Wednesday, October 28, 2015

New Jersey: More accountability for HOAs?

"More than 1 million New Jersey residents live in communities with homeowners associations. The top Republican in the state Senate said people pay hard-earned money in dues to these associations, and they deserve some transparency. Senate Republican Leader Tom Kean (R-Westfield) said he is pushing to expand and update the “Planned Real Estate Development Full Disclosure Act,” which hasn’t been changed since 1993.

“This legislation focuses on accountability as well as transparency,” Kean said. “It’s time to update a 22-year-old law.”
Kean has introduced the “Association Homeowners’ Protection Act of 2015″ (S3235). The measure would require:

  • Homeowners associations to provide a copy of homeowners’ association insurance policies, which are needed to start personal home insurance claims processes. The association member would have to request the copy and it would have to be sent via email within 24 hours, or hard copy within 48 hours.
  • Homeowners associations to offer a 24-hour emergency phone number for members.
  • Homeowners associations to provide information including contact numbers for board members, as well as the most recent budget and all insurance information.

“That should be a transparent flow of information, so people have access to how their money is being spent,” Kean said. “The over 1 million New Jersey residents who are part of these associations pay hundreds, if not thousands, of dollars every year to be part of these associations. It’s simple common sense that they should have access to timely information.”


IC_deLight said...

1. More liability for management companies
2. Require the HOA to own the insurance policy; prohibit ownership of the policy by the management company or its affiliates
3. Prohibit/void any provision that purports to require the HOA to indemnify or insure the management company
4. Eliminate the management company control fraud problem where the management company intercepts all communications to the board, owns the insurance policy, owns the bank account, delivers only financial reports (not bank statements) to HOA, etc.
5. Void transfer fees including those imposed by covenant as well as those imposed by a management company
6. Recognize fining is unconstitutional
7. Eliminate non-judicial foreclosure by HOAs

robert @ colorado hoa . com said...

If I was going to legislate something called the "Homeowners’ Protection Act", it would look something like this, although I'm going to have to steal some of IC's ideas for future versions of this list :

1. Prohibit by law H.O.A. corporations from issuing fines to home owners. * The ability to fine represents a gross and unconscionable imbalance of power, especially since that remedy is not available to the home owner when the H.O.A. corporation is in breach of contract.

2. Prohibit by law H.O.A. corporations from enforcing restrictive convenants. * Individual home owners would still be free to sue their neighbors for violating the covenants, but they probably won't do so unless it's really damn important.

3. Prohibit by law foreclosure by H.O.A. corporations. * The ability to foreclose represents a gross and unconscionable imbalance of power, in addition to cruel and unusual punishment.

4. Prohibit by law H.O.A. corporations from declaring fines and fees -- including attorney fees and late fees -- to be "unpaid assessments". * By classifying disputed fines and fees as "unpaid assessments", H.O.A. corporations are artificially inflating the rate of delinquent assessments, making it harder for a potential buyer to get a loan from a lender -- and therefore making it harder for an existing home owner to sell. This is the exact opposite of "protecting property values".

5. Require by law H.O.A. corporations to produce and make publicly available a corporate prospectus on a regular basis. * This would allow current owners/investors and potential owners/investors to make better and informed decisions. This should also eliminate many complaints about the lack of transparency and disclosure that exists in the current H.O.A. regime.

6. Prohibit or void by law contracts which require mandatory membership in an H.O.A. corporation as a condition of home ownership -- i.e., allow home owners to opt-out of their H.O.A. corporation without having to give up ownership of their home. * This is not a radical idea, since it is stolen directly from the Republican Party position on "right to work", which prohibits mandatory membership in a labor union as a condition of employment. "Right to work" is the law in 25 states, and Republicans keep trying to enact it at the federal level. Allowing home owners to opt-out of the H.O.A. corporation is the only way to incentivize the corporation to treat the home owner as a customer. Ironically, the biggest opponents of allowing home owners to opt-out of H.O.A. corporations are (1) pro-"right to work" Republicans and (2) H.O.A. reform activists who think membership in an H.O.A. corporation should be voluntary. People are strange.

Obviously, I'd like to see all 6 of these proposals become public policy, but any combination of the above should go a long way toward eliminating the perverse incentives and moral hazards inherent in the current H.O.A. regime.