Saturday, May 21, 2011

It's Your Neighbors, Stupid.

Who, not what, is a Homeowners Association?


                 The blogosphere is alive with stories about the transgressions of homeowners associations. Foreclosures. Enforcement of arcane architectural guidelines. Lawsuits by associations for minor rule violations. Owners suing their associations for failing to enforce the rules. “Nazi” boards. Libertarian owners. Just surf the web for awhile and you will see numerous all-caps diatribes against what is perceived as a corporate enemy—the homeowners association. But the truth is that the association serves the owners—not the other way around—in ways that many people do not think about.
       
     Yes, most community associations are corporations. They are run by a (volunteer) board of directors. They have the rules that were left behind when the association was formed by the property developer. The have Bylaws that state how the corporation is to be run. These corporations enforce the Rules and the Conditions, Covenants, and Restrictions (CCRs) that are recorded by the developer.

            Homeowner volunteers are elected to serve on boards of directors. They may or may not have experience running an organization, but the Bylaws don’t require any. The volunteers realize that they don’t have the time or experience to directly manage the association so they delegate some of their authority to professionals—managers, attorneys, accountants. The homeowner board and the professionals they hire try to follow the rules. Some do a good job. Some fail. It’s a mixed bag.

            Many owners see the “association” as a faceless antagonist run by people that they don’t know. The reality is different. The “association” may be a corporation but in fact it is all of our neighbors acting in concert under a set of rules—not unlike thousands of other volunteer organizations that we join every day. The faces of the corporation are the people you see in your neighborhood—you and your neighbors. So guess what? Just like Pogo said, “We have met the enemy and he is us!”




Disputes between an owner and the “association” are at base just arguments among individual owners. But many still don’t see it that way and choose instead to see the association as a monolith operating independently of the owners. And they can be excused for thinking that way. When disputes arise, they are characterized as “Happy Valley Homeowners Association vs. John Smith” not, “All of His Neighbors in Happy Valley vs. John Smith.” A corporation can be bureaucratic, but it also provides anonymity—a delegation of authority so individual owners do not have to personally enforce the rules. Those who believe the rules are beneficial want others to abide by them. Others just want to be left alone. But as long as there are rules in play, someone or something has to do it.

Collection of assessments and the foreclosure process is a good example. Assessments are the property taxes of community associations. They provide the operating capital necessary to maintain the infrastructure that municipalities have delegated to the individual property owners. Maintenance is a shared expense. When one owner fails to pay her allotted share, the other owners invariably have to fill the gap. The mathematics and the logic are simple. 

But yet we hear an enormous outcry over the attempts by associations to collect from members who are delinquent in paying their assessments. Should associations back off? Should people lose their homes for failure to pay assessments? Fail to pay your property taxes to the city and that’s exactly what happens. Fail to make your car payments and the bank takes your car. Fail to make your house payment and the lender takes your house. Yet community associations are excoriated for trying to collect assessments. Why? Perhaps because people view associations more like banks, instead of what they really are—your neighbors and fellow homeowners. 

There is always room for charity of course, but that can only go so far. Everyone has to pull on the rope. When someone stops pulling, the others have to pull harder. Why is that such a difficult concept to accept? Have you and your neighbors agreed to support other owners who lack the funds to support themselves? Of course not. Other than when assisted by organized charities and government aid programs, everyone is expected to pay their own way. Community associations are simply the legal arrangement employed to ensure that the financial load of maintaining the project is distributed equally and fairly. It is the mechanism we use to avoid having individual owners going door to door to pass the hat.

Owners can sue each other directly to enforce the rules but most would rather not do that. It’s messy and expensive and personal. Instead the corporation does it. But that doesn’t change the essential character of the dispute; it just makes it less intimate. Associations, like governments, provide the anonymity and security that prevent street brawls.

So can we blame the corporation for foreclosures? Sure, but that would be a waste of energy. It’s merely what we create to allocate the financial burden fairly among all owners so they don’t have to do it themselves. Can we blame the board of directors for enforcing the rules? For not enforcing the rules?  Yes we can and we do, but let’s be honest—aren’t we really saying: “Do this dirty job so that I don’t have to do it?” Do away with the community association and run the project as a committee of the whole? Not likely. That’s anarchy waiting to happen. No, we are stuck with government and we are stuck with community associations, warts and all. They do the messy jobs for us so we can all just be neighbors.


5 comments:

  1. Your post ignores the all too common situation where the "volunteer" board isn't volunteer at all, but a bunch of shills for commercial interests, typically the developer and its buddies. Under those circumstances, anything goes... and the developer bed buddies get away with murder at owners' expense. The classic fraud is warranty/defect evasion by developer. However, developers are adding sophisticated new wrinkles to this fraud... including extremely pernicious and predatory mixed-use condominium fraud.

    Owners may be naive, apathetic, and ill-informed, but more and more often, they're often kept or made that way deliberately by circumstance (i.e., fraud developer(s), fraud neighbors, and fraud rackets).

    So the "volunteers" in these circumstances aren't doing a thankless messy job, they're messing up the condo permanently for the developer and whatever outside considerations it has provided or promised to provide them. It's pernicious and well known in real estate circles. But the "professionals" typically keep it a secret and even scoff at the idea, even though it's surprisingly common... and growing.

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  2. Actually, the article is written about associations that are beyond developer control and on their own--where the biggest disputes are neighbor on neighbor. I don't disagree with you however that developers use their control over the governing documents and the initial boards to insulate themselves from defect and other complaints. We have turned up many instances where the governing documents were rigged with provisions which, for example, trigger statutes of limitation prematurely or where the owners' power to amend the documents or initiate claims against the developer has been artificially thwarted with such things as super majority voting requirements or "as-is" clauses. If you are interested in those issues see:http://www.berding-weil.net/articles/when-your-ccrs-hate-you.php for more examples.

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  3. When the HOA is not consistent in how and when it applies the CC&R's are there remedies for the individual homeowner?

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  4. To answer that last comment, you have to define "not consistent." If you mean that sometimes they enforce a certain provision(s) and sometimes not without regard to who the enforcement is aimed at, then, if the violations are significant, the board isn't doing its job and the owners can decide whether to keep them or throw them out at the next election. If, on the other hand, you mean that the board picks and chooses against who to enforce the governing documents then that's discrimination and an owner who believes that he or she has been discriminated against (regardless of why or on what basis) can ask a court to stay enforcement. It may or may not do that depending upon how egregious is the discrimination and the degree of intent to discriminate.

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  5. Excellent article in defining that the board represents the interests of the homeowners.

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