Friday, March 6, 2009

Reining in the HOAs

On the hierarchy of human needs, shelter ranks pretty high. Depending upon your situation, it’s likely right up there with food, water and watching football. Sadly, it’s this need that is most imperiled by today’s economic downturn. Foreclosures are at an all-time high, as homeowners struggle to meet their mortgage payments.

Consider, then, the case of homeowners who have met their mortgage obligation, yet still face foreclosure. You see, Texas is one of the few states that allows Home Owners Associations to initiate foreclosure for non-payment of fees. Granted, HOA dues are a contractual obligation that buyers know about before they sign on the dotted line. But unpaid fees can be made up of more than just dues. Penalties. Fines. Special assessments. All can add up – and in some cases, compound – until a homeowner is facing a hefty sum.

The scary part this is that, unlike most other governing bodies, HOAs are not subject to the same rules that apply to city or county governments, or even school districts. HOAs are guided only by their by-laws and declarations, which may vary widely from group to group, and may not even be publicly disclosed. They’re often controlled by people with little or no experience in public policy. This has led to cases where homeowners have racked up serious fees, often for minor “offenses” having nothing to do with dues. Push comes to shove and the next thing you know, they’re facing the loss of the roof over their heads.

At least two Texas legislators have had enough. Burt Solomons (R-Carrolton) has filed House Bill 1976 to try and curb some of the power HOAs wield in Texas. State Senator Royce West has filed a similar bill (SB429) in the Senate. Solomon’s bill seeks to curtail HOAs in several areas, but the most significant is that it removes their ability to foreclose on a homeowner’s mortgage due to unpaid fines. They can still file a lien against the property, but in most cases they’ll have to wait until the property is sold to collect.

Taking the fight one step further, Solomons’ bill would change how HOAs do business. First of all, it requires that HOAs follow the same Open Meeting guidelines as every other government entity. No more closed door sessions and behind the scenes machinations. Everything out in the open, folks.

Some of the bill’s restrictions seem to be a direct response to events right here in Frisco. No longer would an HOA be able to restrict what kind of car you park in your driveway. And boards could not restrict any member from running for office, unless he or she is a convicted felon.

Many will argue that Solomons’ bill eliminates the ability of HOAs to do what they’re supposed to do: keep the neighborhood amenities repaired and help protect property values. Certainly, taking away the foreclosure option removes one of the big sticks that HOAs use to compel people to pay their dues.

Another provision of the bill eliminates HOAs from entering your property to enforce rules. So if your neighbor’s grass is 2 feet high, you can’t just go over there and mow it. Then again, given Texas’ Castle Laws, that’s probably not a good idea in the first place.

Nobody is suggesting that HOAs are inherently evil. The vast majority are well run by civic-minded individuals just trying to keep the neighborhood looking neat. For these organizations, the changes being discussed may make their job a bit more challenging. A few more forms to fill out. Perhaps not as much money in the kitty for the big block party.

It’s not clear how far HB1976 will go. There will certainly be organizations throwing lobbying money around to get it killed. Some tweaks will surely be found to (hopefully) improve it. I’m usually one of those that holds his breath whenever the Texas Legislature meets, hoping they just stay out of the way. But in this case, I’m happy to see them rein in a group that has become an un-regulated government entity. The home they save may be your own.


Henry Tisdale said...

An HOA with no power to enforce the rules is pointless.

My brother lives in an HOA in the Phoenix area. He has neighbors who have weeds that are 4-feet tall, trucks parked in the front yard, etc. They ignore the by-laws of the HOA because the HOA has no power to enforce the rules.

So he is pretty much stuck living there because it would be almost impossible to sell his house.

The other homeowners who moved away were forced to rent out their houses. The renters have even less inclination to keep up the property or follow the rules.

This neighborhood is only 6 years old.

- Allen Biehl said...

Funny, I got the same reaction from my Mother, who is an HOA president in Houston. I'll give you the same response I gave her... I reject the notion that the only enforcement mechanism available to HOAs is foreclosure. On top of filing liens, you have the full force of the courts, just like any other contract holder.