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A homeowners' association, (or, as they are known in the industry, community association) is an organization comprised of all owners of units in a common interest development, and is given authority to enforce the covenants, conditions, and restrictions and managing the common amenities of the development. Most homeowners' associations are now non-profit corporations, and are subject to state statutes that govern non-profit corporations and homeowner associations.

The fastest growing form of housing in the United States today are common-interest developments, a category that includes planned-unit developments of single-family homes, condominiums, and cooperative apartments. Before the first unit is sold in one of these developments, the developer records restrictive covenants on all of the properties.

Covenants and deed restrictions are exclusionary by nature, and in the first half of the 20th century most were racially motivated For example, a racial covenant in a Seattle, Washington neighborhood stated, "No part of said property hereby conveyed shall ever be used or occupied by any Hebrew or by any person of the Ethiopian, Malay or any Asiatic race." In 1948, the United States Supreme Court ruled such covenants unenforceable, in Shelley v. Kraemer. However, private contracts kept them alive until The Fair Housing Act of 1968 banned them. Racial restrictions are often still found on deeds throughout the United States.

Since 1914 builders of common interest developments and firms and companies that sell services to homeowner associations have said that deed restrictions protect property values — a rationale that remains the most common justification for the loss of freedom inherent in a development run under a regime of restrictive covenants. For example, these covenants may authorize the board or a designated committee to approve the color a house is painted, or the types of flowers and shrubbery planted, and even regulate the conduct of homeowners. Restrictive covenants run with the land, meaning that they bind subsequent purchasers.

Proliferation of Homeowners' Associations

Since 1964, homeowner associations have become increasingly common in the USA. The Community Associations Institute trade association estimated that HOAs governed 23 million American homes and 57 million residents in 2006.

Powers

Like a city, associations provide services, regulate activities, levy taxes (assessments), and impose fines. Unlike a municipal government, however, homeowners associations are not subject to the Constitutional constraints that public government must abide by. The board carries out tasks which would otherwise be performed by local governments or require private legal action under civil law. Boards appoint corporate officers, and may create subcommittees, such as "architectural control committees", pool committees and neighborhood watch committees.

Association boards are almost always comprised of volunteers from the community. These volunteers however, are not required to have any formal training, certification or credentials in business. During the construction and development phase of a new community, the developer of the property occupies seats on the board of directors until there are enough homeowners within the community to sustain the responsibility of filling all seats on the board. Some association boards hire property management companies and law firms to assist them in conducting association business.

Assessments

Homeowner associations can compel homeowners to pay a share, usually per-unit or based on square footage, of common expenses. These expenses generally arise from common property, which varies dramatically depending on the type of association. Some associations are, quite literally, towns, complete with private roads, services, utilities, amenities, community buildings, pools, and even schools. Others have no common property, but may charge for services or other matters determined to be in the best interests of the membership. For example, an association can bring legal challenges against other entities as determined by the board of directors, or membership vote if the governing documents so require. In states such as Colorado and others that have adopted the Uniform Common Interest Ownership Act, homeowners associations may have standing to represent their members in an action against the subdivisions' builder for negligence or other causes of action.

Assessments paid to homeowner associations in the United States amount to billions of dollars a year.

Controversies and criticisms

Constitutional Challenges

Homeowners have successfully challenged political speech restrictions in Associations that federal or state constitutional guarantees as rights. These rights include the freedom of speech, due process, and the right to peaceably assemble. A recent decision in New Jersey held that private residential communities could no more deny free speech to its residents to discuss public issues than municipal governments.

Until recently, courts have held private 'actors' are not subject to constitutional limitations -- that is, enforcers of private contracts are not subject to the same constitutional limitations as police officers or courts. However, in 2002 one appeals court, the 11th Circuit, declined to extend Shelley beyond racial discrimination, and so disallowed a challenge to an association's prohibition of "for sale" signs in Loren v. Sasser. In Loren, the court ruled that outside the racial covenant context, it would not view judicial enforcement of a private contract as state action, but as private action, and accordingly would disallow any First Amendment relief.

