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Tuesday, June 20, 2006

New Law Helps Arizona Homeowners with HOA's

Arizona Governor Janet Napolitano recently signed House Bill 2824 into law, giving Arizona homeowners one more tool to fight back against abusive homeowners associations (HOA's).  The new law, which goes into effect 90 days after the legislative session ends, will enable homeowners to have their HOA disputes heard before a judge rather than having to file an expensive lawsuit.  The filing fees haven't been set as of yet, but the non-refundable filing fee is expected to be around $500 versus what could be tens of thousands to file a lawsuit.  Most lawyers oppose the new law, while most homeowner advocates support it, so it must be good for homeowners!  I believe it will help to level the playing field between the homeowner and the HOA.

Personally, I have mixed emotions about HOA's.  I'm currently the President of a commercial property owners association, and I have worked closely with the Board of Directors in other HOA's.  I have seen first hand how great a community can be if it has a good HOA, and how miserable it can be with a bad one.  While homeowners associations can be good for property values, a "bad" HOA can seriously mess up your life.  Because they have the power to lien and foreclose on your property, it is important that you stay paid up on your dues and promptly deal with any fines or non-compliance issues, no matter how angry you become!  I've seen homeowner associations turn a couple hundred dollars into thousands of dollars in fines, late fees and interest in a relatively short period of time. 

So what is a bad homeowner association?  First, it's important to understand how HOA's work.  A homeowners association is usually made up of two components - 1) the elected Board of Directors, who are members of the association, and 2) the property management company, who is hired by the association to take care of the association's daily operations. In my opinion, a "bad HOA" is bad either because it has a "bad" Board of Directors or it has a "bad" management company, or both.  My experiences both in residential and commercial real estate have lead me to the conclusion that property management companies are some of the sleaziest people in the real estate industry.  (Just my opinion, of course!).  I think the reason for this is that property management is not a licensed activity - anyone can do it.  Don't get me wrong, there are many really good property management companies that provide great service to their clients.  But the ones that are "bad" do a huge disservice to their entire industry.

As far as the Board of Directors go, they can be "bad" in more than one way.  If your association has that one Board member that wants to measure everybody's grass and make sure it's not out of compliance, that is "bad" in my opinion.  That's the guy I call the "Neighborhood Nazi", and I've met him!  As long as the Board has other reasonable members to overrule the Neighborhood Nazi, the HOA can still be okay.  If there are more Neighborhood Nazis than reasonable members on the Board, I would call that a "bad" HOA.  The Board of Directors can also be a problem if they are too passive, what I call an "absentee Board of Directors".  Unfortunately, when a management company realizes they are dealing with an "absentee Board", they will often take advantage of the situation.

Remember, not all homeowners associations are bad.  But also remember that even a good HOA can quickly become a "bad" HOA with the election of one or more new Board members, and vice versa.  But the "bad" HOA's worst enemy is the informed, involved homeowner...so be sure to go to meetings, vote and participate in your association.  And even more importantly, before you purchase a home, carefully read the CC&R's.  I know they're usually long and boring, but sometimes they have rules you don't expect like you must have at least 2 citrus trees in your front yard, or you can't park a pickup truck in front of your house overnight.  So use your inspection period wisely and inspect more than just the house, inspect the association before you buy!

Visit Shannon Hubbard's Home Page     Written By: Shannon Hubbard
Realtor®-Investor

Great American Realty, Inc.

Cell: (480) 695-6672
Email me

Posted by Shannon Hubbard, AZ Realtor & Computer Guru on June 20, 2006 | Permalink

Comments

I agree - the most important thing one can do is invest 20-30 minutes and read the rules. Know what you are buying into. I've actually backed out of a deal based on the HOA budget information and asking a few questions - turns out the HOA was so far in debt and the community in need of major repairs, that a huge assessment was pending. I walked away.

But I've also had great HOAs, and the one I'm in now here in Phoenix is pretty good.

Posted by: Jeff | Jun 29, 2006 7:54:10 PM

My hoa sucks. Of course that is my opinion.

Posted by: Jerry | Jul 31, 2006 8:13:21 AM

I still reel in shock every time I hear homeowners and their HOA presented as seperate entities. The truly enlightened should realize that an HOA is the homeowners themselves - not some 'other' entity.

Bad HOA's result from non-participation by the members of the HOA itself and their belief that it is not their responsibility to participate in the oversight and management of their HOA.

It is their organization to run as they see fit. But most homeowners in HOA's subscribe to the delusion - that the HOA is some entitiy they are not a part of and that the homeowners are just innocent victims and not participants. Ignorant hooey.

The only innocent victims of HOA's are those dedicated homeowners who do try to volunteer their time and to try to rally the rest of their apathetic peers to realize that the Homeowners ARE the HOA and to give a damn and help out and quit blaming someone else.

Homeowners are supposed to elect their representatives who carry out the business as best they can. It is a known fact that getting the homeowners to the annual meeting/election is harder than getting citizens to vote for our political representatives. Annual meetings are typically "dead zones." Yet the homeowners do not feel any personal blame for this failure.

The greatest problem facing all HOA's is the notion that the homeowners are not the HOA itself, but that HOA's are some "outside" organization that ruins their lives.

