What do these three stories have in common?
An eighty-three-year-old woman from Houston, Texas, who owed her homeowners association (HOA) $4,000, had her home seized by the HOA and sold for $5,000.
A husband and wife, both longstanding officers of their HOA board in Florida, were accused of using more than $339,000 of member-funded HOA money for personal expenses.
And in Pennsylvania, an HOA bookkeeper pocketed $500,000 through issuing duplicate payments to vendors.
The common link between these stories is the damage done by HOA boards that are undemocratic and unaccountable to the homeowners in their communities.
An HOA is commonly defined as an organization that makes or enforces rules for a group of residents in a subdivision, community, or residential building. HOAs collect fees from their members to pay for the maintenance of common areas and the upkeep of facilities. Some estimates claim that some seventy-seven million people, or one-third of the U.S. population, live in an HOA, condo, or housing cooperative, all of which are considered common ownership communities (COC).
In response to abuses by HOAs and their lack of accountability, more and more homeowners are forming grassroots groups to organize at the local, state, and federal levels. They are working to rewrite the laws to level the playing field between HOAs and homeowners. According to Carol Kaplan, communications director of Common Ownership Community Homeowners Advocating for Reform (CHARM) in Maryland, these organizers are disenfranchised by the undemocratic nature of HOA boards, which operate as quasi-governmental bodies that wield the power to fine homeowners without being subject to due process. HOA boards, she tells The Progressive, were “designed by the real estate industry to pick the pockets of the homeowners;” they have all the power, unless the homeowner has the deep pockets to fight back.
CHARM Maryland, a nonprofit that has operated in the state for a little over a year, advocates for the rights and interests of individual homeowners who live in HOA and condo communities, through changing Maryland state and county laws.
“The original reason the HOAs were designed was because municipalities did not have the money to build new neighborhoods because it would cost a city for new waterlines and new roads, and things like that,” Kaplan explains. “They transfer that cost to developers by allowing them to create homeowners associations. So, these are communities where the common elements are not paid for by the city. They are paid for by the people who live in that community.”
Some of the most common complaints that CHARM and reform groups in other states receive from homeowners include HOA boards refusing to share financial documents with homeowners, raising fees with no explanation, or imposing steep special assessment fees. Kaplan tells The Progressive that one of the buildings in her HOA complex raised monthly fees from $400 to $1,400. Other complaints include HOAs rigging board elections to favor incumbent leadership members, retaliating against homeowners who file complaints against HOA boards, and embezzling homeowners’ fees.
Though CHARM is a relatively new organization, its members feel they are already making a difference in promoting equity for homeowners in Maryland. The organization cites the passage of a new law in the state that requires that elections for HOA board members be run by independent third parties.
The group has also pressed for state legislation that establishes a wide-ranging “bill of rights” for residential owners in COCs, which would ensure the rights of homeowners to timely access to financial documents of the COC, the right to secret ballot elections for the COC board of directors, and the right to due process and equal protection in case of disputes with COC boards.
But Patrick Johansen, founder of the HOA Reform Leaders National Group (HRLNG), tells The Progressive that even with the passage of the most far-reaching legislation, homeowners will still be at a disadvantage so long as they lack proper mechanisms for enforcing the law.
“The homeowner has to sue to get the law enforced,” Johansen says. “It is a stacked deck. Risky and expensive.”
HRLNG is a volunteer-run association dedicated to changing the laws of all states to protect and benefit homeowners. Toward that end, the group has developed a list of twenty specific reforms it hopes to see implemented both at the state and national levels. By far the most important reform on that list, Johansen says, is the creation of a state HOA office to enforce the current law, as well as any reforms that may be implemented in the future.
According to Johansen, homeowners who sue HOA boards in court for violations can spend as much as hundreds of thousands of dollars on cases that can take five to seven years. In addition, he notes that HOA management often has vast financial and legal resources to conduct litigation, resources that homeowners usually do not.
“There are very few attorneys in any state that will actually take the homeowner’s side of the case because they know the laws are all in favor of the HOAs,” Johansen says.
In one notorious case, a woman living in an HOA in Waldorf, Maryland, got permission from her HOA in 2017 to build a fence on her property. But after the fence was finished, the HOA board ruled that the fence was encroaching on her neighbor’s property by about eight inches, and threatened her with fines if she did not adjust it. When the HOA and the homeowner were unable to resolve who would pay the costs to adjust the fence, the HOA filed a complaint with the St. Charles Circuit Court. After several years in court, a judge initially ruled the woman was on the hook for $22,000 in fines and $17,600 in legal fees.
An additional hurdle for homeowners is that many courts do not have expertise in HOA and real estate law, Johansen says. What’s more, most states don’t have effective enforcement laws to effectively police HOA abuses, leaving homeowners reliant on toothless government ombudsmen or mediators to settle disputes.
Johansen sees the creation of separate state agencies with enforcement powers, preferably under the wing of that state’s attorney general’s office, as an alternative for homeowners to the gridlock of the expensive, lengthy, and largely ineffective judicial system. He envisions such an agency to be staffed with investigators and attorneys specializing in enforcing HOA laws and the governing rules of HOA boards, and having the power to act quickly and decisively on homeowner complaints.
“Putting the enforcement in place would solve about half of the problems,” he asserts. Johansen believes these HOA boards would act in the same streamlined and effective manner as small claims courts and consumer protection agencies.
There is at least anecdotal evidence that more and more homeowners are organizing to level the playing field with HOA boards.
“We’ve had a lot more activity this year than we’ve had in any year before,” says Johansen. “We have people in all fifty states, including Washington, D.C. Hopefully, a lot of these states will come forward.”
In the last few months, the Minnesota state senate has passed legislation that would cap homeowners association fines, require board members to disclose conflicts of interest, and establish new rules to settle contentious HOA disputes. The North Carolina legislature is considering bills that would make it harder for HOAs to foreclose on homeowners for unpaid fines or dues.
But Kaplan concludes that unless there is a state enforcement mechanism, it will be difficult to enforce these laws through the current judicial process. According to Kaplan, “The entire system needs to be upended.”