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Thread: Article about HOA excessive power

  1. #1
    Cyburbian Plus
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    Article about HOA excessive power

    HEADLINE: Neighbor vs. neighbor as homeowner fights get ugly
    "The treacherous part is that homeowners' associations are acting like a local government without restraints, and they have this extraordinary power,"
    Has anybody experienced or heard about stuff like this happening in your fair community ?

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    Cyburbian hilldweller's avatar
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    Never heard of HOAs foreclosing on homeowners. Wow.

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    Cyburbian
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    Quote Originally posted by hilldweller View post
    Never heard of HOAs foreclosing on homeowners. Wow.
    Wasn't there something on NPR about this maybe 18 months ago?

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    Quote Originally posted by ColoGI View post
    Wasn't there something on NPR about this maybe 18 months ago?
    Indeed
    Not So Neighborly Associations Foreclosing On Homes

    in 33 states, an HOA does not need to go before a judge to collect on the liens.

    It's called nonjudicial foreclosure, and in practice it means a house can be sold on the courthouse steps with no judge or arbitrator involved.
    Is something wrong with this picture ?

  5. #5
    I have never liked restrictive HOA, never will. Ultimately it's a person's choice if they choose to buy into one of these developments. I'm not surprised this is happening, especially now since the economic downturn.

  6. #6
    Cyburbian Linda_D's avatar
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    Quote Originally posted by OfficialPlanner View post
    I have never liked restrictive HOA, never will. Ultimately it's a person's choice if they choose to buy into one of these developments. I'm not surprised this is happening, especially now since the economic downturn.
    I don't think that most people who buy into these developments realize exactly what they're getting into, especially in newer developments with detached homes. All a lot of these folks see is the community pool and clubhouse and the low tax bill (because they aren't paying for the infrastructure through their taxes), and think it's no big deal not to pay the HOA fees since they don't use the pool and clubhouse anyways. Then when a number of homes sit empty and nobody pays the HOA fees on them or as the development ages and repairs are required, the proverbial excrement hits the proverbial fan.

  7. #7
    Quote Originally posted by Linda_D View post
    I don't think that most people who buy into these developments realize exactly what they're getting into, especially in newer developments with detached homes. All a lot of these folks see is the community pool and clubhouse and the low tax bill (because they aren't paying for the infrastructure through their taxes), and think it's no big deal not to pay the HOA fees since they don't use the pool and clubhouse anyways. Then when a number of homes sit empty and nobody pays the HOA fees on them or as the development ages and repairs are required, the proverbial excrement hits the proverbial fan.
    I fully agree. I'm amazed at how little due diligence is undertaken given a home is the biggest investment most will make in their lifetime. It's unfortunate that some really have no idea what they walking into when purchasing a home in a HOA. Reading and understanding the HOA documents are a must!

    I wonder if this is more of a legal issue than a planning problem. IMHO, HOA should not have anywhere near the kind of power to foreclosing on past dues without a judicial proceeding.

  8. #8
    Cyburbian
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    Quote Originally posted by Linda_D View post
    Then when a number of homes sit empty and nobody pays the HOA fees on them or as the development ages and repairs are required, the proverbial excrement hits the proverbial fan.
    I'm curious. Is there any legal basis to unwind an HOA and contribute its assets to the municipality, in the event things go completely pear-shaped? What happens to the clubhouse when 40% of the units sit vacant and unsold? Who waters the lawns? Can the municipality refuse to take the assets? What would that mean for the homeowners who are there?

    Moral of the story: People need to design communities that don't require Big Brother to run them, to preserve their value. Unbelievably (to me), somebody here tried to argue on another recent thread that municipal governance needs to change to look and act like HOAs. Yeah, that'll work.

  9. #9
    Unfrozen Caveman Planner mendelman's avatar
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    Quote Originally posted by Cismontane View post
    I'm curious. Is there any legal basis to unwind an HOA and contribute its assets to the municipality, in the event things go completely pear-shaped? What happens to the clubhouse when 40% of the units sit vacant and unsold? Who waters the lawns? Can the municipality refuse to take the assets? What would that mean for the homeowners who are there?
    That happens often, especially when there are private streets in the development. After about 20-30 years the streets need to be replaced, which is very expensive, but the units are not likely to be occupied by households with enough income to cover the special assessments to rebuild the streets. Therefore, they ask to have the municipality take over the street. Unfortunately, most municipalities only accept public infrastructure from private entities in a new state (new construction) and it must meet the dimensional/construction requirements for public streets. So, the HOAs get stuck in a catch-22.

