The legislative process never ceases to amaze me. Every year thousands of bills are introduced by our representatives both at the Federal level and in State Capitols across the country. Some have a list of sponsors while others do not. Every bill goes through a hearing process in subcommittees where they are either passed on to the full committee as presented, amended or killed. The survivors of the first cut then go through the process again in front of the full committee, and if not killed get passed on either intact or amended to one of the two houses, talked about, voted on, amended and if not killed the bill goes to the other house and eventually ends up on the President’s or the Governor’s desk where it is signed into law or vetoed.
With the seemingly endless opportunities to hear and discuss proposed legislation, how on earth do we end up with so many bad laws on the books?
David Kahne and Beanie Adolph join us On The Commons this week. David is among a handful of attorneys who has and will represent homeowners in HOAs. Although she has never lived in an association controlled development, Beanie is a tireless advocate for preserving individual and private property rights. She is the Director of the HOA Reform Coalition of Texas. She also provides a page where homeowners can share their HOA problems because, as she explains, “… there is no state agency where homeowners can register their problems”. David and Beanie give us a rundown of some of the bills the Texas legislature had in front of them. We also learn that the legislators did not want to hear from the homeowners so David went to Austin to represent the Coalition and Texas homeowners. Tune in for a run down on the bills, what they would have done, which ones passed and which ones were killed, at least for this year.
Home owners are so screwed, and it’s going to get worse.
DAVID KAHNE: [ 23:12 ] “I’m not saying that every dispute in a subdivision is wrong. Sometimes, there are people who allow their houses to become crack houses. Or become sufficiently dilapidated that it’s dangerous if children play in them. It’s at least possible to imagine such circumstances, and they come up.” [ 23:34 ]
I’m so disappointed, because this episode is another illustration of what is so wrong with whatever passes for an H.O.A. reform movement. I’ll probably write a couple of comments on this over the next few days as time permits. As Shu is aware, it’s something I complain about a lot.
For example, “our side” accepts the legitimacy of the idea that H.O.A. corporations should have the authority to dictate what home owners are allowed to do on their property. David is a lot smarter than I am, and he’s been at this a lot longer than I have. He’s done a hell of a lot more good than I ever will. But even though he knows better, he falls into the common trap of conflating H.O.A.s — which are corporations — with C.C.& R.s — which are the “neighborhood rules”. Shu had just cited an example of an H.O.A. corporation that had lost its power to enforce the neighborhood rules.
Instead of trying to tweak the dispute resolution process between H.O.A. corporations and home owners — as David thinks we should — we should be working to eliminate the perverse incentives and moral hazards for H.O.A. corporations to engage in the most destructive and expensive of litigation against home owners.
One way to do to do this is to remove an H.O.A. corporation’s ability to enforce covenants and fine home owners. And I don’t mean “regulate fines” or “set threshold for fines” or “set limits for fines” or the usual “not withstanding the provisions of…” crap. The ability of an H.O.A. corporation to fine a home owner for alleged breaches of contract should be void by law. Period. No “ifs” “ands” or “buts”. End of discussion. And that ban should be non-waiveable.
And making this happen should be a top priority for whatever it is that passes for an H.O.A. reform movement, instead of expending scarce political capital on lobbying for rules about propane and reading documents and whatever the other thing was.
This may come as a shock to a lot of Americans — especially our policy makers, and even some listeners of this show — but it is quite possible to have and enforce restrictive covenants without an H.O.A. corporation enforcing them.
An H.O.A. corporation’s ability enforce the restrictive covenants is backed by very real threats of fines, liens, and foreclosure. As a result H.O.A. corporations have every perverse incentive and moral hazard to engage in the most destructive of litigation for the most trivial of amounts and reasons against their involuntary members. Tom Skiba’s minions have demonstrated not only a willingness, but an eagerness, to abuse this power. The profit motive ensures it can be no other way.
Without an H.O.A. corporation, the individual owners would still be free to enforce the neighborhood rules. However, there would be some very important differences:
– Unlike an H.O.A. corporation, the individual owner would not be able to unilaterally declare his neighbor to be in breach of contract and fine his neighbors. He would have to take his (allegedly) rule-breaking neighbor to civil court.
