A homeowner living the tyranny responds to Evan McKenzie's predictions

March 13, 2004

By Richard Craig (View author info)

" If we go from banana republics to failed states, most people won't like the latter any better than the former, and somebody will have to pick up the pieces of failed CIDs. Who will that be?"

City governments would take over some of them, and take America back to the golden years of the 1960's and 70's when the city paid for parks and maintained the pools. You paid membership fees for joining the pool each summer- so now those of us who have no "private pool" would gain access to the ones nearest our homes - If the neighborhood owners decide not to continue allowing the mandatory dues payments and the "tipping" or "critical mass" phenomenon comes to pass.

Private Non-Profit Clubs would take ofver the remaining "common Areas" and the owners will contruibute if they want to join the club. NON-PROFIT corporations should only get $$$$ by DONATIONS, Isn't that the American way?

I live in the next subdivision over from ones with the nice pools and playgrounds. Our 154 lot "community" was deprived of such amenities by the developer. We were duped. I asked at a HOA meeting the first year I lived here - and the developer's agent promised us a say in the matter just to pacify and make it thru the annual meeting without a lynching. At the end of the developer's reign there was no pool and there was no referendum or choice at all. Lies and deception by Pulte Homes. I hate liars.

Homeowners will manage to take care of what we feel is important. After all, this is OUR HOME and our community you are talking about. If we want to join the club and enjoy the clubhouse, the community (include those of us in surrounding subdivisions who have nothing) would join the pool and pay their fair share of the costs to keep it up.

Yep, I live in one of those neighborhoods without a common area - and I pay for TWO homeowner associations to torment me. I'm outraged and fed up with the lies I hear at every turn by the HOA industry, and the refusal of the HOA board to approve ANY improvements on my home without a 6 month merry-go-round in 30-day letter delay tactics.

Lucky for my HOA board that I know that killing them would not solve the problem!

Here's the CAI's most famous line (IMHO):

"95% of the people living in mandatory associations 'love their associations ". William Gammon - CAI attorney testimony before the Texas Senate on May 28, 2002.

I say this to the legislature and to every American Homeowner living under a mandated HOA regime:

MAKE THEM PROVE IT

We love them - "95 to 5" in SWORN TESTIMONY! SO...Put it to a vote!! See how many people actually "agree" to this forced association and forced dues payments as a consequence of purchasing basic housing.

Test the will of the people by supervised petitions - and make them
pass by the same margin and same process required to change the restrictions. In my neighborhood, they should get 66% to agree (by petition) to perpetuate the mandatory dues payments. Then cut off their foreclosure rights and all other rights that the regime enjoys IF they cannot get at least 66% to agree to "renew" this contract written by Pulte Homes Corporation in collusion with the CAI attorneys and management empires of Senator John Carona..

The property code in Texas says it takes 75% of the owners to form a mandatory HOA - so why not put it to a VOTE and comply with the LAW when the developer sells his last house? Why let these perpetuities continue to torment the masses and provide an avenue for tyranny?

Our legislators said in testimony that they must find a way to kill the
"bad" regimes in a civilized manner, while allowing the "good" ones live. So - here's the best idea America can offer - PUT IT TO A
VOTE!!!

When the truth comes out - we'll have to convert the "Failed States" into country clubs and let the rest of us get in line to pay for and enjoy what the owners in those neighborhoods no longer wish to fund.

What's wrong with enacting legislation that REQUIRES a "mandated HOA" to renew its charter that includes non-judicial foreclosure by contract? It is the AMERICAN WAY.

OPEN FIRE ON THE CAI BISMARCK, LEGISLATORS - You now have the model for the MAGIC BULLET!!! Let the people living this nightmare decide their own future - cancel the contracts unless the people petition to save them.

If we truly "love our associations" we will surely sign the petition to continue the status quo. The sooner the better.

Sincerely

An Army of One


My above remarks are in response to the following posting on homeowner association foreclosures powers by Evan McKenzie

Some people in the anti-HOA activist ranks are angry because I said yesterday that, although I think nonjudicial foreclosure should be banned, associations need to have recourse to foreclosure to collect unpaid assessments (but not fines--that's a different issue). That means judicial foreclosure, where the association has to file a lawsuit and a judge makes the final decision after hearing from both sides. I'm talking about a last resort, with procedural protections against abuse and with limits on attorney fees.

