enabling statutes for homeowner's associations, but these efforts are usually paternalistic, constituent-favoring amendments that do little or nothing to solve the fundamental problems. Holding board members personally liable for overzealous enforcement, as a recently defeated Arizona law would have done, would accomplish nothing except to instantly vacate all of the seats on the board of every community association in the state. Anyone who remained would either be a martyr or a fool. 

           Existing community associations cannot be undone by later amendment of the very legislation that created them either. They could be dissolved by their own members, assuming a lot of things that are unlikely to happen: a super-majority vote of the members; no common area, or a municipality willing to accept responsibility for it; and the realization that it would be up to the members themselves to enforce any provisions of the remaining governing documents. The only real candidates for dissolution that would leave the housing intact are single-family home developments that own no common area at all. 

          Dissolving an association like that, assuming all of the onerous per-requisites could be met, would still leave all behavioral and architectural restrictions intact for the individual owners to enforce, unless the super majority vote that would likely be required to also vacate the recorded restrictions could be marshaled. It's possible, but not likely. Apathy is so pronounced that getting enough votes to accomplish that would be very difficult. It would take a vote of the members sufficient to not only dissolve the corporate association, but to vacate the Conditions, Covenants, and Restrictions as well. I could see, in very rare cases, the former, but I doubt enough owners would want to abandon all semblance of control to approve the latter.

            Dissolving an association that owned and/or was responsible for maintenance of the common area, and especially where the common area consisted of the housing itself, is impossible short of complete partition (aggregating and selling all of the units) which we have discussed in the past. But as long as there was common area to own and maintain, the association could not be eliminated even with a 100% vote of the members. The members could vote to sell the property, but not to simply dissolve the association which owned it. And if they did, the local city or county would no doubt condemn the property since it could no longer pay for maintenance, water, or insure it against disaster.

          It is also unlikely that any state or municipality would ban community association housing. The tax benefits are too great, and the land use too efficient. Urbanization, not suburbs is the new trend and in urban environments affordable owned housing is usually attached or it is rental housing. The future portends more, not less, privately owned, and privately governed, housing.

          So, films like HOAX, and the constant drumbeat of those advocates who believe that the community association form of housing is a mistake, can only repeat the obvious--there are problems with it and there is occasional abuse of power by its governors. But in fact they can't do very much about it. There is too much of this type of housing and it meets too many important needs, to abandon it any time soon. Legislatures may nibble around the edges of owner control and the concept of private, contractual government, but they dare not cut too deeply lest the states and municipalities end up inheriting it and all of the expense and political turmoil that would entail. In the end, ask yourself, who would you rather have govern your homeowner's association, your neighbors or your state legislature? If they are honest, most people will not want local or state government in their clubhouse!



1 comment: