Friday, September 19, 2014

Nevada high court makes key ruling on HOA liens |

Nevada high court makes key ruling on HOA liens | LAS VEGAS (AP) — The Nevada Supreme Court has ruled that a lien held by a homeowners association can override a deed of trust involving a first mortgage on the property.

Real estate investors in Las Vegas who have been buying foreclosed property at bargain prices claimed a victory in the ruling on Thursday.

The state Supreme Court overturned an earlier Clark County District Court decision and ruled in favor of SFR Investments Pool 1, the Las Vegas Review-Journal reported (

Homeowners associations can place liens on properties within their communities for unpaid fees. Unpaid association dues land in a super-priority lien that must be paid off first when a foreclosed home is sold.

Thursday, September 18, 2014

Ayn Rand-style libertarian paradise fails to produce bliss

Well, I'm just shocked--shocked, I tell you--to hear that Galt's Gulch didn't pan out.
"In Rand’s novel the great, throbbing “motor of the world” (it’s made of executives, remember?) retreats to an Atlantis-like idyll known as “Galt’s Gulch.” Without their ingenuity and drive the nation descends into chaos, leading many long pages later to their triumphant return and anointment as leaders of a new libertarian order. Which gets us to the fraud charges now swirling around a venture called “Galt’s Gulch of Chile.” Its website is currently down, but it’s still being promoted as a real-world retreat for the world’s movers and shakers. “Yes, you read that right,” the organizer chirps cheerily. “Those who become one of GGC’s Founders will be paid back … within three years of the consummation of their Founders Club participation (please contact GGC for the fine print and T&Cs). In what should be an unsurprising outcome, it didn’t turn out very well.  That news comes (via Metafilter and Gawker) from a blogger named Wendy McElroy, who writes that she bought some property in Galt’s Gulch with her husband and then learned that it never had legal rights to the property in the first place. A visit to Chile revealed that many of the area’s local vendors had also been defrauded by the Galtians."

Wednesday, September 17, 2014

Illinois Supreme Court: Contract? What contract?

Spanish Court Two Condominium Association v. Carlson:  Spanish Two sued a unit owner for failure to pay assessments. In Illinois, condo associations can do that in landlord-tenant court, and evict the owner without needing to foreclose. The owner alleged an affirmative defense of failure to maintain and repair the common elements and asked for a set-off, something that tenants do in landlord-tenant disputes over rent. The trial court struck the defense, but the Appellate Court reversed, saying unit owners could avail themselves of the same failure to maintain defense against condo associations, just as tenants do against landlords.  The Illinois Supreme Court reversed the Appellate Court, saying the trial court was right--

"Where a condominium association brought a forcible entry and detainer action against a unit owner for failure to pay assessments, the affirmative defense of alleged failure to repair and maintain common areas was properly stricken as not germane to that summary statutory proceeding."

It is interesting to read the language where the Supreme Court dances around the claim that the association-unit owner relationship is based on contract, something we hear all the time from advocates of strictly enforcing the DD&RS:  It's a contract, they say, and if you didn't like it you shouldn't have entered into it.  But now the shoe is on the other foot--an owner wants the rights that go with a contract:  the party claiming back assessments hasn't lived up to its part of the bargain, so the owner, like a tenant, should have the benefit of that breach.  But no, the court says, now that contract language isn't to be taken so literally.  You see, it's more accurate to say that it is largely based on statute.  From the IL SC opinion:
Spanish Court maintains that the appellate court’s recognition of a nullification defense rests on an ill-fitting analogy, namely, that the association-unit owner relationship is, for purposes of the forcible statute, analogous to the landlord-tenant relationship. See 2012 IL App (2d) 110473, ¶¶ 16, 26, 46. We agree with Spanish Court. 
¶ 20 The relationship between a landlord and tenant is contractual. See generally 24 Ill. L. and Prac. Landlord and Tenant § 1, at 157 (2009). Although aspects of that relationship may be governed by state and local landlord-tenant laws, the relationship is created through the agreement of the parties. When a landlord breaches the terms of the agreement (the lease) by failing, for example, to comply with the implied warranty of habitability, cases have traditionally applied contract remedies, including damages, rescission, reformation, or abatement of rent. Glasoe v. Trinkle, 107 Ill. 2d 1, 15-17 (1985). Cf. Mohanty v. St. John Heart Clinic, S.C., 225 Ill. 2d 52, 70 (2006) (“Under general contract principles, a material breach of a contract provision by one party may be grounds for releasing the other party from his contractual obligations.”). 

