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Defective Product

As a corporation, an H.O.A. is a defective product.

The purpose of a corporation is to shield an investor's personal assets from the corporation's liability.

For example, if you own stock in Corporation X, and Corporation X goes bankrupt, or is fined by the government, the most you can lose is the value of your stock.

The creditors of Corporation X cannot go after your home, your car, your bank account, etc.

But if you live in an H.O.A., which is legally a corporation, your house is forever collateral to whatever debts and liabilities the H.O.A. corporation creates.  The assessments are a perpetual lien on your home, which can never be paid off.  Even after you have paid off the mortgage, your house is still collateral to the H.O.A. corporation -- forever.

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

But bankruptcies don’t typically occur with community associations for a big legal reason ― owners are essentially liable for the association’s debts. “What?” you say. Community associations are corporations, and aren’t shareholders protected from corporate obligations? Isn’t that the whole point of a corporation?

Yes, most community associations are corporations ― non profit mutual benefit corporations. But there is a major difference between a community association and the typical business corporation. With a typical corporation the investors’ (shareholders’) liability is limited to the amount of their individual investment. Community associations usually have something more ―lien rights to an individual owner’s separate interest, either a lot or a unit, and the personal obligation of an individual owner for his or her share of assessments.
. . .
A corporate bankruptcy filing essentially tells the world that the assets of the company are insufficient to meet its obligations to creditors.  But, where the value of all of the real estate interests within the community can be accessed through the lien process to pay assessments, where assessments are backed by the personal assets of all owners, and where the association has a statutory obligation to assess, the property and personal assets of the owners essentially become the “assets of the company. Collectively, these are likely to be more than adequate to pay any creditors.

If an H.O.A. corporation goes bankrupt, or is fined by the government for some illegal act, the creditors of the H.O.A. have the right to collect the H.O.A.'s debts from the individual homeowners.  This includes place liens on the homes within the H.O.A., and foreclosure if necessary to collect the debt owed by the H.O.A. corporation to the H.O.A.'s creditors.

A perpetual lien which can never be paid off can not enhance the value of a property.  Far from protecting an individual's property, the existence of an H.O.A. corporation endangers it.

UPDATE:  Adam Jason SInclair, a proponent of H.O.A.s, told reader Mike Reardon, who is suing his H.O.A., that

I would suggest that legal matters against your own interest, (which suing an HOA is) should only be as a last resort. As a homeowner in the association, you are in essence suing yourself, and who really wants to do that?

source:  comment by Adam Jason Sinclair on November 17, 2011 at 12:21pm 
"Occupy Your HOA"  November 15, 2011  www.examiner.com/hoa-in-west-palm-beach/occupy-your-hoa

If a homeowner wins a judgement against an H.O.A., the cost will simply be passed back to the homeowners.  The homeowners are responsible for the debts and liabilities incurred by the the H.O.A. corporation, "backed by the personal assets of all owners."

H.O.A. corporations, and their lawyers, have every incentive to sue homeowners for the most trivial of reasons.  Whereas homeowners have every incentive to not sue their H.O.A.  In both cases, the homeowners will be paying the H.O.A.'s lawyers before and afterwards.

Like the face-hugging parasite from the movie Alien, H.O.A.s have a "wonderful defense mechanism".

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Right To Own,
Feb 12, 2012, 10:11 AM
Right To Own,
Feb 12, 2012, 10:11 AM