Some of these anti-HOA activist comments make good points about issues like homestead protection, how long should statutes mandate before foreclosure is allowed, and so forth. All good points. They have answers, and in many states such protections and time limits already exist. The problem with NJF is that there is no lawsuit and no judge and no protections--it is a draconian practice that should be banned because it can't be fixed to make it fair.



But the loudest complainers, as usual, show the same characteristics. One is the typical tone--uncivil rage, peppered with insults and vulgarity. Another is the refusal to deal with inconvenient facts or arguments, better known as "reality." A third is the lack of any alternative that would allow HOAs to continue functioning, and advocating instead for positions that would almost certainly destroy common interest housing and leave millions of people in major financial trouble. That, of course, is the hidden agenda of some of these folks.

Here are some of the inconvenient facts:

(1) The vast majority of associations are under-reserved already.

(2) As housing built during the 1980s and 1990s ages, the need to maintain, repair, and replace commonly owned property is increasing every day, leading to major special assessments (see below) all over the nation.

(3) People typically spend as much on a house as they can possibly qualify for, which means more house than they can really afford, so they are often house-poor.

(4) We are in a soft employment market that could last for years, in which white collar workers are losing jobs and staying unemployed longer than before.

(5) When money gets tight, the first homeowner expense people try to shirk is their HOA assessments. If push comes to shove, they will make their house payment and their property tax payment and their homeowner insurance payment (both of the latter often escrowed into their house payment anyway), and not pay their HOA assessment.

(6) When people don't pay their assessments, the rest of the owners get stuck paying in their stead. That makes the non-payers "free riders" on the backs of those who are paying.

(7) Real property deteriorates quickly if it isn't maintained--the cost of necessary repair snowballs fast when water starts coming in.

All the above is basically simple math and common sense, and everybody who knows anything about common interest housing knows it is all true. Property and debt collection laws vary from state to state, but all I can say is I don't think associations can remain solvent if all they can do is go after people's wages and personal assets--cars, boats, bank accounts, and so forth. Like it or not, there are people who get very good at not owning things that can be attached by judgment creditors. HOAs would end up competing with all the other creditors--credit card companies, tax collectors, etc.--for the money they need to fix the roof this month. Net result: the existing owners bear the burden for the non-payers.

That is a completely unsustainable situation. The owners who pay would go deeper in the hole covering for those who didn't, and then more of them would stop paying the increased assessments, increasing the burden on those who still do, who would then stop. This is what we call a "tipping" or "critical mass" phenomenon, and you can cound on it happening.

So, knowing all this, why do people say that associations should not be allowed to foreclose, no matter how far in arrears an owner goes?

Simple. The obvious intent some people have is to create a legal environment in which HOA owners can ignore all the obligations that are contained in their governing documents, tell their board to sod off, and live exactly as they would if they had bought conventional single family housing. No assessments to pay, no rules to follow. They would make association obligations voluntary instead of mandatory. If you have no commonly owned property to maintain, that might be just fine with most owners and that's why some associations with no common property have just sort of disappeared. But if you do have common property, it's not fine at all.

That situation would, of course, leave the entire burden of paying assessments and following rules and maintaining commonly owned property to those who voluntarily chose to do so. They would carry the burden--in this case, the assessment burden--for all the unit owners. That would never work, for the reasons described above. Soon nobody would pay or obey because it would be economically irrational to do so.

I've always been against associations having dictatorial power. I'm also against going to the opposite extreme and leaving them powerless. If we go from banana republics to failed states, most people won't like the latter any better than the former, and somebody will have to pick up the pieces of failed CIDs. Who will that be?

But maybe that is exactly what will happen. Maybe this will be the year when associations take their biggest hit in state legislatures. It is an election year, and legislators have proven themselves to be capable of most anything at such times. There have been so many outrageous and highly publicized abuses of the foreclosure power by unscrupulous lawyers that there may well be a kind of legislative over-reaction. I have been warning the industry about this sort of reaction for years, with very limited success, but it's not something I want to be right about at long last, because a lot of ordinary HOA residents may be the ones to suffer.

I don't want to be right about assocation abuses leading to bad reforms. I also don't want to be right about what those reforms will bring about.