Friday, December 04, 2009

Why Won't They Serve?

Why Won't They Serve?: "It seems that I am increasingly a prophet of doom. But really, if owners are unwilling to govern themselves then condominiums are merely apartments, and if they are unwilling to make the contributions that must be made for a community association to survive, then they must be willing to surrender their ownership interests and be renters. This is a housing crisis as serious as the present economic one, and it may be worse, because the crisis in community association government is not likely to end in a year or two."
A missive from attorney Tyler Berding--thanks to Fred Pilot for flagging it.


Fred Pilot said...

Berding correctly points out the conflicts between expectations and reality that make condos as organized in their current form unworkable and unsustainable.

While nominally based on a home ownership model, condos tend to be regarded as rental apartments both by occupants who see the condo association as a landlord and by absentee owners who see them as sources of rental income.

Beth said...

This is very true. I've talked to many people who choose condos because they "don't want to have to worry" about property maintenance. In fact, condos are marketed that way. Really, they should worry more because their property maintenance depends on their neighbors taking an interest and making good stewardship decisions.

Anonymous said...

Since this was written by an H.O.A. attorney, it can be summed up as follows:

Everything is the fault of the individual home owners.

(That about sums it up. But for extra effect, we can add the following):

The board, property management company, and H.O.A. attorneys are blameless angels.

The board members and property management company are doing a wonderful job, but those damn home owners are just so ungrateful.

Therefore, our clients need more power over the home owners.

We will continue to serve these whiny child-like home owners, even though they our unworthy of the limitless benevolence displayed by the board, management company, and attorneys.

Anonymous said...

The "crises" in community corporation government existed long before the present housing crises. The victims of the crises have been the homeowners - not the vendors (i.e., attorneys, management companies, etc.) of the corporation.

Although the article was directed towards condominiums, many of the issues likewise apply to SFH housing. Although industry marketing propaganda claims that owners "chose" this nothing could be further from the truth. People don't like spending large sums of money to be owners only to have the indignity of being treated as renters in their own property. Even when they are not owners, however, residents absolutely despise the intrusion of the HOA corporation into their defensible space. That intrusion is the seed for the litigation that the HOA vendors thrive on. HOA burdened property cannot compare to property that is not burdened by perpetual liens, litigation, lis pendens due to litigation with others, predatory management companies and HOA attorneys, or the constant spying and anonymous threats that define and will eventually be the demise of HOA housing. The demise of this lucrative defective product is what the vendors fear.

Anonymous said...

1. Marginalize home owners.

2. Disenfranchise home owners.

3. Take any other step necessary to create home owner apathy.

4. Blame home owners for apathy.

5. ???

6. Profit!

Anonymous said...

I am in agreement with all those who stated that the problems that Mr. Berding mentioned apply to ALL common interest developments.

It is the servitude burdened ownership model of the HOA concept that will be the downfall of this type of housing and is the source of the problems.

I like to refer to ownership in a CID as "homeownership in name only."
In essence, the owner of such property is nothing more than a glorified tenant. As a tenant in an apartment complex, I can tell you the treatment that I get from my landlord is far better than most "owners" get from these HOAs.

Anonymous said...

As the true cost of repair is realized, and the cash reserved for it continues to pale in comparison, the growing shortfall will equal the increasing loss in value of each owner's interest. When the maintenance deferred is so expensive that it can never be done, the project will be adrift, obsolete and valueless, and all equity will be lost because no unit can be sold. At this point it will not matter in the least who is on the board of directors, what the CCRs say, or who the vendors are.

Anonymous said...

> As a tenant in an apartment complex,
> I can tell you the treatment that I get
> from my landlord is far better than most
> "owners" get from these HOAs.

It is in the landlord's interest to keep the tenant as a customer. If the apartment is vacant, the landlord is not generating any revenue.

HOAs have no incentive to keep homeowners as "customers."

1. Unlike a renter, an owner simply cannot vacate a property -- especially in the current housing market. But regardless of the market, here is always a mortgage and/or equity to consider. Neither can simply be given up.

2. The HOA property will always have assessments levied against it, regardless of who the actual owner is -- even if its the mortgage company. Therefore, the HOA corporations have no interest in treating any particular owner as a customer.

3. As has been pointed out by other commentators on this web site, it may be in the interests of the HOA's management company and attorneys -- often the real power behind the curtain -- to create strife and conflict.

Free marketeers/libertarians/conservatives fail to understand this about HOAs, and thus continue to cling to their failed theories about privatized governments.

Anonymous said...

> The HOA property will always have assessments levied against it,
> regardless of who the actual owner is -- even if its the mortgage company.

As if to demonstrate that point, see . HOA seizes a property, but wants -- and gets -- somebody else to take responsibility for the assessments.

Miami Beach Commissioner Jerry Libbin Applauds 'Reverse Foreclosure' Ruling, Renews Call for State Lawmakers to Enact Comprehensive Foreclosure Reforms

MIAMI BEACH, Fla., Jan 27, 2010 /PRNewswire via COMTEX/ ---- Miami Beach City Commissioner Jerry Libbin ( today applauded the "reverse foreclosure" ruling by a Miami-Dade Circuit judge that forced a bank to take title from a homeowner association (HOA) of a property that had not been paying its assessments.

The HOA, which had foreclosed on the house but couldn't sell it because of the bank's lien, waived its right to the property. Now the bank, HSBC Bank USA, is responsible for paying future HOA fees and assessments.

Anonymous Communist said...

The current HOA model, as it exists in America today, in unsustainable.

That is Mr. Berding's reasoning.

And I think that many of this blog's readers would agree.

After thinking about this for the past 3 months, I have come up with an alternative system, applicable to both condos and single family housing HOAs. This is a rough-draft brainstorm, details need to be worked out, and critics need to point out any faults of this idea.

Under the current HOA model, people are responsible for the purchase of homes, but never truly own them, even if the mortgage is paid off. The homes are always collateral to the HOA corporation. This creates all sorts of perverse incentives, which readers of this blog are familiar with.

Since HOAs are corporations, anyone moving into an HOA community should instead purchase shares of the HOA corporation, which allows them to live in a home. The title of home would be in the HOA corporation's name, not the individual.

There would be no illusion about who actually owns the property. As Mr. Berding said, homeowners "must be willing to surrender their ownership interests and be renters."

The difference in my model, though, is that when somebody moves out of an HOA community, they don't receive the equity of their individual home. Instead, they receive the cash value of their shares, which would be based on the overall property value of the HOA community, not just their home.

If property values go up, the value of everybody's shares increase. If property values go down, the values of everybody's shares decrease.

This provides a quantifiable measure of how well the HOA corporation is protecting property values. And possibly less incentive (although not zero incentive) for a person in position of power, say a board member, to abuse the system or other homeowners for personal benefit.

It's a small step from "Common Interest Communities" to "Communist Interest Communities", or if you prefer "Common Interest Communism." But if everybody gives according to his ability, and takes only according to his need, HOAs can maintain property and aesthetic values while ensuring that all homeowners are equal.

This is in contrast to the current Animal Farm model, where all homeowners are equal, but some homeowners are more equal than others.

Homowners in HOAs unite! You have nothing to lose but your chains.