Legal View: A look at the pros and cons of home associations

By Phil Hardwick

The Daily Record Newswire

Mr. and Mrs. Binder do not want to renew their homeowners' association dues, but they will be legally forced to if they do not pay up. Mr. and Mrs. Washington, on the other hand, are not going to renew their homeowners' association dues this year, but nothing will happen to them. Why the difference?

The Binders live in a development in which the developer mandated a homeowners' association through covenants, which clearly set out the rules and regulations of the association and also stated that if a homeowner does not pay dues then a lien can be placed on the property in the name of the homeowners' association.

The covenants, which the developer placed on file at the county clerk's office when the development was legally created, state that each lot or unit in the development has one vote at the homeowners' association meeting, and that the association is governed by a board of directors that has broad power when it comes to making and enforcing rules and regulations regarding the development. Consequently, the developer has control of the association until over 50 percent of the lots or units are sold.

This is not necessarily a bad thing because the development was marketed as having certain amenities and features. The so-called character of the development is important not only to the developer, but also to the buyers who want not only a nice place to live, but also a property that will maintain or increase in value. The downside of the arrangement is that the development is overly dependent on the developer to enforce and maintain those rules and regulations. For example, if there is a beautiful greenspace in the middle of the development, and the rules state that the space must be maintained by the homeowners' association then it is the responsibility of the developer to see that it is maintained. If weeds begin growing and grass is not cut it is the homeowners' association that is left to get it done. But what can the homeowners' association really do if the developer has a controlling number of votes and offers a motion to suspend enforcement of the rules until further notice? The result is a development of unhappy and maybe even rebellious homeowners. In short, real estate developments that start out with homeowners' associations are typically as good or bad as the developer.

Such homeowners' associations are not uncommon. According to an Associated Press article more than 80 percent of newly built homes belong to association communities, and 24.4 million homes, or 20 percent in America, are represented by homeowners' associations.

On the other hand, one thing to keep in mind is that, in general, the real estate developments with the highest property values tend to be the ones with the most restrictions on use of the real estate, one of those restrictions being the mandatory homeowners' association.

The Washingtons live in a neighborhood with a different kind of homeowners' association. Their association is strictly voluntary, and some would argue that it is a homeowners' association in name only. There is a board of directors, but it has no power over any property or property owners.

The association was formed in response to a growing crime problem in the neighborhood. Several concerned residents got together to discuss ways to deal with the crime problem. They also were concerned that property values were being affected because there were more houses on the market than normal. They discovered that some neighborhoods had formed crime watch organizations, but the only evidence of true success of that effort was an annual "night out" neighborhood watch and some street signs proclaiming, "Burglar Beware." The most extreme alternative was to have a gated neighborhood, but that was not feasible due to the high number of entrances to the neighborhood. The chosen alternative was to hire a security patrol.

The board took bids from several private security companies, and then surveyed the neighbors about their desire to hire such a patrol and how much the neighbors would be willing to pay. After several neighborhood meetings enough property owners, including the Washingtons, signed up and agreed to pay annual dues to the association.

Things went fairly well for two years. Property crimes went down, neighbors were reassured by the presence of security patrols and the association even had as annual picnic. However, the original board grew wearier of being the only ones involved in collecting dues, managing the association and hearing from disgruntled neighbors about everything from loud music to potholes. The second generation of board members decided that neighborhood security was the reason the association was formed, so the only thing it did was collect dues and pay the security patrol. The association membership declined.

When the Washingtons received their latest statement they noticed that the association dues had increased by 30 percent. After discussion, they realized that they did not know whether or not the security patrol was effective because the only communication they had received from the association board in the past year was a billing statement. They decided not to renew their membership in the association.

One thing common to them and to all homeowners' associations is that communication with members is critical to effective homeowners' association management and operation.

Published: Thu, Sep 1, 2011


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