– Unlike an H.O.A. corporation, the individual owner suing his neighbor would have to demonstrate actual damages to recover a monetary award, instead of being able to claim fines, fees, and other arbitrary and artificial accounting artifacts as actual damages. Absent monetary damages, the plaintiff home owner would still be entitled to injunctive relief (a Court Order ordering his rule-breaking neighbor to comply with the rules).
– Unlike an H.O.A. corporation, the individual owner suing his neighbor has an incentive to control his legal expenses.
– Unlike an H.O.A. corporation, the individual owner suing his neighbor would be responsible for his own up-front legal expenses.
– Unlike an H.O.A. corporation, which compels other home owners (including the defendant) to pay its legal expenses through mandatory assessments, the individual owner suing his neighbor would still be free to have other home owners fund and/or join in his litigation. But he’d have to “pass the hat” and persuade them to do so.
– Unlike an H.O.A. corporation, the individual owner suing his neighbor would not be able to “hide behind the corporate veil”.
– Unlike an H.O.A. corporation, which by definition are sociopaths — legal “persons” without a conscience, empathy, or morality — natural persons are subject to moral and social pressures that make most of us “behave nice” (or, as economists and game theorists would say, “cooperate” instead of “defect”).
Organizations are of course made up of individuals, who bring with them the sorts of societal dilemmas we’ve already discussed: both the dilemmas between the organization interest and the individual’s own competing interests, and the societal dilemmas that come from the individual being a member of the organization and a member of society as a whole. But we often treat organizations as if they actually were individuals, assuming that societal pressures work on them in the same way they do on individuals. This doesn’t work, and results in some pretty bad trust failures, and high scopes of defection. ( Bruce Schneier. Liars and Outliers. 2012. Chapter 12. emphasis added)
The end result of the elimination of H.O.A. corporations, or at least a law that prohibits H.O.A. corporations from enforcing covenants and restrictions, would be that individual home owners aren’t going to sue their neighbors, unless it’s over something that is really damn important (such as David’s example of the crack house next door). Imagine that! It would reduce expensive litigation to almost zero- something that the libertarian and Republican proponents of “tort reform” claim they want to accomplish.
Even the HOApologists admit that H.O.A. corporations behave in ways that individual home owners do not and would not, except that they tout this as a benefit! For example, H.O.A. attorney Tyler Berding wrote that
Many owners see the “association” as a faceless antagonist run by people that they don’t know. The reality is different. . . . Disputes between an owner and the “association” are at base just arguments among individual owners. But many still don’t see it that way and choose instead to see the association as a monolith operating independently of the owners. And they can be excused for thinking that way. When disputes arise, they are characterized as “Happy Valley Homeowners Association vs. John Smith” not, “All of His Neighbors in Happy Valley vs. John Smith.” A corporation can be bureaucratic, but it also provides anonymity — a delegation of authority so individual owners do not have to personally enforce the rules. Those who believe the rules are beneficial want others to abide by them. Others just want to be left alone. But as long as there are rules in play, someone or something has to do it. . . . Owners can sue each other directly to enforce the rules but most would rather not do that. It’s messy and expensive and personal. ( “It’s Your Neighbors, Stupid” May 21, 2011. emphasis added )
According to the H.O.A. industry professionals, we’re supposed to believe that when the Make-A-Wish Foundation offered to build a playhouse for Ella Shultz earlier this year, her neighbors acted collectively through the Stonegate H.O.A. corporation to deny the wish of a dying 6-year old girl. After all, if her neighbors had to enforce the rules themselves, rather than acting anonymously by hiding behind the Stonegate H.O.A.’s corporate veil, “most would rather not do that” because it would have been “messy and expensive and personal”.
Hmmm. If most neighbors would rather not take personal responsibility for enforcing the neighborhood rules, then perhaps they would exercise some common sense about which neighborhood rules they actually enforce. What a concept! It’s no coincidence that “personal responsibility” and “common sense” — two other things libertarians and Republicans claim they want more of — are absent where H.O.A. corporations exist.