    As for half developed/occupied developments with common buildings like clubhouses, the municipalities will just make sure they are maintained, but will not do much else.
    Last edited by mendelman; 12 Jul 2011 at 8:42 AM.
    I'm sorry. Is my bias showing?

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  10. #10
    Cyburbian Cardinal's avatar
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    Adding to Mendelman's comments...

    Many times the developer prefers that the infrastructure be private so that they do not have to conform to the city's standards, particularly with regard to streets. The buyers do not understand this. They see new pavement and think it is just fine. Right. Later when it begins to crumble and needs to be replaced, they do not want to bear the cost and think it should be the city's responsibility, just as it is in other neighborhoods.

    In this state we had a legal challenge a few years ago where the owners of a condo development thought they should not have to pay all of their property taxes because they do not have the city plowing their private streets, maintaining them, etc. It failed. What these people did not realize is that they collectively own a private property, not simply a house on a public street. It is no different than a shopping mall or office complex. These places need to maintain their own internal streets, plow their parking lots, mow the lawns, etc., just as the owners of the condominium complex must do, or just as we need to do on our own single family detached housing lot with public sidewalks that we must shovel and maintain.
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  11. #11
    A couple of comments. 1) For our conservative members, shouldn't this be the way to go? The free-market and people making decisions. You don't have any government interference and taxes. You don have any social agendas. People deciding what level of service they want.

    2) It is fairly common for developments to what the local government to take over the streets. Especially after the residents discover how expensive infrastructure really is. I don't have a problem with the local government requiring all the roads in a development-be it public or private, to be built to their specs. That way when the residents petition the local government to take over the roads, the government knows what it is getting.

    3) There normally is a trigger point for when the developer hands over the development to the HOA. It's normally a set number of people. The problem that comes up is when the HOA falls apart.
    When did I go from Luke Skywalker to Obi-Wan Kenobi?

  12. #12
    Cyburbian
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    Quote Originally posted by Whose Yur Planner View post
    A couple of comments. 1) For our conservative members, shouldn't this be the way to go?
    Actually, a lot of HOAs smack of Big Brotherish collectivism to me, and that's hardly a conservative ideal.

  13. #13
    OH....IO Hink's avatar
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    This is the private sector working for the people. Unfortunately the cost to run the development is higher than the fees residents are paying currently. With no subsidies, they have to be trickled down to the residents. It sucks, but that is what you signed up for.

    We have numerous HOA's that were created so the developer didn't have to meet our standards. These HOA's then don't maintain anything, and want to turn it over to us. The road isn't to our standards, so we won't take it. Which means that the private drive becomes almost undriveable. Grass doesn't get cut and becomes a nuisance. All the homeowner's get assessed.

    It is a bad idea all around. Government is good for some things. Infrastructure and regulation are two strong points.
    A common mistake people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools. -Douglas Adams

  14. #14
    Cyburbian
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    I'm not sure most residents/consumers make a fundamental distinction at an emotive level between paying "public" as opposed to "private" taxes. Taxes are taxes. Let's say you own a condo and your tax assessment is $800/month (for the streets, parks, dogwalk, playground, local schools, police, fire, etc) and your condo HOA charges are $700/month (for the building staff, hallways, gym, building plant, private security, etc). Each month you pay your management company $1,500 and they pay your taxes out of that, as is generally the case where I live. You don't really say, "OK. $700 of that $1,500 is good because it's going to a private, voluntary entity that I decided to join while the $800 is bad because it's going to the evil of public government. Rather, you just say, "Woah.. that's a lot of money for taxes each month." If you're renting that same apartment, for, say $2,500 a month, that $1,500 is invisible to you.

