If HOAs are businesses, then should they be so regulated?

CAI continues its promotion that HOAs are communities,
Community Associations Institute (CAI) is a national organization dedicated to fostering vibrant, competent, harmonious community associations. For more than 30 years, CAI has been the leader in providing education and resources to the volunteer homeowners who govern community associations and the professionals who support them.
(Note that this quote does not even hint at a homeowner buying a business,  but entering into a  “superior” community.  CAI “About Us” webpage).
Yet, CAI practitioner-member lawyers continue to inform HOA boards that they are businesses and must act accordingly.  The most recent and ardent contradiction to the above comes from Arizona CCAL members Carpenter and Hazelwood in their eNewsletter.
Boards also have to operate in the business sphere. . . . Even worse, now that we are in a truly bad economy, boards are even more willing to justify holding the line on assessment increases because “times are tough”. . . . The rationale appears to be that homeowners are struggling, so the corporate association should struggle alongside them. That becomes the political reason during these times, based on apparent sensitivity for the human condition. They are ignoring the business reality of having foreclosures and bad debt than needs to be offset.
And a direct rebuttal of the HOA as a governing body of a community:
Perhaps “political” is not the right word for the third sphere. Perhaps it is “community minded”. Or, perhaps it is “short-sighted”. It is the same view that some legislators have about raising taxes even though it is necessary. They cannot do it because of fear they will look bad to the voters. However, directors have the luxury of being unpaid volunteers. They do not have to campaign or have funds to run for office.
If the misleading CAI promotional statements about community have indeed fallen by the wayside, then I believe that HOA corporations should be regulated as any other business and not as a nonprofit, since they are have a purely restricted, privately targeted basis, and not a public at-large basis — just the members of the particular subdivision. 
Since HOAs sell to the public at-large, however, they are ripe for regulation under small stock offerings, with all those bold, red-lettered, large font cautionary warnings about the downside of buying into the HOA real estate business. (The offering is referred to as the Red Herring prospectus).
Published in: on November 2, 2009 at 7:15 am  Leave a Comment  

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