Call me crazy, but instead of changing the “when” “where” and “how” of dispute resolution between home owners and H.O.A. corporations, we could simply eliminate those disputes by taking the H.O.A. corporation out of the equation. Yeah, some disputes will still exist, but they would be between neighbors — equals – -rather than the exercise of gross and unconscionable imbalances of power that currently exist between natural persons and H.O.A. corporations.
My overall impression is that homeowner advocates have to spend too much time in defensive mode rather than being proactive. Somehow, that power imbalance needs to fundamentally change, putting “we the people” back in control, rather than the special interests.
Great idea, but HOA reformers are often like herding cats, and worse. When effective, many turn against each other in ways they have learned well from the evils of the HOA industry. Scary!
DAVID KAHNE: [ 23:12 ] “I’m not saying that every dispute in a subdivision is wrong. Sometimes, there are people who allow their houses to become crack houses. Or become sufficiently dilapidated that it’s dangerous if children play in them. It’s at least possible to imagine such circumstances, and they come up.” [ 23:34 ]
Robert, I am responding to this quote.
I intended to comment on this during the show but sometimes my thoughts slip through the cracks because the moment is lost.
There are real laws on the books about crack houses and dilapidated houses that are a hazard. These laws are usually enforced by real governments like cities and counties. HOAs are NOT qualified to determine whether a house poses a danger to to children in the area. Nor are they capable of dealing with a crack house. Call the police! Let the people whose job it really is to handle these problems.
What the HOAs end up dealing with are cracked flower pots, pudgy pooches and blinds in the windows that are the wrong shade of white. You know, all the major issues facing the world today. The really important stuff that makes life worth living.
I keep saying this and one day maybe, just maybe the light bulb will go off with legislators (and homeowners) around the country. HOAs do NOT protect property values. HOAs do NOT make for a “community”. You need no further proof than Olde Belle Haven that became a real community and property values went up when the the covenants were GUTTED. People made the improvements to their houses without having to go through the ridiculous and frustrating exercise of trying to get permission to fix their roofs from people who don’t have the brains God gave a pea – and then being denied.
HOAs are there for the benefit of the local municipal government, the developer and the HOA industry. NOT the homeowners.
Shu, when you say the covenants were gutted, do you mean the owners voted to remove most of the restrictions as well as the authority of the Board? Or did the just remove most of the restrictions?
If enough homeonwers can agree on “gutting” the HOA, they can start by getting rid of what I call KUA Rules (Keeping Uniform Appearances). That eliminates 90% of the CC&Rs, which typically includes all those aesthetic and architectural “standards” about how your property can or cannot be improved, designed, or decorated to conform with some Developer’s concept created before the first lot was sold.
From there, the owners can vote to eliminate all unecessary restrictions upon USE of property. Most cities and counties already have Zoning restrictions that cover major concerns. (There are some exceptions, such as parts of Texas, where there is no Zoning.)
But was Olde Belle Have able to completely do away with the Board, or did they simply dilute Board powers as much as possible?
They removed the restrictions and the covenants. There is no ACC, so no more “mother may I?” as my friend Joni Greenwalt used to say. No restrictions on fences, decks, flower pots, plants, paint colors, pink flamingos, pets, trees, you know, all the usual things that send the “enforcers”, or those with an enforcer mentality into orbit. They looked at extinguishing the association but that was too difficult so they did the next best thing, they stripped the of all their powers and became a true community instead of a war zone. Funny how that works, isn’t it?
Their papers and the new declaration are on my web site so you can check it out for yourself.
I’ll check it out Shu.
“My overall impression is that homeowner advocates have to spend too much time in defensive mode rather than being proactive.”
There’s an old saying in various security fields: The bad guys only have to get lucky once. We have to be lucky every time.
While it’s good to “hold the line”, the simple fact is that in a war of attrition we are going to eventually lose. The enemy is better funded and better organized. Tom Skiba’s minions — who do this thing for a living — will be back year after year after year, until they get what they want. Meanwhile, we have a few good folks who get bogged down in minutia, such as whether or not certain notices should require the use of registed mail. That some legislators actually thought that eliminating this requirement was a good idea speaks volumes to the levels of their cluelessness and/or corruption.