The homeowner's refusal to accept responsibility and role in their HOA has created this mythical "us" versus "them" mentality that dominates thinking about HOA's.

Just as in politics - apathy is the problem, not those that are actually involved. The players run the game - if you don't play, then shut up about how it is played.

By the way - I do not disagree with the positive results the new legislation should create. Lawsuits settle nothing and only drain the coffers of the HOA.

Posted by: Jayne | Aug 20, 2006 8:09:37 AM

I live in a community that has a HOA . I did not have a job when we moved and after arriving to Beautiful Arizona I started looking for a job . It just so happens that the company I was hired by requires me to bring home a company van with there logo on the side. I have been notified that I am not allowed to park a commercial vehicle in my driveway. I have to pay the mortgage on my house and the other jobs in this area pay 4-5 dollars less per hr. than this one. Does anyone have any information that could help me or am I going to have to either find a different job or move to a non HOA area.

Posted by: Ryan G | Sep 27, 2006 6:29:24 PM

Hi Ryan - Sounds like a bad situation that may be difficult to overcome without moving or finding a different job. But I would start by looking at the specific article/section in the CC&R's that says you cannot park a commercial vehicle in your driveway. First, how is "commercial vehicle" defined? I have seen some communities use the size of the vehicle as the determining factor, i.e. 1-ton trucks and above, etc. So first make sure your vehicle fits their definition of a commercial vehicle. If it's not well defined, you could make the argument that the logo does not make it a commercial vehicle, it's just a van. Also, are there any other exceptions to this rule? Some communities say you cannot park the commercial vehicle in your driveway "overnight", or for more than a certain number of hours. Would it then be allowed to park the van on the street overnight, or is that prohibited too? Were you given the opportunity to know about this rule prior to closing on your house? You should have been given a copy of the CC&R's to approve or disapprove during your escrow period. But it sounds like since you didn't have your current job at that time, you probably would not have cared about the rule about commercial vehicles.

Also, you could try to go around the neighborhood and find other houses with commercial-looking vehicles and talk to them to see if they have similar problems. You may find that your neighbors disagree with you, but in many cases your neighbors will agree that this rule is a headache. If you can get enough support within the neighborhood, you could either push the Board of Directors to redefine "commercial vehicle" (assuming it is not already well defined), or you could get members to support an amendment to the CC&R's. An amendment usually requires at least 2/3 of the members to vote for it and is difficult to get passed (check your HOA documents to find out what your association requires). The Board, however, usually has the authority to set certain policies with just a majority of the Board members approval, so long as they do not change the CC&R's in doing so. If you know one or more Board Members and have a good relationship with them, you may want to ask them to bring this up to the other Board members. If not, this may be a good time to become friends with the Board Members!

Sorry I cannot be of more help. Good luck!

Shannon

Posted by: Shannon Hubbard | Sep 28, 2006 8:33:01 AM

The comment below was emailed to BlogArizona.com by Jean:

"I have been active in supporting our HOA board. I think that most problems could be solved if more residents became more involved. We have over 600 residents but only see those that have a complaint at meetings. If we had even 10% attendance they would begin to feel a sense of ownership.

Boards are made up entirely of volunteers and it is hard to fill committees. A few hours per month at those meetings could resolve alot of the ill feelings."

Posted by: Jean | Feb 25, 2007 4:14:20 PM

Does any other HOA have a Reserve Fund that pays a private company to tell us how much money we need to have in the reserve fund? I was also wondering if more homes need to be built in the area and the monthly/quarterly payment goes up will it every decrease due to the amount of new homes? Need some help with this. HOA Board begins in November early December and right now is ran by the Management company.

Posted by: Keith Christofferson | Oct 17, 2007 6:55:44 PM

I purchased a home with a HOA and specific CC&R's, recently I received a noticed that the CC&R's were changed and they now require a background check on anybody that is going to rent the house,a copy of the rental application and lease agreement plus a $175.00 service fee. I have had the house rented by the same family for almost three years and now they are requiring this of us. When I bought the house and was issued a contract with the HOA it was the CC&R's as they were written then, am I obligated to meet their current requirements?
AL

Posted by: AL | Oct 31, 2007 10:51:21 AM

Hi Keith -

Actually, I don't think it's that rare to see an HOA pay a third party to prepare their reserve study. It may seem like a waste, but sometimes you need it for tax reasons since HOAs are usually non-profits. Each HOA is different in how they determine the dues amount, so I can't answer that question. But it sounds like you're in a new area where the builder is about to transfer power of the HOA to the (residents) new Board of Directors...? It is likley that you will still have a management company - but it will answer to the new Board of Directors instead of the builder. Hope this helps - good luck!

Posted by: Shannon Hubbard | Nov 6, 2007 3:19:52 PM

Hi Al -

If the changes were passed as an amendment to the CC&R's or otherwise properly passed, you will probably have to abide by the new rule. It really depends on what your specific CC&Rs say. You may want to consult an attorney regarding the matter. Sorry I can't help more - good luck to you.

Posted by: Shannon Hubbard | Nov 6, 2007 3:25:09 PM

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