  15. #15
    OH....IO Hink's avatar
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    Quote Originally posted by Cismontane View post
    I'm not sure most residents/consumers make a fundamental distinction at an emotive level between paying "public" as opposed to "private" taxes. Taxes are taxes. Let's say you own a condo and your tax assessment is $800/month (for the streets, parks, dogwalk, playground, local schools, police, fire, etc) and your condo HOA charges are $700/month (for the building staff, hallways, gym, building plant, private security, etc). Each month you pay your management company $1,500 and they pay your taxes out of that, as is generally the case where I live. You don't really say, "OK. $700 of that $1,500 is good because it's going to a private, voluntary entity that I decided to join while the $800 is bad because it's going to the evil of public government. Rather, you just say, "Woah.. that's a lot of money for taxes each month." If you're renting that same apartment, for, say $2,500 a month, that $1,500 is invisible to you.
    No, but people do make the decision to live outside the private arm quite often. They let the public sector meet their need of infrastructure and regulation.

    Also, the biggest issue here is having an open book. The private HOA doesn't have to explain to anyone where the money is going. $500 a month pays for the services. A public body has a line item budget that shows exactly where the money came from and went.
    A common mistake people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools. -Douglas Adams

  16. #16
    Cyburbian Linda_D's avatar
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    Quote Originally posted by Cismontane View post
    I'm not sure most residents/consumers make a fundamental distinction at an emotive level between paying "public" as opposed to "private" taxes. Taxes are taxes. Let's say you own a condo and your tax assessment is $800/month (for the streets, parks, dogwalk, playground, local schools, police, fire, etc) and your condo HOA charges are $700/month (for the building staff, hallways, gym, building plant, private security, etc). Each month you pay your management company $1,500 and they pay your taxes out of that, as is generally the case where I live. You don't really say, "OK. $700 of that $1,500 is good because it's going to a private, voluntary entity that I decided to join while the $800 is bad because it's going to the evil of public government. Rather, you just say, "Woah.. that's a lot of money for taxes each month." If you're renting that same apartment, for, say $2,500 a month, that $1,500 is invisible to you.
    Actually, many, many people do. Coming from NY, all I ever hear about is how so-and-so is moving to South Carolina (or fill in the Sun Belt state) where the taxes on a new $200,000 house in a development ruled by an HOA is only $1500 a year. Why am I so stupid as to stay in NY and pay for "welfare" people? Of course, these folks ignore the fact that they are also paying $300+ a month in HOA fees to pay for infrastructure and a community pool, things that my local taxes in NYS pay for -- plus the rules for the government seizing my property for non-payment of taxes are explicit and appealable.

  17. #17
    Cyburbian
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    Quote Originally posted by Linda_D View post
    government seizing my property for non-payment of taxes are explicit and appealable.
    Actually, in NYC, I'm pretty sure that nonpayment of condo HOA charges will result in legal action against me about a zillion times more quickly than nonpayment of municipal property taxes on the same. And, in terms of what they're likely to do to me to interfere with my exercise of property rights, I'm a lot more afraid of my HOA than I am of the government. And while NYS is more likely to rebate my taxes, the chances of me getting any relief on my HOA charges is nil. And if the elevator breaks and needs to be replaced with a special assessment, I'm really really in trouble. That concerns me a lot more than what Bloomberg does with my property taxes. He actually seems to know what he's doing.. Frankly, I'd much rather the HOA's powers be curtailed than Bloomberg's.

    IMO, the New urbanist/smartgrowther reliance on HOA structures for their projects is a critical weakness of their paradigm. I don't believe that asking citizens to take on such unpredictable risk from what are often poorly managed local management companies contracted to run HOAs asure failure for many such communities.
    Last edited by Cismontane; 12 Jul 2011 at 11:55 AM.

  18. #18
    But are not people who live in developments with HOAs chosing the level of services that they want and are willing to pay for. Therefore, is not the free market working in that circumstance. Further, free market ideology is a basic tenet of conservatism. As for the collectivism, people are chosing to live in that environment therefore agreeing with the collectivism. If they don't agree, they don't have to live there.
    When did I go from Luke Skywalker to Obi-Wan Kenobi?