¶ 21 Although contract principles have sometimes been applied to the relationship between a condominium association and its unit owners based on the condominium’s declaration, bylaws, and rules and regulations (1 Gary A. Poliakoff, The Law of Condominium Operations § 1:23 (1988 and Supp. 2012-13)), the relationship is largely a creature of statute, defined by the provisions of the Condominium Act (765 ILCS 605/1 et seq. (West 2008)). Under that Act, the board of managers, through whom the association of unit owners acts (765 ILCS 605/2(o) (West 2008)), has the duty “[t]o provide for the operation, care, upkeep, maintenance, replacement and improvement of the common elements.” 765 ILCS 605/18.4(a) (West 2008). The Condominium Act also addresses the “[s]haring of expenses” among unit owners, and establishes that: “It shall be the duty of each unit owner *** to pay his proportionate share of the common expenses.” 765 ILCS 605/9(a) (West 2008).2 Although these duties may also be reflected in the condominium declaration and bylaws, as they are in this case, they are imposed by statute and exist independent of the association’s governing documents. Accordingly, a unit owner’s obligation to pay assessments is not akin to a tenant’s purely contractual obligation to pay rent, which may be excused or nullified because the other party failed to perform

Sunday, September 14, 2014

More details revealed in Las Vegas HOA fraud case

What this massive fraud reveals is how vulnerable HOAs and condo associations are to being taken over or manipulated into becoming ATMs for fraudsters. Insurance companies were taken to the cleaners. I haven't even tried to list all the embezzlement cases. I have a notebook three inches thick of press clippings reporting them. Then there were the developer and converter frauds.  Here in Chicago at least 200 fraudulent condo conversions shoveled millions of dollars from banks into the pockets of crooks, cost investors a fortune, and victimized  hundreds of tenants who were paying rent to somebody who didn't own the building.  

And all that criminality is in addition to the non-criminal practices of underfunding reserves that  exposes owners to enormous risk, and vendors charging ridiculous fees for doing nothing and locking  associations into terrible adhesion contracts.

Why is it so hard to put all this together and reach the obvious conclusion that the money side of CIDs is not working?  The media have a frame for reporting on the social control conflicts that happen in associations--flags, pets, political signs, religious symbols--but they can't seem to see the pattern when it comes to the enormous financial problems that leave millions of Americans vulnerable to major economic loss.

It makes no sense to put untrained, uncompensated, and often unqualified volunteers in charge of billions of dollars, based on a bogus ideology of privatism.

Wednesday, September 10, 2014

DURHAM: City threatens to cut off water to apartment complex - WNCN: News, Weather

DURHAM: City threatens to cut off water to apartment complex - WNCN: News, Weather: The president of the homeowners group, Greg Jones, said he learned of the possible disconnection from the city via email. From there, he said, he spoke with the tenants association, which prompted the letter left on doors.

Jones said Bentwood Park started getting behind on payments in December because some of the units' 90 different owners began falling behind in paying their dues, in particular one who owns multiple units.

"I have two small kids in here that go to school every day, and we need water to bathe and to drink," said renter Latoyia Edwards. "They need to find the man that created this problem and make him pay for it, or somebody just has to deal with it."


Conflicts of interest abound when the HOA becomes a super landlord but doesn't pay the water bill.

Thursday, September 04, 2014

Condo president buys car, pays himself, with association funds
"Ed Ryan, a long-time condominium president in Fort Lauderdale, has been violating the law for years by paying himself tens of thousands of dollars -- and even buying himself a car -- out of neighborhood funds, according to state records. In September, the Department of Business and Professional Regulation alleged Ryan was illegally managing the association without a license and issued a cease and desist order to stop him from paying himself after he'd received $45,000 in the first nine months of the year alone. But Ryan, president of Georgian Court North Apartments, hasn't missed a beat, admitting to Local 10 News that he's still paying himself. "
One of the cool parts about volunteer private government:  having access to all that money!

Thursday, August 28, 2014

Bill addresses watering in homeowner associations - SFGate

Bill addresses watering in homeowner associations - SFGate: SACRAMENTO, Calif. (AP) — Homeowner associations would be prohibited from requiring residents to pressure-wash their driveways or other areas when droughts are declared locally or across California, under a bill sent to Gov. Jerry Brown.

Republican Sen. Jim Nielsen of Gerber says some homeowners are caught in bind. They face fines under state regulations that prohibit washing driveways, as well as fines from their associations if they don't follow its rules.

Government already regulates many private sector industries. The community association industry fine machine is now getting a greater degree of regulation.