Most people aspire to own they own homes. What homes look like may have changed over the years. They might be a log cabin, a single family detached home with a garden, an attached townhouse or even an apartment in a high rise building, but what remains a constant is the sense of “home”, the pride of having achieved a certain level of success. A sense of having control over your home and being able to make it personal. The knowledge that it will always be there.
Or will it?
As the desire for homeownership increases, the risks also increase. The headlines of late have been screaming about mortgage foreclosures. In some of the smaller text, foreclosures by HOAs to collect past due assessments, fines and the never-ending legal fees that seem to spiral out of control have also made headlines. Scams to defraud homeowners of their property and money abound.
Bill Davis and John Cowherd join us On The Commons this week. My two guests are pioneers in a way. They are among a very small handful of attorneys across the country who focus their respective practices on representing homeowners against their residential associations. Bill is in Texas and John in Northern Virginia. They talk about the many ways property owners lose their homes and explain how “condo terminations” work, what happens to property values and why some owners can force the sale of a condo even when the owner wants to stay and how the process also robs the reluctant sellers much of the equity they have built up.
Another good show and I hope Shu will have these two attorneys back together for another show.
My contributions here are: In Kansas the homeowners can recover their legal fees if the judge awards them. This is possible due to the Kansas Uniform Common Interest Owners Bill of Rights Act.
Gathering homeowners together to take action I have found to be a total failure. Everyone gets all fired up and ready to go but one person has to sign the engagement with the attorney. I made this mistake. We were seeking access to the financial records after we learned 10 Million Dollars was unaccounted for. The legal bill ran into the thousands and the donations to the “legal fund” did not come near paying for it. Many people thought a $5 to $20 donation was there fair share. I was stuck with the bill. And the attorney was kind enough to write off $3,200 of that bill but I still pay out thousands of dollars.
I found most people in my HOA struggle to figure out what groceries to pick up at the market. They have no clue how to strategize a legal battle. Therefore, they cannot help themselves without an attorney and the majority cannot afford to hire one. Not to mention most of them keep very sloppy or no records and have nothing to support their claims with against their HOA. My attorney has tried to help many of my neighbors but now refuses to take any of them as clients except me. Sadly, for what I have lost in this HOA on property values and paying legal bills I could have funded my own law school education without taking out one penny in loans.
Bottom line is we all know the homeowners have lost their shirts the day the ink dries on the paper. Some will sell and get out with a profit others will get severely burned and have their health and financial security destroyed. It’s a risk that no one should take to put a roof over their heads, in my opinion.
The so-called Colorado Common Interest Ownership Act (C.C.I.O.A., 1991), based on the Uniform Common Interest Ownership Act (U.C.I.O.A., 1982) also allows home owners to recover legal fees if they are the prevailing party in court. However, the law is so weighted against the home owners that it ensures that the home owners will hardly, if ever, be the prevailing party.
While prevailing home owners should recover their legal fees, I truly do not understand this fixation on legal fees, as though that really solves anything. Here’s a crazy idea — how about removing the perverse incentives and moral hazards that encourage H.O.A. corporations to engage in costly and destructive litigation against their involuntary members as a business model?
Excellent information from John Cowherd and Bill Davis! We need many more attorneys willing to stand up for owner-occupants (homestead owners) in HOAs, Condos and co-ops in the US.
Mr. Cowherd is correct that FL SB643 is a “fix,” but not for homestead owners or anyone that is not a “bulk owner,” a developer, an investor group looking to acquire condos as rock bottom prices, or any other affiliates to include insurance carriers (as refernced by Mr. Davis).
FL SB643 does very little to help any minority condo owner being forced to sell in a termination orchestrated as what essentially amounts to a hostile corporate takeover.
The bill is full of loopholes and conditions for providing full reimbursement of purchase price (which is usually higher than current fair market value calculated by the biased appraisals): the purchase had to be made from the developer and not a resale, and the owner cannot owe a single dime to the HOA, even if the debt owed to that HOA has been entirely manufactured.
The proceeds of the sale may be reduced by not only bank liens, but also any of numerous fees, fines, or special assessments owed to the HOA. In some cases, the owner may still end up with little to no cash proceeds, plus liability for a second mortage or HELOC. Cash buyers will have lost a lot of their equity unless they meet the narrow criteria for being “made whole” on the purchas price.
That’s only the tip of the iceberg. The irony is that local press releases are touting SB 643 as legislation that will reverse the current state of injustice. It will not.
Mr. Cowherd is correct that condo owners’ rights need to be protected at least as much as any other property owner involved in an eminent domain taking by the local government. Yet, under current law, there is no such protection for condo or HOA owners.
Excellent presentation by the Texas and Virginia attorneys. As pointed out though homeowners most often can not afford to hire an attorney to argue against the community associations’ injustices. In Florida, provisions have been given for the prevailing party to get attorney fees on condo and hoa disputes but I wonder if there are any number of attorneys willing to take on justified cases based on not charging client fees but relying on the court to award fees to them?
A recent news release on SB 643, the FL bill intended to help condo owners dissenting to termination forced by investors/bulk buyers/developers
http://tbo.com/news/politics/legislature-oks-bill-to-protect-condo-owners-20150428/
The Real Estate broker crusading for this law is “lukewarm” as to its current language. She is disappointed, and acknowledges this bill, if signed by Gov. Scott, will offer only limited consumer protection for resident (homestead) condo owners .
Note the attitude of real estate attorneys and even the author of the bill — “we have to balance the rights of different kinds of owners.”
In other words, we have to cater to owners who are in this corporate shell game to make as much profit as possible – even if that means exploiting the rights of onwer-occupants.
Tell me, were these condos marketed as places to live or merely investment commodities? We know the answer. Just watch any real estate commercial, where the message is to tug at your heartstrings of finding the perfect place to make a home. Nowhere in buyer’s disclosure is it prominently and explicitly stated that non-resident “bulk owners” (ie-investors or developers) can literally steal most or all of your equity, leaving you homeless, potentially in debt, and penniless.
If that were disclosed up front, the only people willing to buy would be those with deep pockets willing to take an investment risk – like playing the stock market, or, in some cases, gambling in the casino.
“we have to balance the rights of different kinds of owners.”
I always get disgusted when I hear some industry apparatchik or politician say something like that: “We need to balance the rights of the home owners with the rights of _______________” (fill in blank with whatever organization is trying to deprive the individual home owners of their property).
Ideologically, these are often the same people who preach about “property rights” — and scream the loudest about eminent domain abuse — but have no problem with an individual’s property rights being delegated to a 3rd party corporation.
The motto of the H.O.A. industry should be “Your home is our business”.