In a more recent 2002 case, after trial in the New Jersey Superior Court the trial judge ordered that the homeowners' association would not be subject to prohibitions against interfering with free speech of the New Jersey constitution, provisions that parallel the First Amendment but are more broadly applied. This trial judge's order was reversed on appeal, and the associations' restrictions on free speech were struck down, in Committee for a Better Twin Rivers v. Twin Rivers Homeowners' Assoc. (N.J. Superior Court, 2006). In the Twin Rivers case, a group of homeowners collectively called "The Committee for a Better Twin Rivers" sued the Association, for a mandatory injunction permitting homeowners to post political signs and strike down the political signage restrictions by the association as unconstitutional. The appeals court held the restrictions on political signs unconstitutional and void, relying on a 1946 United States Supreme Court case, Marsh v. Alabama. In Marsh, the Court held that a company-owned town that functioned like a government should be treated like one. Accordingly, the company town was subject to the First Amendment and could not abridge the employees' freedom of speech. Similarly, the New Jersey appeals court found the Twin Rivers Homeowners' Association was open to the public, contained public schools within its boundaries, and provided many traditionally public services and amenities such as roads. The court concluded the association had assumed many governmental functions, and therefore the New Jersey state constitution would apply to protect fundamental liberties from excessive abridgment by those who set and administered that Associations' "standards of the community." The residents' free speech liberties were excessively abridged by provisions in the standards that sought to prohibit them from even posting political signs; such prohibitions were therefore void.

Undemocratic

Many scholars and the AARP charge that in a variety of ways, CID private governments violate public policy by suppressing the rights of their residents . Specifically, HOA boards of directors are not bound by constitutional restrictions on governments, although they are a de-facto level of government. Proponents of HOA power point out that the master deed and bylaws create a set of rules for the community which is a voluntary agreement made when a buyer purchases the property in the community. A board of directors can be sued if it breaches its duties under the contract. However, lawsuits are expensive and even if the homeowner is in the right, the deck is stacked - he must pay both his own attorneys' fees as well as those of his opponent, through assessments.

Corporation and homeowner association laws provide a limited role for HOA homeowners.The structure of corporate governance fashioned by corporation laws is essentially a "top down," oligarchical structure. Unless either statutory law or the corporation's governing documents reserve a particular issue or action for approval by the members, corporation laws provide that the activities and affairs of a corporation shall be conducted and all corporate powers shall be exercised by or under the direction of the board of directors. Thus, unless member approval is specifically required either by some statute or by the association's governing documents, members who are not directors or officers have little or no role to play in the day-to-day management of their development. The authority of homeowner association management over mundane aspects of daily life is superimposed over the residents' absence of any meaningful opportunity to participate in the course and direction of their association.

Voting in a homeowner association is based on property ownership.Only property owners are eligible to vote in elections, so renters are disenfranchised, but still subject to the board's authority. Additionally, only one vote per unit may be cast, rather than one vote per adult occupant. Critics argue that homeowner associations establish a new community as a municipal corporation without ensuring that the residents governed will have a voice in the decision-making process.

Lack of checks and balances

Many argue that homeowners' associations wield the power of a government without having to submit to the checks and balances and other responsibilities of one.

The US Bill of Rights guarantees its citizens certain protections against abusive or intrusive government; however, these protections do not extend to private contracts. Homeowners' associations can function as governments, but structurally and operationally they are private corporations. Many state statutes now require HOAs to provide certain basic protections to its members; however, directors may not read or comply with state laws.

The Bureau of Homeowner Protection of the New Jersey Department of Community Affairs reported these disturbing observations of association conduct:

"Curiously, with rare exceptions, when the State has notified boards of minimal association legal obligation to owners, they dispute compliance. In a disturbing number of instances, those owners with board positions use their influence to punish other owners with whom they disagree."

"Perhaps most alarming is the revelation that boards, or board presidents desirous of acting contrary to law, their governing documents or to fundamental democratic principles, are unstoppable without extreme owner effort and often costly litigation."

Many of the problems affecting Homeowner Associations today may be explained by another statement taken from the "Hannaman Report":

"The complete absence of even minimally required standards, training or even orientations for those sitting on boards and the lack of independent oversight is readily apparent in the way boards exercise control."

Double taxation

All homeowners pay property taxes. These taxes are used to maintain roads, street lighting, parks, etc. Planned unit development owners pay association assessments that are used to maintain the 'private' roads, street lighting and parks of their developments. Local governments have saved money and reduced the community wide tax burden by requiring developers build 'public improvements' such as parks, passing the cost of maintenance of the improvements to the common-interest owners.

Some states (including Maryland, Missouri, New Jersey, and Texas), however, give citizens who are also residents of community associations specific tax breaks in recognition of the principle that they should not be double-taxed for services already provided to them.

