I've been away from this blog for quite a while because events in my life made it hard for me to focus on it. I have a lot to report on and I'll try to get to it over the next week or so.
First up: the media has reported extensively on the massive flooding in South Carolina. One angle hasn't been reported much, even though it is at the heart of the problem. South Carolina is one of these states where they brag about how low their taxes are and how useless government is. But the reason the flooding is so bad is...privatization. They keep taxes low by not spending much public money on maintaining infrastructure like, oh...dams, for instance. Instead they trust developers to build them, and homeowners' associations to maintain them. And surprise, surprise! Many HOAs are doing a perfectly terrible job of maintaining the earthen dams that keep water from wrecking other people's neighborhoods.
http://www.thestate.com/news/local/article38043186.html
5 comments:
So glad you are back!!
“HOAs are doing a perfectly terrible job of maintaining the earthen dams that keep water from wrecking other people's neighborhoods”
Which of course begs the obvious question. Who is financially responsible for the damage caused by the failure to maintain the dams? The mandatory members of the negligent H.O.A. corporation are. As a corporation, an H.O.A. is a defective product. This has been discussed in detail before on this blog, at
privatopia.blogspot.com/2004/03/blog-post.html
The Le Parc case and the Oak Park Calabasas case in California are great examples of this, where association boards incurred multi-million dollar liabilities (in the form of contract and tort judgments) in disputes with contractors over major repairs, and then the HOA corporation files for bankruptcy because they can't pay. The bankruptcy judges said that the creditors can proceed directly against the assets of the individual owners for the liabilities of the corporation.
privatopia.blogspot.com/2008/12/richard-white-associations-should-allow.html
Usually the bankruptcy courts will not accept an association bankruptcy. Their feeling is that all the board needs to do is raise the fees...
If the association does go bankrupt the owners are still on the hook for the debt.
privatopia.blogspot.com/2010/03/bankruptcy-wont-work.html
But bankruptcies don’t typically occur with community associations for a big legal reason ― owners are essentially liable for the association’s debts. “What?” you say. Community associations are corporations, and aren’t shareholders protected from corporate obligations? Isn’t that the whole point of a corporation?
Yes, most community associations are corporations ― non profit mutual benefit corporations. But there is a major difference between a community association and the typical business corporation. With a typical corporation the investors’ (shareholders’) liability is limited to the amount of their individual investment. Community associations usually have something more ― lien rights to an individual owner’s separate interest, either a lot or a unit, and the personal obligation of an individual owner for his or her share of assessments...
But, where the value of all of the real estate interests within the community can be accessed through the lien process to pay assessments, where assessments are backed by the personal assets of all owners, and where the association has a statutory obligation to assess, the property and personal assets of the owners essentially become the “assets of the company.” Collectively, these are likely to be more than adequate to pay any creditors.
privatopia.blogspot.com/2012/03/hoa-could-be-sued-in-trayvon-martin.html
the residents could be responsible for satisfying any judgment against the association...
That would leave the association potentially facing an uninsured judgment that could involve a great deal of money. Who would pay that judgment? Some readers of this blog know that I have been writing about this for some time. The answer is, "the unit owners"...
try and find that responsibility in your CC&Rs. We constantly hear from the industry and the courts that you are stuck with the terms of the governing documents because you should have read and understood them...here is an obligation that nobody knows about: responsibility for uninsured debts and judgments of the association.
privatopia.blogspot.com/2012/04/trayvon-martin-homeowners-could-pay-in.html
Welcome back, Evan! Great comments.
Here's my take on this: you can't get blood from a stone. Most SC homeowners lack the cash reserves and home equity to pay for liabilities to others for flood damages caused by their poorly maintained dams. And homeowners can argue that the DHEC (regulatory agency in charge of inspecting dams) has not been doing ITS job well --- owners are volunteers without engineering knowledge. Without administrative support, without the resources for each HOA to hire their own engineer to evaluate a dam that belongs to the HOA, how can the Association and its owners be held financially responsible?
If millions of dollars of liability ends up dumped on HOA homeowners, will there be mass liens and foreclosures in an attempt to collect? Will every owner have their wages garnished -- assuming they are still employed and not retired?
Unless I am missing something, according to the report, the responsiblity for dams is shared. The HOA pays, but DHEC - the state agency - is supposed to provide oversight and direction.
And I agree, Evan, that it is unwise to attempt to parse out maintenance of individual components of strom water drainage and flood control (dams, in this case) to separate HOAs, when, in fact, water freely flows downstream and eventually returns to the watershed -- affecting the general public, and not just the private little HOA bubble where that breached dam happens to be located.
http://independentamericancommunities.com/2015/10/11/poor-oversight-maintenance-of-hoa-dams-result-in-sc-flooding/
> “you can't get blood from a stone”
The H.O.A. industry is extremely effective at bleeding home owners. And look up the stories about "debtor's prison" on this blog, how debt is repeatedly piled upon poor people by local governments in the form of repeated fines.
> “If millions of dollars of liability ends up dumped on HOA homeowners, will there be mass liens and foreclosures in an attempt to collect?”
Why not? As Tyler Berding said:
“where the value of all of the real estate interests within the community can be accessed through the lien process to pay assessments, where assessments are backed by the personal assets of all owners, and where the association has a statutory obligation to assess, the property and personal assets of the owners essentially become the ‘assets of the company.’ Collectively, these are likely to be more than adequate to pay any creditors.”
Is the plaintiff going to say, “We suffered $D in damages. But the defendant only has X% of $D. Oh well, there’s no point suing, because getting something (X% of $D) is worse than getting nothing ($0)”? And if the value of the real estate interests governed by the negligent H.O.A. corporation is not enough to cover the costs of any judgments, then the creditors, through the H.O.A. corporation, will simply follow the debtors — the individual home owners — to the ends of the earth to collect every last penny that can be taken. One H.O.A. law firm calls it “Finding the Gold”:
Collecting assessments from delinquent owners is a little bit like mining for gold. First you have to find the gold.
. . . We have to locate attachable assets to satisfy the judgment. Generally attachable assets come in the form of a bank account or an employer. But there can be other attachable and valuable assets. Some of these include vehicles, boats, recreational vehicles, planes and motorcycles (only if there is no loan against them), valuable collections such as rare comic books, businesses, other real property, significant jewelry. Finding all of these assets isn’t as easy as it sounds. That’s were managers and board members come in. Much like prospectors, you can help find the gold by conveying the following information to us:
1. Any phone numbers of record for owners (work, home or cell);
2. Employment information;
3. Copies of cancelled checks from last payment made by the owner;
4. Description of all vehicles, boats, RVs, motorcycles, etc. seen at home (with license plate numbers if available);
5. Any information you know about the owners such as they inherited a lot of money recently, they have another house in Aspen, or they have a computer consulting business on the side.
All of this information can be used to find the gold and use it to satisfy the debt owed to your association.
Or use it to satisfy the debt owed to the H.O.A. corporation’s creditors.
The bottom line, of course, is that foreclosures do not increase property tax revenues for the local government. And they have a larger economic impact ( a negative one) than keeping owners in their homes and working out a plan to make necessary safety repairs.
The obvious cheapest and easiest option for some communities will be to simply keep the lake drained for good. Having lived in PA for many years, I witnessed as this happened in a nearby lake community. The dam was deemed in poor condition, and property and lives downstream were at risk. After going to court and appeal, the township prevailed. The private community had to either repair the dam with money they didn't have, or permanently breach the dam and drain the lake. The lake was drained. End of story.
Post a Comment