By Deborah Goonan, Independent American Communities blog http://independentamericancommunities.com/
In a recent discussion forum on rules regarding display of flags in Common Interest Communities (aka Homeowners Associations), there was some vigorous back and forth about the fact that Association-controlled communities are controlled primarily by the CC&Rs (or Declaration of Condominium) contract, rather than Constitutional law.
The classic Association Governance industry argument is that the governing documents are contractual agreements to which property owners “agree,” and that the Constitution forbids interference with, or “impairment,” of HOA contracts.
One Community Association Manager’s comment on the thread reads as follows:
“To call this a patriotic issue is fatuous at best. The number of ‘patriotic’ issues can bury an HOA or Condo with beliefs of how to showcase them. The ‘freedom’ is to make the changes in an organized fashion. If your neighbors agree, then change the docs. If not, agree to conform or sell and move on. No one is forcing you to live where you, and only you chose to live…”
Let’s unravel several untrue premises and faulty assumptions.
First of all, a buyer, or someone otherwise acquiring title to an Association-controlled property, has absolutely no control over the contents of this “contract” to which one supposedly agrees without full disclosure. It’s not as though a home buyer is instructed to sit down with an attorney prior to closing, reading and initialing each cumbersome page of Declarations of Covenants, Conditions, and Restrictions or Declaration of Condominium, with an opportunity to ask for clarification and to negotiate the terms of the agreement with the Developer or Owner-Controlled Association.
Even if full disclosure were provided in plain language, those Declarations are subject to change significantly after purchase or transfer of title. On the day you move in, the pool is open all weekend, you can park your Ford F-150 in the driveway, and your 55 pound dog is acceptable. Next month or next year, the Board could change the rules, sometimes without a direct vote of members, depending upon the latitude spelled out in the governing documents. Or there might be a membership vote at the next annual meeting. All of a sudden, the pool is closed on Sundays, you are expected to park your truck in the cramped garage, and you must get rid of your pet unless he loses 15 pounds.
…a buyer, or someone otherwise acquiring title to an Association-controlled property, has absolutely no control over the contents of this “contract” to which one supposedly agrees without full disclosure.
Furthermore, the entire process of amending the governing documents “contract” is most often undemocratic.
The only title holders that have meaningful power to amend its terms are the majority shareholders, usually represented by the Developer, affiliated investors, or perhaps a voting bloc represented by a handful of persons who either own multiple units or hold most of the proxies. These same individuals often have the power to unilaterally amend By-Laws without a vote of membership. The truth is, a physical majority of people (homeowners) might not hold a majority of corporate voting interests, resulting in Minority Rule.
Even if that’s not the case – in the rare instance that each member owns an equal proportion of property – the homeowner must be prepared to conform to Majority Rule, subject to change at any time in the future, regardless of the resulting inconvenience or hardship.
Who, in their right mind, would agree to these terms, if given the choice?
If a buyer were writing a contract to purchase a home in a homeowners or condominium association, what would it look like?
- If HOA governing documents were valid, consumer-friendly contractual agreements, then title holders would be required to agree to any change in the terms of the agreement.
- Likewise, property owners would demand the right to withhold payment of assessments for non-delivery of services or non-performance of HOA duties.
- The HOA would not be permitted to use title holder funds to settle disputes with unit-owners in court.
- The HOA would not have the unilateral power to fine, where the homeowner is presumed guilty with the burden of proving innocence.
- Nor would title holders agree to the HOA’s right to foreclose upon private property to collect its lien on relatively small debts – often inflated by hefty legal and collection costs.
On the issue of “choice:” If one wants to own a home in many US housing markets, one is forced to hold one’s nose and take the bitter HOA pill.
In reality, the only “choice” is to simply walk away from the closing table or refuse to buy into an association governance. But when 80% of new construction is burdened by Association control, then for millions of buyers in the fastest-growing real estate markets, choice is merely an illusion.