HOA limitations: conscripting people who cannot run an HOA

Highlights of the The Urban Institute Forum, June 30, 2011, Private Community Associations: Boon or Bane for Local Governance?

Sadly, Robert Nelson’s pro-HOA opening statement was filled with the myths, misconceptions and half-truths that perpetuate the laissez-faire attitude from government. Legislatures that have failed to reign in these undemocratic private, second political system of government known as HOAs. He is part of what I term the legal-academic aristocrats. McKenzie’s response rejected what he called Nelson’s theoretical, alternate form of government, saying that, “If you actually look at the reality of the way these [HOAs] . . . function, they do not fit these assumptions at all.”

McKenzie said that, for example, this “volunteerism” simply doesn’t happen, since, as it appears that,as all the “common people” know, the agreements are created by the developer’s attorneys and handed down. There is no give and take in creating this form of individualized local government, so often touted as town hall government at work in HOAs. McKenzie described these declarations as “boiler plate”, and mentioned seeing covenants relating to elevators when there were none in the subdivision.

“People are “conscripted” into these associations if you buy the lot”, he further added. They are then told “that they consented to the agreement, but that’s a legal fiction.” “And realtors don’t even tell them anything about it.” In reality, he continued, “the people really don’t control their association, the dead hand of the developer does” since changing the CC&Rs is difficult to do. [With respect to the past attempt at Arizona legislation to allow 1/3 of the members to change the CC&Rs for everyone does not address the problem of ex post facto contracts].

Addressing the contractual legal scheme, McKenzie stated that, “This [HOA legal scheme] is a model . . . that trickled down from the top of the income distribution . . . . It is probably a form of governance that would work reasonably well if practiced by 1% of the population.” The wealthy and reasonably affluent with money “who can hire lawyers and who came in with their eyes open and knew what they were getting into.” In other words, a specialized, utopian, perhaps cult community for the wealthy. As I’ve written many times, McKenzie said the mass merchandising [my words] was driven not by the people demanding HOAs, but by the developers and municipalities that are increasingly mandating only HOA regimes for new developments. There is no free market system at work, no freedom of choice.

As this mass marketing proceeds, “you begin to conscript people into this mass housing who cannot run it.” In particular in today’s climate, the failure to establish adequate capital reserves to offset decreased income. Well, isn’t that also a failure of the national HOA educational organization that “certifies” HOA managers for the past 40 years?

“The idea of private government is fine,” according to McKenzie, “for people who can afford to operate it. Imposing this on people, which we have done, who cannot run it, who don’t know how to run meetings, who won’t go to board meetings at all . . . . What we are seeing is professional people, managers and lawyers actually running the associations.” You know, the “hired hands.” “The priority on foreclosure is driven by the professionals. It is not driven by what’s best for the community.”

“The owners are not loyal to their association. They put up flagpoles because they don’t think they are legitimate.”

The policy makers and public interest ‘influencers” should pay attention to the realties before them, and cease their dogmatic, unworkable ideology. This Forum is a good start.

Published in: on June 30, 2011 at 11:52 am  Comments (1)  
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  1. Great review, George. Thanks. “The priority on foreclosure is driven by the professionals. It is not driven by what’s best for the community.” What’s best for the community is of no concern to the “hired professionals”. What’s best for themselves is their concern.

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