For at least the last dozen years or so, there have been two camps of displeased Privatopians: Those who want to take on the community association industry and try to reform HOAs to make them more democratic and more accountable to those owning property within their jurisdiction. And those who see HOAs as essentially FUBAR with abolition the only way to deal with them.
The latter group will undoubtedly be pleased to learn proposed amendments to an Arizona bill, S.B. 1326 this week would ban new detached unit CIDs going forward. (Condos are not within the scope of the bill). This is a very important development because to my knowledge, it is the first piece of state legislation that would bar future formation of CIDs with mandatory membership HOAs -- and the restrictive covenants upon which they are based.
This is also an important development because it could be a harbinger of an emerging realization in Sunbelt states like Arizona -- where practically all new freestanding homes built of the past 15-20 years are within CIDs with mandatory HOAs -- that privatizing local government may be great in theory but suffers from inherent defects in the real world.
The chances of S.B. 1326 moving forward are slim given that it would likely face a solid wall of opposition from residential developers, local governments and of course the so-called "community association" industry. But the fact that legislation that would effectively close the door on the future expansion of Privatopia in Arizona is even being considered shows "the times they are a changin."
Thanks to Pat Haruff for the link.
6 comments:
I believe that 20 years from now, we will be shaking our heads at the outrageous abuses that routinely and predictably accompanied the fact of homeowners being forced into a subordinate role to unconstrained private governance.
HOA living will be as dead then as "separate but equal" living is today.
Finally “a voice of reason” acts to correct a past calamitous public policy.
History long ago recognized the disastrous consequences of, when power is concentrated into just a few people such as in the case of housing association Board governance.
Planned communities are nothing new, Washington DC. , Savanna GA and CIDs are all examples but what makes the difference is how their governed. Regretfully for consumers when CID housing was created it was never intended to benefit its members because they never had and still don’t have a seat at the creation table.
Furthermore CID’s when under housing association control becomes a “corporate product” plain and simple and therefore should not be mandated through any public policy. Since the public has no voice or vote in the CID’s charter creation because they are tightly controlled by those who depend on this type of housing for their livelihood and that needs to change.
Arizona’s SB1326 represents for the first time a State legislature affirming that “the buck stops here” after years of being asked to correct privatized housings endless irresolvable issues. Unfortunately unconscionable public policy has allowed others who don’t live in the CID to control through their exclusive declarations the way property owners must live and manage their castles and portions of their CID and substantial change is long overdue.
What's Next ? Do we continue down this mandated privatized housing path that brings with it privatized justice and contract governance despite its historically understood shortcomings that produces an endless Pandora's box of issues. Or do we return to what we understand is better (not perfect) or do we seek/invent something new ?
Finally “a voice of reason” acts to correct a past calamitous public policy.
History long ago recognized the disastrous consequences of, when power is concentrated into just a few people such as in the case of housing association Board governance.
Planned communities are nothing new, Washington DC. , Savanna GA and CIDs are all examples but what makes the difference is how their governed. Regretfully for consumers when CID housing was created it was never intended to benefit its members because they never had and still don’t have a seat at the creation table.
Furthermore CID’s when under housing association control becomes a “corporate product” plain and simple and therefore should not be mandated through any public policy. Since the public has no voice or vote in the CID’s charter creation because they are tightly controlled by those who depend on this type of housing for their livelihood and that needs to change.
Arizona’s SB1326 represents for the first time a State legislature affirming that “the buck stops here” after years of being asked to correct privatized housings endless irresolvable issues. Unfortunately unconscionable public policy has allowed others who don’t live in the CID to control through their exclusive declarations the way property owners must live and manage their castles and portions of their CID and substantial change is long overdue.
What's Next ? Do we continue down this mandated privatized housing path that brings with it privatized justice and contract governance despite its historically understood shortcomings that produces an endless Pandora's box of issues. Or do we return to what we understand is better (not perfect) or do we seek/invent something new ?
Robert Metcalf, a board member of his HOA and an advocate of abolishing HOAs, wrote that "this is as much a battle for civil rights as what occurred in the 1950s and 1960s" in his "Position Statement On Common Interest Developments" (2007).
The paper is available at www.texashoareform.org/Documents/PositionStatementOnCommonInterestDevelopments.pdf
Ms. Bartholomew interviewed Mr. Metcalf back in July 2007. That interview can be heard at onthecommons.net/2007/07/09/on-the-commons-with-robert-metcalf.aspx
As far as HOA abolition, HOAs are not necessary for single family housing. As "texan99" pointed out in a comment to Megan MCardle's "No Such Thing As A Simple Mortgage", "Restrictive covenants are one thing, and HOAs are another. In order to enforce a neighborhood's restrictive covenants, it is NOT necessary to have an HOA."
