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Are HOAs Necessary?


The argument in favor of H.O.A.s runs something like, "H.O.A.s preserve property values by enforcing the rules."

Aside from the fact that it has not been proven that H.O.A.s preserve property values -- as evidenced by the ongoing housing market crisis -- nor has it been proven that "enforcing the rules" preserves property values, are H.O.A.s even necessary to "enforce the rules"?

No.   

I do understand your point about keeping up the deed restrictions, but careful, because you may be falling into a common error. Restrictive covenants are one thing, and HOAs are another. In order to enforce a neighborhood's restrictive covenants, it is NOT necessary to have an HOA. It is true that having a HOA can make it easier to enforce the covenants, in several ways. For one thing, you don't need to find a homeowner to be a plaintiff, although any homeowner will do and it shouldn't be that hard to find one if anyone's really interested. For another, if you have an HOA, you can bill all the neighbors and force them to help pay for the lawsuit. For another, you can enforce the collection of this bill with a lien against everyone's house. Finally, if the HOA wins the dispute with the homeowner whose grass is too high, or whatever (and the HOA always wins, because the rules and vague and discretionary and totally in its favor), the HOA has a lien against the homeowner for the penalties and legal expenses. As in, $700 for the pain and suffering caused by the too-high grass, and $15,000 for the lawyers.

The question is whether all this is a good trade-off. Without the HOA, the neighbors have deed restrictions and any one of them (or group of them) can sue if someone violates the restrictions. The concerned neighbors will have to pass the hat to pay for the lawsuit, so they probably won't sue if it's not pretty important. They can always coordinate all this through a civic club, which probably will be funded by voluntary contributions, which are a pain to collect -- but all these factors make it likely the lawsuits won't get out of control and people won't be losing their homes to foreclosure over silly disputes. Oil stains on the driveway, flagpole too tall, mailbox in non-approved location, shrubbery not up to snuff, miniblinds in front windows not approved shade of ecru -- and I'm NOT making those up, they are from real court cases.

My 50-year-old non-HOA neighborhood in Harris County had mild deed restrictions. The place didn't look like a manicured showplace with totally coordinated everything, but we kept  the major problems under control. No management company, no law firm, no out-of-control Inspectors General on the board, no foreclosures, and no bitter divisions among neighbors. Every few years someone tried to convert the neighborhood to an HOA, but they always got voted down after a public campaign. It takes healthy local grassroots political involvement, which has the added advantage of strengthening the community for other purposes.

The whole thing is a lot trickier for townhouses and condos, where I'd think it would be hard to avoid some kind of HOA with teeth.
source:  a comment by "Texan99" at  http://www.theatlantic.com/business/archive/2010/08/mortgage-blogging/60884/


As H.O.A. attorney Tyler Berding wrote:

"Owners can sue each other directly to enforce the rules but most would rather not do that. It’s messy and expensive and personal. Instead the corporation does it. But that doesn’t change the essential character of the dispute; it just makes it less intimate. Associations, like governments, provide the anonymity and security that prevent street brawls."
source:  "It's Your Neighbors, Stupid."  May 21, 2011.

What Mr. Berding ignores is that when an H.O.A. corporation takes action against a homeowner, it is still messy and expensive and personal for the homeowner involved.
 
The mere existence of an H.O.A., which unlike an individual has no incentive to control legal costs, encourages messy and expensive and personal conflicts and litigation.



Notes :

[note to self:  there was a story about an H.O.A. where the entire board resigned.  Since the H.O.A. corporation was not dissolved, the homeowners still had a contractual obligation to pay assessments, which were collected by the property management company, even though the company was not providing any service.  Find this story and post it here].


Story about HOA that collects dues but does not provide services:


Posted: 8:11 p.m. Monday, Oct. 31, 2011
Residents upset over unfinished neighborhood
By Carl Willis
 COLLEGE PARK, Ga. —

Dozens of College Park homeowners said they've been abandoned by their builders. In addition, they say they have to pay a homeowner's association for services they're not getting.

Yuma Mallard told Channel 2 Action News that she was promised a subdivision with 200 homes and amenities including a swimming pool and field for children to play. 

    . . .

Trash is collecting where new homes were supposed to be built, and the subdivision is barely three years old.

At the entrance, the swimming pool at the community clubhouse is filled with green water and chained up.

"It's just frustrating because we've tried to come together as a community. We've tried to do things on our own, and it's like who is speaking for the little people?" Mallard said.

Neighbors said the developer, Atreus Home Builders, lost the property when the housing market collapsed.

Shortly after, she said the homeowner's association stopped servicing the properties, but they kept on collecting the fees.

"They're still accepting our assessments, and we haven't been able to swim in our pool in over three years," said homeowner Melvin Coltrane.

The fees are about $500 a year. Due to the lack of service, some homeowners have stopped paying. 
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