Tracking Arizona homeowners association foreclosures
The Arizona Republic is seriously going after the HOA foreclosure situation. I've been commenting on the issue for just about forever, and so have a lot of other people. The problem is that CIDs typically have exactly one source of income, which is assessments. The volunteer owner-directors typically don't have enough training and experience to do their jobs, so they tend to rely on property managers and lawyers. In most areas where there are many CIDs, here are some law firms that function basically as HOA/condo assessment collection agencies. Their bread and butter is an automated business of sending demand letters, slapping liens on people's homes, doing foreclosures (often nonjudicial), and slapping attorney fees on every action they take. It is all collectable, all secured by the lien, and that means that the owner can't extinguish the lien unless s/he pays the attorney fees. So you get situations such as owing $1000 in unpaid assessments and $12,000 in attorney fees. The final piece of the problem is that in virtually every state these lawyers and their foreclosure mills are not regulated in any meaningful way. So there are abuses. Now, I would be the first to say that CIDs need to collect assessments, and they need to be able to foreclose at some point--for the assessments. That is a serious situation. They will go under if they can't collect, and before they go under the burden of paying for delinquent owners fall on the other owners, which can drive them into delinquency, too. So associations need to be able to collect their assessments in a timely manner. But what about all the extra charges and attorney fees? Here, there has to be some oversight and some proportionality, so that people don't lose their homes not because they can't pay their association, but because they can't pay the padded bill of the association's lawyer. And no, I don't begrudge these lawyers their living, because they have to pay the rent, too. But there are many documented examples of abuses, and state legislatures need to set some standards.
6 comments:
> Evan McKenzie wrote... "Now, I would be the first to say that CIDs ... need to be able to foreclose at some point--for the assessments."
No.
> Evan McKenzie wrote... "And no, I don't begrudge these lawyers their living"
I do.
> Evan McKenzie wrote… “The volunteer owner-directors typically don't have enough training”
Providing "training" and "education" isn’t going to fix the fundamental problems with H.O.A.-burdened housing, which have been well-documented on this blog for over a decade.
who could "begrudge" HOA attorneys a living?
1. Get HOAs out of the business of "enforcing restrictions". More often than not this is the pretext under which HOA attorneys and management companies entangle assessments with attorney fees and management company windfall fees ("late fees").
2. Make the HOA pay its attorney - no contingency fee and no "deferred payment" where the money comes from the homeowner. This should force down those attorney fees and generally start reducing the bad practices. The suit are overwhelmingly launched by the HOAs - not the homeowners. Why? Because the agents of the HOA are spending other people's money whereas homeowners have to bear their own costs.
3. CIDs do not always 'have' to collect. There is some myth that CIDs must maintain all assets they have into perpetuity. A real business and even real governments, however, close amenities and dispose of assets. CIDs should operate like any other business in this regard.
IC_deLight said… “Because the agents of the HOA are spending other people's money whereas homeowners have to bear their own costs”
The directors and officers of the H.O.A. corporation are also spending other people’s money. Additionally, those other people -- the mandatory members of the H.O.A. corporation -- are often forced to pay for Directors & Officers (D&O) insurance in order to indemnify their tormentors.
And the costs borne by the homeowners aren’t just financial.
“Our legal system invites lawyers to act like bullies. Only in America can I sue you for dubious reasons, force to you spend thousands of dollars on lawyers (not to mention the psychic costs — the anxiety and lost sleep that the lawsuit create), and when a judge rules that my claim is bunk, I don’t even have to say ‘sorry’. I can blithely move on to sue someone else.” (John Stossel. “Bullied by Lawyers”. ABC 20/20. April 09, 2008. emphasis added).
Corporations, on the other hand — and homeowner associations are corporations — can't suffer the “psychic costs” that individual homeowners do.
IC_deLight said... "Make the HOA pay its attorney - no contingency fee and no 'deferred payment' where the money comes from the homeowner."
And how exactly would that be enforced?
In the past, I've been able to uncover fraudulent attorney fees -- down to the penny -- by noting discrepancies in the account statement generated by the H.O.A corporation, which included both the amount of attorney fees and when those fees were billed to my account, and comparing them to Motions and Affidavits for Attorney Fees files with the Court.
And I've also been able to prove that thousands of dollars in attorney fees were repeatedly billed to my account in direct violation of a judge's Court Orders. Yes, plural. There were two Court Orders over the course of six years by the same judge explicitly prohibiting attorney fees being billed to my account. The judge didn't care, but that's another story....
The H.O.A corporation "fixed" that problem. And by "fixed that problem", I don't mean eliminating the fraudulent and illegal attorney fees. Instead, they now put a disclaimer in their monthly account statement sent to me stating something like "If your account is in collections, this statement may not include attorney fees. Contact the collections attorneys for the total and accurate amount owed." It's a gigantic loophole that allows them to make up any amount owed after-the-fact as the circumstances require, in order to prevent anyone from ever doing again what I did.
Several years later, the injustice and insanity and Kafkaesque nature of it all still keeps me up some nights. But that, too, is another story . . .
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