The existence of an HOA privatized corporate government makes it far too easy to sue homeowners for trivial violations, because all of the homeowners -- including the defendant -- are required to pay the plaintiff's legal expenses, with collection enforced by liens and threats of foreclosure. The HOA system encourages costly litigation for the most frivolous of reasons, with or without the approval of any homeowner; ie, the property management companies and HOA law firms who profit from such lawsuits can initiate them, and there is no risk to them for doing so. HOAs are a system that have risk distortions, moral hazards, and incredibly perverse incentives built into it. The profit motive ensures that homeowners governed by the current HOA structure will be abused; it can be no other way.
In the absence of a mandatory-membership HOA union, where membership in the union is a condition of home ownership, a homeowner, or a group of homeowners, can still litigate against another homeowner for violating the deed restrictions and covenants. However, the plaintiff homeowners would be required to pay the up-front legal expenses out of their own pockets, or collect voluntary contributions form other homeowners. The defendant homeowner would not be in the morally indefensible and financially burdensome position of having his own money used against him by the plaintiffs. With such disincentives to sue for trivial amounts and reason, offended homeowners "probably won't sue if it's not pretty important."
As "texan99" wrote:
My 50-year-old non-HOA neighborhood in Harris County had mild deed restrictions. The place didn't look like a manicured showplace with totally coordinated everything, but we kept the major problems under control. No management company, no law firm, no out-of-control Inspectors General on the board, no foreclosures, and no bitter divisions among neighbors. Every few years someone tried to convert the neighborhood to an HOA, but they always got voted down after a public campaign. It takes healthy local grassroots political involvement, which has the added advantage of strengthening the community for other purposes.
See also the comment by Anonymous @April 4, 2010 8:42:00 AM CDT on this blog's entry "Lawyer: Be Aggressive With Your Foreclosure Actions":
In distinguishing condos from HOAs:
With respect to the remark that "the other owners end up paying for the ones who don't" - there is an inherent and unfounded presumption that the HOA must exist in the first place and that these "costs" simply must be allowed to accrue.
Many of these costs in an HOA often occur solely as a result of the existence of the HOA in the first place. D&O policies, other HOA insurance policies, HOA employees, HOA compensation to directors and officers, the litigation provoked by attorneys specializing in HOAs where the HOA is a party, etc. If there were no HOA these costs simply would not exist.
As to other costs there are ways of reducing, controlling, or eliminating them. For example, the HOA can dispose of its property...
I reject the notion that these costs are unavoidable. If you eliminate the HOA or its "amenities" (forced liabilities) then you eliminate the costs.
I am a member of a HOA; in fact, I have been and am a member of the Association's BOD for several years. I have serious problems with HOAs though. First, I don't understand how one owner in the chain of possession of a piece of property can place conditions on the use of that property that last forever. That is the case related to planned communities that have associated CC&Rs and HOAs. Such an ability singles out one owner and gives that owner supreme consideration over all subsequent owners, allowing that owner to essentially retain part ownership of the property. At worst, it would seem that some limitation on the length of time the conditions could be in effect would be appropriate.
Arizona law requires the purchaser of property in an area with a HOA to agree that, as a condition of purchase, the purchaser has a contract with a third party that has no financial interest in the property. I can not find any other purchase for which the State requires such a contract. That is like requiring the purchaser of a car to have a contract with a particular third party maintenance company. I know that some consider the requirement to be for the greater good, but it actually is an infringement on the right of ownership of property. What ever happened to the concept that a man's home is his castle? The requirement to belong should be a choice not conditioned on the purchase, and choosing to say no to Association membership should not be a disqualification to the purchase of the property. I don't know how the amendments to SB 1326 went, but correcting problems for future property purchasers should also apply to past purchases by allowing them to reconsider their State-imposed contract.
Our HOA does not even seem to meet the definition of an HOA under Title 33. Under that Title, an HOA must both own AND operate community property. Our HOA only owns undeveloped property that requires mowing once a year. Yet, the apparent requirement to belong means that property owners must pay assessments and be subject to the CC&Rs and rules of the sociopaths that seek positions on HOA BODs. At least the law needs to be modified to clearly indicate that a HOA must meet the terms of the Title 33 definition, not just be called an HOA.
If the State is going to impose HOAs on anyone, that imposition should be uniform and consistent. All communities should therefore have HOAs and there should be a basic set of CC&Rs that apply uniformly to all with changes only allowed for unique differences among the communities. Otherwise the State has no business even supporting in law quasi-governmental associations.
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