Financial Risk for Homeowners

In some U.S. states, including California and Texas, a homeowners association can foreclose a member's house without any judicial procedure in order to collect special assessments, fees and even a fine. Other states, like Florida, require a judicial hearing. Foreclosure without a judicial hearing can occur when a power of sale clause exists in a mortgage or deed of trust.

Homeowners association boards can also collect special assessments from its members in addition to set fees, often without homeowners' vote. Special assessments sometimes require a homeowner vote if the amount exceeds a prescribed limit established in the Association's by-laws. In other cases, the amount of special assessments is completely at the board's discretion.

Increasingly, homeowner associations handle large amounts of money. Embezzlement from associations has occurred, as a result of dishonest board members or property managers. Losses have been in the millions of dollars.

The AARP has recently voiced concern that homeowners associations pose a risk to the financial welfare of their members. They have proposed that a homeowners "Bill Of Rights" be adopted by all 50 states to protect seniors from rogue Homeowner Associations.

See also

• Gated community
• Jesse Clyde Nichols
• Housing society
• Business Improvement District

References

1. Template:Harvard reference
2. James Foley v. Osborne Court Condominium, et al.; C.A. No. 96-360; Superior Court of Rhode Island, Newport; 1999 R.I. Super. Lexis 50
3. McKenzie, Evan. Privatopia: Homeowner Associations and the Rise of Residential Private Governments. Yale University Press. p. 7. ISBN 0-300-06638-4.
4. Plotkin, Wendy (Spring 2001). ""Hemmed in": The struggle against racial restrictive covenants and deed restrictions in Post-WWII Chicago". Retrieved 2007-04-13. {{cite journal}}: Cite journal requires |journal= (help); Unknown parameter |publication= ignored (help)
5. Racial covenants
6. Michaels, Christopher (2006). "Racial covenants still on deeds in Dane County". The Capital Times, reprinted at Madison Commons. Retrieved 2007-03-22. |
7. McKenzie, Evan. Privatopia: Homeowner Associations and the Rise of Residential Private Governments. Yale University Press. pp. 41–43. ISBN 0-300-06638-4.
8. CAI
9. Privatopia, p. 142
10. Brief of Amicus Curiae AARP in Twin Rivers litigation
11. See, e.g., Heritage Vill. Owners Ass'n Inc. v. Golden Heritage Investors Ltd., 89 P.3d 513 (Colo. Ct. App. 2004).
12. Educating Homeowners, Orange County Register, Nov. 12, 2006
13. Twin Rivers litigation Apellate judgement
14. Loren v. Sasser (11th Cir. 2002).
15. http://www.aclu-nj.org/downloads/TwinRiverDecision.pdf
16. Barton & Silverman 1994, p. xii.
17. Professor McKenzie, Privatopia, 21
18. ^ Template:Harvard reference
19. Barton & Silverman 1994, p. 36.
20. Professor McKenzie 1994, p. 20.
21. McKenzie 1994, p. 128.
22. Hugh Mields, Jr., Federally Assisted New Communities: New Dimensions in Urban Development (Washington, D.C.: Urban Land Institute, 1973), 54.
23. Katherine N. Rosenberry, "The Legislature Addresses Problems in the Law of Condominiums, Planned Development and Other Common Interest Projects," 3 California Real Property Journal p. 27 (Winter 1985).
24. "Texas Foreclosure Law". StopForeclosure.com. Retrieved 2007-05-07.
25. AARP: Homeowner Bill of Rights

Further reading

• David T. Beito, Peter Gordon, and Alexander Tabarrok, eds., The Voluntary City: Choice, Community, and Civil Society, University of Michigan Press, ISBN 0-472-08837-8/
• Ronald M. Sandgrund and Joseph F. Smith, "When the Developer Controls the Homeowner Association Board: The Benevolent Dictator?" The Colorado Lawyer, January 2002, p. 91.
• Robert H. Nelson, Private Neighborhoods: And the Transformation of Local Government Urban Institute Press (Washington, DC): 2005. ISBN 0877667519/ ISBN 978-0877667513/

External links

• The HOA Primer
• American Homeowners Resource Center - History, and news of homeowner associations
  • AHRC: Ten Things your CCR's Won't Disclose
• Editorial:Homeowner Boards Can't Exclude Democracy (Twin Rivers case)
• New York Times article, "Homeowner Boards Blur Line of Who Rules Roost" by Motoko Rich July 27, 2003
• Center for California Homeowner Association Law

Original references

The original article was based on an article first published at Internet-encyclopedia.org.

• Real estate
• Types of organization
• Housing