The good and bad of HOAs - East Valley Tribune: News

The good and bad of HOAs

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Posted: Sunday, November 23, 2003 1:31 am | Updated: 2:22 pm, Thu Oct 6, 2011.

Tim Coughlin couldn’t live with one. Now he’s frustrated without one.

"I’ve been put through the wringer with my homeowners association," the Chandler resident said. "I’ve sued them twice. It’s a nightmare, and it still continues."

While Coughlin still owns property in that HOA, he now lives in a community that cannot enforce its Covenants, Conditions and Restrictions.

"If you don’t have an HOA, it can also be a nightmare," he said.

Homeowners associations are a way of life in the East Valley, a hot topic at the Legislature — where legislation to restrict associations is expected to be reintroduced early next year — and a subject that sparks emotion from both sides.

In the past month, there were the well-publicized cases of a Gilbert HOA trying to foreclose on the home of a terminally ill mother and a lawsuit filed against another Gilbert HOA over the height of a backyard play set and inconsistencies in enforcement of rules. The play set case was settled out of court.

Earlier this year, Scottsdale’s Gordon Fitzgerald filed a lawsuit against McCormick Ranch Property Owners’ Association in response to its actions to make him trim his palm tree. A court ruled in September in favor of the association and Fitzgerald is appealing that decision.

And last year, 77-year-old Marie Brown of Peoria was evicted for not paying more than $22,000 in fines, assessments and legal bills that began accumulating after she refused to trim her landscaping.

But also in the past month, the nonprofit Leadership Centre of Chandler held two training and networking sessions for HOA board members, including the first East Valley Homeowners Association Summit that attracted about 250 people to the Sheraton Mesa Hotel.

In these sessions, attendees were not discussing how to foreclose on a home or the right way to mow the lawn but rather encouraging social events, better communication, an opendoor policy, equal enforcement and ongoing training.

"In life, there are good neighbors and bad neighbors, good businesses and bad businesses, good attorneys and bad attorneys, and there are bad examples of HOAs," said Frank Mizner, executive director of The Dobson Association, the master association for the Dobson Ranch community in Mesa. "But what you don’t hear is the thousands of HOAs that run smoothly and provide good service."

There are more than 1,400 associations in Mesa, Scottsdale, Gilbert and Tempe. The number in Chandler was unavailable, city officials said.

They are mandated for all new developments in Gilbert and encouraged by other cities, whose historical duties of street and landscape maintenance and code enforcement are being turned over to the associations. Supporters claim that they increase property values, while opponents argue they are intrusive bodies with unregulated power.

"I think they are good, but they are bad too," Gilbert resident Angela Palumbo said. "It does keep a neighborhood looking nice . . . but they can dictate your life."

THE POWER OF FORECLOSURE

Evelyn Lyles is a terminally ill mother of three whose Gilbert HOA threatened to foreclose on her home. Lyles faced a $2,216 bill stemming from late and legal fees despite paying $1,800 to her association this year. Lyles fell behind on her $40 monthly dues while undergoing chemotherapy and radiation treatment for breast cancer.

After the Tribune reported the story last month, support and donations for Lyles poured in. The Western Skies Estates 4 HOA was chastised, while homeowners from around the East Valley were quick to point to another example of HOA abuse.

Pat Haruff of Mesa, a homeowner activist and president of the Coalition of HomeOwners for Rights and Education, blames HOA attorneys for these incidents — a few of which get publicized, while many more never go beyond a city’s neighborhood outreach department or elected officials’ e-mail box.

"If the attorneys couldn’t foreclose or couldn’t fine, they’d have to go back to chasing real ambulances," Haruff said.

State Rep. Eddie Farnsworth, R-Gilbert, introduced legislation during the 2003 session to require associations to wait at least seven years before foreclosing on a home. The waiting period was later reduced to three years but the bill died in a Senate committee.

Farnsworth said he will introduce similar legislation in the upcoming session but has not announced details.

"I don’t think HOAs should be able to foreclose on homes, period," Farnsworth said.

Gilbert Mayor Steve Berman, who received an e-mail from Lyles asking for help, said recent events have increased his support for Farnsworth’s plan.

"Earlier this year, it sounded like a good idea, but now it’s empirically obvious what’s at stake," Berman said.

The local chapter of the Community Associations Institute, a political group composed of attorneys, property management companies and HOA board members, opposed Farnsworth’s legislation.

"As offensive as it is in certain situations, foreclosure is the great equalizer between people who pay and people who don’t," said HOA attorney Scott Carpenter, a past CAI chapter president and current chairman of the group’s Legislative Action Committee.

Carpenter, who was not involved in the Lyles’ case, said taking away the right to foreclose — and thus enforce the assessments and fines — would shift the financial burden to the other homeowners.

"I’m trying to point out that you’ve got to be careful what you wish for," Carpenter said.

CHALLENGING THE STEREOTYPE

Some board presidents are pushing an enforcement approach that challenges the negative perception of HOAs.