  19. #19
    Cyburbian
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    Quote Originally posted by Whose Yur Planner View post
    But are not people who live in developments with HOAs chosing the level of services that they want and are willing to pay for. Therefore, is not the free market working in that circumstance. Further, free market ideology is a basic tenet of conservatism. As for the collectivism, people are chosing to live in that environment therefore agreeing with the collectivism. If they don't agree, they don't have to live there.
    Survey after survey say that people choose their homes on the basis of whether they like the house, the quality of the schools in the neighborhood, the prestige of the zip, their ability to afford it (get a mortgage for it, have enough downpayment), and their regard of the home's investment potential, roughly in that order. Factors such as the favorability of HOA policies tend to rank below issues such as proximity to work and services, which itself is way down on the list.

    If people aren't bothering to check on HOA policies as part of their buying decision, then they are not really "choosing" a particular type, bias and level of services.
    Last edited by Cismontane; 12 Jul 2011 at 4:24 PM.

  20. #20
    Cyburbian Linda_D's avatar
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    Quote Originally posted by Cismontane View post
    Survey after survey says that people choose their home on the basis of whether they like the house, the quality of the schools in the neighborhood, the prestage of the zip, their ability to afford it (get a mortgage for it, have enough downpayment), and their regard of the home's investment potential, roughly in that order. Factors such as the faborability of HOA policies tend to rank below issues such as proximity to work and services, which itself is way down on the list.

    If people aren't bothering to check on HOA policies as part of their buying decision, then they are not really "choosing" a particular type, bias and level of services.
    I think the operative phrase here is caveat emptor.

    I have no problem with governments regulating HOA practices/policies, but I'm not going to feel particularly sorry for folks who get screwed by their HOAs, either, and I sure don't want any part of rescuing them when they face major special assessments.

  21. #21
    Cyburbian
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    Quote Originally posted by Linda_D View post
    I sure don't want any part of rescuing them when they face major special assessments.
    I don't disagree with you, but my earlier point is that munis may get "stuck" with taking over those services when HOAs fail. Taking regulatory measures to prevent that from happening, by ensuring that HOAs are properly and prudently set up in the first place and that they do not assume excessive powers and responsibilities becomes a way for munis to protect themselves.

    Think of it this way: munis may be using HOAs to defer or avoid certain types of investments - which makes sense if the HOAs have pro forms that actually make sense, but if the HOAs aren't truly self-funding and are at risk of never being so, then the Munis are just kicking the can down the road by allowing PUDs on the basis of HOA-managed services and infrastructure. That's not the fiscally responsible thing to do. It's just more "deficit financing" hiding behind another name.

    In a way, it doesn't make a difference who owns the commons and public infrastructure. Cities, HOAs, private companies, coop associations, whatever. My parents' suburban HOA is in excellent fiscal health and has been for nearly 40 years. Clearly, there's no reason why the city needs to get involved there. What matters is whether the fiscal math works and that HOAs don't become a crutch to transfer un-economic investments to third parties in order for cities to avoid taking responsibility today.

    Again, if I'm paying $XXXX a month in total taxes - to the private and public sector - I can care less who is getting my money as long as the services I need work, and I, as the tax payer, am getting good value for my money. Personally, I think Mayor Bloomberg is more cost effective dollar-for-dollar with my money, than my buildings' board, but that may just be me. My concern is that Bloomberg, as mayor, doesn't transfer public services to the less efficient HOA in order to do some clever off-balance sheet financing. Yet I know this is exactly what has happened in the burbs, and in places like Florida, on a massive scale.
    Last edited by Cismontane; 12 Jul 2011 at 4:48 PM.

  22. #22
    Cyburbian Linda_D's avatar
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    Quote Originally posted by Cismontane View post
    I don't disagree with you, but my earlier point is that munis may get "stuck" with taking over those services when HOAs fail. Taking regulatory measures to prevent that from happening, by ensuring that HOAs are properly and prudently set up in the first place and that they do not assume excessive powers and responsibilities becomes a way for munis to protect themselves.

    Think of it this way: munis may be using HOAs to defer or avoid certain types of investments - which makes sense if the HOAs have pro forms that actually make sense, but if the HOAs aren't truly self-funding and are at risk of never being so, then the Munis are just kicking the can down the road by allowing PUDs on the basis of HOA-managed services and infrastructure. That's not the fiscally responsible thing to do. It's just more "deficit financing" hiding behind another name.