Evan McKenzie described the C.A.I.’s desired endgame at:
“The BODs [ H.O.A. board of directors ] would have nearly absolute power over homeowners, whose only options, if they feel they have been mistreated, would be to elect a new board or sell their home and move somewhere else. The association attorney and property manager would (and do) control the BODs. CAI [ Community Associations Intitute, the H.O.A. trade and lobby group ] trains and organizes the attorneys and property managers. The states would require certification of property managers. CAI would provide that certification. The out-of-control owner-run insurgent groups would be shut out of the policy process and branded as loons and nutcases, and their websites would be shut down. The press would get off the ‘HOA abuses abound’ angle, and instead go to CAI for comment on community association issues, and print the PR line. Particular complaints about abuses would be conclusively presumed to be either a) lies and distortions spread by neighborhood malcontents who couldn’t get along with Mother Theresa, or b) unrepresentative anecdotes that fail to capture the true level of mass satisfaction with HOA life. And the state legislatures would pass UCIOA [ Uniform Common Interest Ownership Act ] and move on from HOA legislation to other matters, like selling the state tollway system to Spanish and Australian corporations to finance free health care and early childhood education for all. Happy ending. That’s the desired endgame as I see it.” ( March 14, 2007 at http://privatopia.blogspot.com/2007/03/cais-objections-to-aarp-ho-bill-of.html )
As David pointed out, one tactic of the H.O.A. lobbyists is to make certain consumer protections enacted by the Texas legislature a few years earlier waivable. Once our rights are waivable, the H.O.A. industry attorneys will use that as leverage against the home onwers. I think this is actually a common practice in the H.O.A. industry; I recall hearing about things like this happening on Shu’s program several years ago, but I’m not going to go through and listen to the archives to find examples.
If Skiba, Corona, etc., could have their way, H.O.A. adhesion documents-enforced-as-contracts would contain a clause saying something like “the home owner agrees to waive his 13th and 14th Amendment rights. All income earned by the home owner will be automatically deposited into the First Bank of C.A.I. [ or Bank of Associa, if an Associa managed property ]. At an exchange rate to be set by the board of directors, the home owner will receive scrip which can be used to purchase goods from the H.O.A. store. Additional fees may apply.”
Welcome to their vision for our homes and our neighborhoods — life in a corporate controlled community plantation (C.C.C.P.), where the home owners are the crop.
Think big or go home.
Below is a list of the 30 H.O.A. bills in the Texas legislature this year, from http://www.abouthoas.org/?p=7470
We don’t need 30 bills. Trying to enact (or hold the line on) that man pieces of legislation dilutes our efforts, and expends scarce political capital. In a war of attrition, we will eventually lose. It’s that simple.
What we need need is about 3 – 5 bills, addressing the fundamental problems, perverse incentives, and moral hazards inherent in the H.O.A. system. Instead, we keep doing the same thing over and over and over — creating affirmative defenses to address specific harms, in ways that won’t really be enforceable anyway. Yet how often do I hear “Let’s get this imperfect (or even bad) law passed now, just to do something, and then we can try to fix it later”? How stupid are we?
Consider that in 2001, Texas enacted a law that prohibited H.O.A. foreclosure for fines and fees. H.O.A. corporations were only allowed to foreclose for unpaid dues. It worked so well that in 2011, Texas enacted a law that prohibited H.O.A. foreclosure for fines and fees. Yet no one ever addressed the fundamental problem by questioning the legitimacy of H.O.A. foreclosure in the first place. We’ll see if the new law works any better than the old one, or if the H.O.A. industry just does a better job of keeping abuses out of the light this time.
01. HJR 55 – Villalba – Proposing a constitutional amendment relating to a person’s free exercise of religion.
02. HB 745 – Bohac – Relating to the installation of solar-powered stop signs by a property owners’ association.
03. HB 748 – Isaac – Relating to the regulation of liquid propane gas tanks on residential property.
04. HB 939 – Dale – Relating to unenforceable restrictive covenants regarding standby electric generators affecting residential homes.
