Sunday, September 30, 2007

Could we all just get along?

Rules have been governing how we live within our neighborhoods since Adam and Eve frolicked at their Garden of Eden home. Their world abruptly changed when they didn’t comply with God’s rules on horticulture. God told them not to eat the forbidden fruit, which they did, for which he/she tossed them out of the garden for misbehaving.

About a half-million years later, Thomas Radcilff of Copper Cove Lake in Copperopolis, California, fell behind on his monthly homeowners associations dues. The Tulloch Home Owners Association filed a property lien in the amount of $207 and subsequently foreclosed upon his home tossing him out of the community. Radcliff’s home, valued at $289,000 was sold for $70,000. What’s wrong with this picture?

About 60 percent of all new homes and developments in California come under the influence of a Homeowners Association (HOA). The fastest growing segment of the housing market has been common-interest developments that include planned unit developments (PUD) of single-family homes and condominiums. California has 40,000 different HOA and according to the California Association of Homeowners, 23 million homes and 57 million people in our country live within a HOA.

An HOA is the legal entity with broad management and enforcement powers granted to them through property deed restrictions. Most HOA’s are initially set into place by the developer as non-profit corporations, subject to state statutes that govern corporations. Like a city, the HOA’s have the authority to provide services, levy assessments, regulate construction, set rules and enforce regulations. Unlike a municipal government, they are not subject to the Constitutional constraints of public governments.

Most of my clients moving into a new HOA development like the idea. The purpose of a HOA is to maintain, enhance and protect property values. This has allowed HOA’s to provide and maintain many common facilities such as pools, tennis courts and clubhouses which individual homeowners would never be able to build and maintain on their own. The HOA has the authority to make any assessment against individual property owners they feel necessary to pay for the maintenance of amenities or operational costs of the association and community. The powers of an HOA, however, extend beyond weekly landscaping of common grounds or cleaning the community pool. Some HOA have become fiefdoms of power hungry board members and a cash cow for management companies and litigation attorneys.

Although Zogby International reported general satisfaction by residents of a homeowners association, the over zealous enforcement of association rules or vindictive behavior of board members are noteworthy. “When you have a neighbor put in charge of you, it breeds resentment,” says David Feingold, a San Rafael attorney, who represents HOA’s. As an example, in Sea Ranch, a managed costal community, a widower had his home foreclosed upon when he didn’t pay the $600 in association fees. The house was appraised at $300,000 and sold for $2,000. Pamela McMahan, age 77 who walks with a cane, didn’t expect her cocker spaniel to be a problem but the HOA where she lived in Long Beach, fined her $25 for each time she walked her dog through the lobby. The HOA required all dogs to be carried through the lobby. McMahan’ s fines soon totaled thousands of dollars and she was forced to sell her condo or face foreclosure. In Marin County, the head of the HOA and a neighbor, got into a fistfight over a shared patio wall. During the scuffle the board president suffered a heart attack. He later sued the neighbor and the HOA. Jeffery DeMarco planted too many roses for his Rancho Santa Fe HOA. The board leveled a hefty fine and later placed a lien on his property. DeMarco took the board to court but lost on the grounds that he had violated the associations architectural design rules. To add to his disappointment was his $70,000 in legal bills.

The California Association of Homeowners Associations estimates that 75 percent of all associations are embroiled in some type of legal entanglement. Attorney Mark Pearistein, who represents associations, estimates that 60 percent of all condo boards and HOA are involved in a lawsuit. Evan McKenzie, a lawyer and author of Privatopia: Homeowners Associations and the Rise of Residential Private Government, found that associations were quick to litigate for even minor offenses. “It’s part of our litigious society, he said. “Association lawyers tell the board to enforce every rule. They say if you make one exception, the whole neighborhood falls into chaos.” So who bears all the cost for all this litigation?

When buying a home within an HOA, buyers need to have a full understanding of their obligations and consequences of ignoring the rules. George Staropoli, who lives in a HOA and founded a homeowners rights group says, “It’s a government outside the U.S. government.” His rational is that HOA’s can and do regulate practically everything as long as it is not in a violation of federal and state laws. “Basically you have people who own their own home, but are being treated like tenants,” says Janet Portman, a managing editor at Nolo Press in Berkeley.
Despite the problems, HOA’s are popular and will become more common in our county. As with other long-term commitments, they should not be entered into without careful consideration.


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