    In a way, it doesn't make a difference who owns the commons and public infrastructure. Cities, HOAs, private companies, coop associations, whatever. My parents' suburban HOA is in excellent fiscal health and has been for nearly 40 years. Clearly, there's no reason why the city needs to get involved there. What matters is whether the fiscal math works and that HOAs don't become a crutch to transfer un-economic investments to third parties in order for cities to avoid taking responsibility today.

    Again, if I'm paying $XXXX a month in total taxes - to the private and public sector - I can care less who is getting my money as long as the services I need work, and I, as the tax payer, am getting good value for my money. Personally, I think Mayor Bloomberg is more cost effective dollar-for-dollar with my money, than my buildings' board, but that may just be me. My concern is that Bloomberg, as mayor, doesn't transfer public services to the less efficient HOA in order to do some clever off-balance sheet financing. Yet I know this is exactly what has happened in the burbs, and in places like Florida, on a massive scale.
    I think you are making the assumption that municipalities have to accept infrastructure maintenance if HOAs fail. From what others have posted on this thread, I don't think that's the case. I would bet there is no state that has a law requiring a city, town or county to rescue private developments. Now, maybe that will change in states like Florida with huge amount of development based on HOAs but I wouldn't hold my breath. Would residents in fiscally stable HOAs vote to raise their public taxes to help out the fiscally unstable HOAs next door?

  23. #23
    Cyburbian
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    Quote Originally posted by Linda_D View post
    I think you are making the assumption that municipalities have to accept infrastructure maintenance if HOAs fail. From what others have posted on this thread, I don't think that's the case. I would bet there is no state that has a law requiring a city, town or county to rescue private developments. Now, maybe that will change in states like Florida with huge amount of development based on HOAs but I wouldn't hold my breath. Would residents in fiscally stable HOAs vote to raise their public taxes to help out the fiscally unstable HOAs next door?
    In theory, they can (and probably should) always refuse to accept HOA maintenance costs, but (1) HOA residents vote and (2) resulting blight and other economic losses will effect the neighbors of these HOAs and those neighbors vote too. This is more the case where property values are at stake. Given that I'm sort of the resident libertarian here on land-use regulatory issues (hehe.. ok, I'll admit that much), I'm all for the caveat emptor rule in principle, but my experience with municipalities suggest that sticking to it is easier said than done.

  24. #24
    Cyburbian hilldweller's avatar
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    Quote Originally posted by Cismontane View post
    I don't disagree with you, but my earlier point is that munis may get "stuck" with taking over those services when HOAs fail. Taking regulatory measures to prevent that from happening, by ensuring that HOAs are properly and prudently set up in the first place and that they do not assume excessive powers and responsibilities becomes a way for munis to protect themselves.
    Municipalities don't have to get stuck with taking over failed HOA services, and I 'd like to think most are prudent enough to avoid this happening. That's not to say that there couldn't be a situation where the muni takes over due to political pressure (I've seen these), but legally the muni isn't required to rescue an HOA. As to the regulatory measures you refer to: what else can munis do beyond exercising planning/zoning powers at the review stage? I think we both agree that the problem is the financial (in)feasibility of these PUD/HOA projects, but it is a slipperly slope for local officials to get involved in such determinations. I don't think many City Councils are going to tell developers they can't build because they don't agree with their financials. There's always the expectation that the project will be viable and fully built-out (athough maybe this thinking should go out the window in light of this recession).

    Quote Originally posted by Cismontane View post
    Think of it this way: munis may be using HOAs to defer or avoid certain types of investments - which makes sense if the HOAs have pro forms that actually make sense, but if the HOAs aren't truly self-funding and are at risk of never being so, then the Munis are just kicking the can down the road by allowing PUDs on the basis of HOA-managed services and infrastructure. That's not the fiscally responsible thing to do. It's just more "deficit financing" hiding behind another name.
    Where's the developer in all of this? Oh that's right, he skipped town before those poor sucker homeowners realized how much that water/sewer assessment was going to cost them. And keep dreaming about that clubhouse in Phase III.

  25. #25
    Cyburbian mgk920's avatar
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    "First thing, if/when we (the city) take over your HOA's private streets, we lose the gate and guard shack...."



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