05. HB 971 – Bohac – Relating to requirements governing officers and directors of condominium unit owners’ associations and property owners’ associations.
06. HB 1072 – Thompson – Relating to the eligibility of certain persons to serve on the board of a property owners’ association
07. HB 1178 – Isaac – Relating to the enforceability of certain restrictive covenants governing the use of fuel on and supply of fuel to property in certain subdivisions or other planned developments.
08. HB 1335 – Gutierrez – Relating to the collection of attorney fees in property owners’ association foreclosures.
09. HB 1442 – Workman -Relating to a property owner’s right to remove a tree or vegetation that the owner believes poses a fire risk.
10. HB 1455 – King – Relating to procedures required before a condominium association files a suit or initiates an arbitration proceeding for a defect or design claim.
11. HB 1792 – Springer – Relating to regulation of residential short-term rental units; creating offenses and authorizing a fee.
12. HB 1886 – Martinez – Relating to the authority of certain counties to impose an assessment on landowners for the installation, operation, and maintenance of streetlights.
13. HB 2147 – Keffer – Relating to secret ballots in a property owners’ association election or vote.
14. HB 2148 – Keffer – Relating to voting methods in a property owners’ association election or vote.
15. HB 2489 – Leach – Relating to the ability of a property owners’ association to enforce certain provisions on the lease or rental of real property.
16. HB 2594 – Parker – Relating to the modification or termination of restrictions by petition in certain real estate developments with certain amenities.
17. HB 2797 – Villalba – Relating to the operation of certain property owners’ associations.
18. HB 2999 – Landgraf – Relating to restrictive covenants regarding the possession, transportation, or storage of firearms or firearm ammunition and the otherwise lawful discharge of firearms.
19. HB 3460 – Murr – Relating to provisions in th dedicatory instruments of property owners’ associations regarding the display of flags.
20. HB 3539 – Dukes – Relating to the regulation of the installation of solar energy devices in a residential subdivision.
21. SB 283 – West – Relating to requirements for the nonjudicial foreclosure of certain residential mortgage liens.
22. SB 284 – West – Relating to service of citation in connection with an application for an expedited court order allowing
23. SB 834 – Creighton – Relating to procedures required before a condominium association files a suit or initiates an arbitration proceeding for a defect or design claim.
24. SB 862 – Birdwell – Relating to voting methods in a property owners’ association election or vote.
25. SB 864 – Birdwell- Relating to secret ballots in a property owners’ association election or vote.
26. SB 1168 – West – Relating to the operation of certain property owners’ associations.
27. SB 1244 – Burton – Relating to property owners’ association elections and votes.
28. SB 1535 – Burton – Relating to procedures to amend a declaration by a property owners association.
29. SB 1626 – Rodriguez – Relating to the regulation of the installation of solar energy devices in a residential subdivision.
30. SB 1852 – Nichols – Relating to the adoption of an amendment procedure for restrictive covenants affecting real property in certain residential subdivisions.
If you want to know why we’re eventually going to fail, read “Help, I’ve Been Colonized And I Can’t Get Up” (Jane Anne Morris. 1998) at
http://democracythemepark.org/articles/help-ive-been-colonized/
It was written from the perspective of the environmental movement, but even if you don’t agree with the author’s tree-huggin’ hippie agenda, much of what she says is extremely applicable to whatever it is that passes for an H.O.A. reform movement.
“Our campaigns follow the gambling addiction model. The last bet didn’t pay off but the next one might if…if…if we just had a new, improved tripod, three more experts, more labor or church support, ten more elected officials on our side, a hundred more people at the demo, or a thousand more letters in the mail….Who are we kidding? We are just Doing the Same Old Thing over and over again and fooling ourselves that it might work next time. We are stuck in a feedback loop where our failures are interpreted as signs that we should repeat our failed tactics, but try harder.”
Read the whole thing.
See also the Community Environmental Legal Defense Fund’s “Democracy School Online” videos. Again, their lessons are applicable to us.
http://www.celdf.org/democracy-school-on-line
Although the CELDF was winning in the court room, things were getting worse “on the ground”, because their legal victories were procedural, not substantive.