Mizner said the goal of the Dobson Association and the community’s 11 subassociations is not to punish but to enforce the standards among the 5,000 residences.

"We’ve never foreclosed on a home in 30 years, and we’re one of the first and certainly largest associations," said Mizner, a former Mesa planning director.

Wayne Hatch, The Manors HOA board president in Gilbert, said he prefers to knock on doors and offer to help.

"If there’s a problem with the look of the home, or with paying dues, there is a reason why," Hatch said. "We try to find out the reason why and help them."

Communication is the key, said Stephanie Fee, assistant regional vice president for the Scottsdale office of Capital Consultants Management Corp., a national company which manages 10 associations in the East Valley.

"When the bad things happen, it always boils down to a lack of effort and lack of communication being made with the homeowner to try and correct the problem," she said.

Some argue that the media fuels the stereotype by focusing on the few bad decisions.

"The media will consider one or two people out of 300," said Helen Corson, secretary of the Scottsdale Council of Homeowner Associations, an HOA educational and political organization. "They don’t talk to the other 298 who like the rules enforced, don’t leave garbage cans out in the street and don’t paint their houses a weird color."

Susan Hard is a Gilbert board member and host of HOA Networking, a 100-person e-mail group of board members, real estate agents and property managers who exchange questions and answers. She is a big proponent of board member education, but not of HOAs themselves.

"Personally, if I had the opportunity not to live in a HOA, I would not live in a HOA," Hard said. "By design, it pits neighbor against neighbor."

LOOKING FOR REFORMS

Coughlin, who’s been frustrated living both with and without an HOA, supports state licensing of property management companies and better oversight of the HOA boards.

"The state needs to put rules and regulations on the associations and penalties for misconduct, just like they impose on their neighbors," Coughlin said.

Haruff agrees.

"We want accountability and responsibility from the boards. In Arizona, they are affecting over 1 million lives . . . and there’s no checks and balances," she said.

Gilbert resident and HOA board member Fred Fischer submitted a 22-page report to the town last week that explores the history and purpose of HOAs, as well as the problems he said are created by the power of the HOA attorneys and management companies, which control the education and disclosure being provided to the homeowner.

"A lot of this stuff you never hear spoken in an education class. Frankly, (the industry) doesn’t want people to know this stuff," said Fischer, whose report is available for public review.

As some push for legislative or regulatory changes, HOA groups continue to offer training for the neighborhood volunteers.

The Leadership Centre has plans for upcoming HOA forums in Chandler and Queen Creek, although no dates have been set. Leadership Centre founder and former Gilbert Mayor Cynthia Dunham plans to make the East Valley summit an annual event and continue forums in Mesa, Gilbert, Chandler and Queen Creek.

"It’s a little education and a lot of relationship building," Dunham said. "It’s nice to find out what other people are doing since we all share the same issues."

Corson’s Scottsdale group holds monthly meetings for its more than 100 association members to discuss topics such as roofing, street paving, swimming pools, landscaping and tree maintenance.

Hard said she started HOA Networking after taking HOA education classes and realizing the responsibility of board members.

"If you have a property manager that doesn’t know what they are doing and you as a board don’t know what you are doing, you’re running a multimillion dollar corporation and no one knows how to drive the car," Hard said.

Homeowner association laws

Arizona homeowner associations receive their power and authority primarily from state statute, along with the associations’ governing documents and other federal and state regulations.

According to a published legal definition, homeowners associations are formal legal entities created to maintain common areas and enforce private deed restrictions.

Specifically, an HOA is an organization where all owners are automatic members, mandatory fees or assessments are levied against owners to operate the association, and owners share a property interest in the community.

The documents that govern an HOA are the Covenants, Conditions and Restrictions (CC&Rs), Articles of Incorporation, Bylaws and Rules and Regulations.

The CC &Rs are recorded with the county, and empower the HOA to control property use, including construction and alteration of homes. The CC &Rs are an enforceable contract between the HOA and homeowners. The articles of incorporation are filed with the Arizona Corporation Commission, the bylaws determine the procedures for governance and operation of the association, and the rules relate to the use of the property not specifically covered by the CC&Rs.

All board meetings must be open to all members, but, unless amended by the bylaws, the members may be prohibited from participating in the discussion by a majority vote of a board. A meeting may be closed to discuss legal or personnel matters or pending matters related to enforcement of the association’s documents or rules.

HOAs may impose past due charges for late assessment payments. Fines may be imposed for violations of the bylaws or rules. There is no limitation on these fees. If fines remain unpaid, an HOA can place a lien and eventually foreclose on a residence.

Financial records and other documents must be reasonably available for members to view. Personnel and legal matters may be withheld.

Violators have a right to be heard, but there’s no statutory process for the hearing and appeal.

HOAs must also abide by federal statutes and regulations, including the Civil Rights Act and Internal Revenue Code.

SOURCE: Arizona Revised Statutes, Arizona State Legislature

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