"Buying into an HOA with your eyes wide open!"Click Here
One issue I've identified is that very little is discussed and taught about the potential issues with HOAs, and the HOA Industry itself. What we have not focused on is that all those amenities could change or go away based on decisions of volunteer board members (that are indemnified from any liability for their actions) and unlicensed and unregulated HOA management companies (they need not answer to anyone). That life in that HOA could either be pleasant and friendly or a constant source of confrontation and intimidation depending on the nature of that board or its managing agent. To that end I've tried to make it my mission to inform fellow Realtors and the public of things that they have to consider before buying in an HOA. I've written a sample HOA Industry Advisory at http://www.hoasavers.com/briefcase/30242_5192016105559AM13699.pdf covering issues about the HOA Industry that I believe all agents, buyers and owners should be aware of.
Who do you think the courts will hold accountable for disclosure issues where the buyer is harmed by failure to disclose significant material facts about the HOA and HOA Industry, or significant additional cost required by a special assessment not disclosed prior to closing? The volunteer board indemnified from liability for its actions, the unlicensed and unregulated management company or the licensed and regulated Realtor?
The Agency Disclosure came into existence due to problems with the public not knowing and being harmed. More people have been harmed by the current HOA Industry, and yet we have no disclosure about the very troubled HOA Industry. Possibly, this is because the HOA Industry has powerful lobby groups fighting to keep a disclosure from being utilized by Realtors, fighting to keep us from being educated on the numerous issues effecting our clients? Did you know that the court could hold you to a higher standard than the regulatory agencies? Are you comfortable just doing the bare minimum and taking a chance of being liable for damages to your client? The facts of the HOA Industry are reasonably discoverable. The disclosure of material facts trumps fiduciary duty. An HOA Industry Advisory helps agents protect themselves from future complaints. The best way to avoid claims of wrong doing is to lay all the cards on the table upfront. The fact that a real estate professional has fulfilled his or her obligations set out in the real estate licensing laws and rules may not necessarily satisfy the courts in the event of a lawsuit. An attorney has stated that using the HOA Industry Advisory probably provides you a certain level of protection. I have requested to speak to the AAR Risk Management Committee.
What I ask of you today is that you read the HOA Industry Advisory, and review any of the other information on my HOA website www.hoasavers.com, and learn as much as you can of the potential impacts on owning in an HOA. That you take this information and share it with other agents. And most importantly that you inform your clients on what to look for and what to ask prior to buying into an HOA.
I'm involved with a dedicated group of homeowners working with select state senators to propose and support legislation that will require HOAs to more completely disclose the financial and behavioral nature of the HOA to buyers and to protect buyers from undisclosed violations. We are also working on many other proposed legislation that will protect the interest and the rights of the homeowners, and limit the ability of an HOA to foreclose on a home. We are also working on requiring licensing and regulation of the HOA managers.
We ask for your support in our efforts to pass HOA reform legislation and that you include your voice to request that AAR and ADRE support these legislative efforts as well.
Thank you for your time and patience.
Why state licensing and substantial regulations of HOA property management companies is good for HOA Boards and owners!In formal classes the HOA industry money makers (property management companies and attorneys) seem to smirk/smile when they say “but ultimately the Board is responsible for everything.”
It seems most HOA attorneys are in lobby groups with the property management companies which then lobby to keep the HOA management companies unlicensed and unregulated (or as they say, self governed).
This is not in the best interest for you.
You are relying on self-proclaimed ‘professionals’ who are unlicensed and unregulated HOA property managers. When they give their so-called ‘expert advice,’ should they not be required to follow the laws, and be held accountable for their actions? As a Board member, you are…
Licensing and substantial regulations should result in less attorney fees! Simple issues such as not following the law, could be handled in a complaint department. The management company would be required to follow the law...no more ridiculous lawsuits due to not following open meeting laws, or refusing to show owners the records. They would be obligated to follow the law, and if they don’t, there would be fines, suspensions and revocations of licenses.
Call and email Legislators, Real Estate Commissioner, Association of Realtors and your city officials.
Don’t fall for the HOA industry saying it’s going to cost the HOAs more money. The cost to have a license and take classes, are just a part of doing business. Real estate agents aren’t complaining because the cost to renew their license is $75 in AZ, and they can take 24 hours of renewal classes for $100, and that is every two years!
Think about how much HOAs have already lost in the current circumstances, especially in attorney fees and embezzlement cases. HOAs can negotiate lower management fees than they are currently paying.
Credentialing is not enough. Something similar would be...imagine real estate agents not being licensed, and simply just being part of their lobby group, the Association of Realtors.
HOA reform needs to include: licensing and substantial regulations through the Dept of Real Estate, with the power to fine, suspend and revoke licenses, combined with a complaint process to handle HOA problems without attorney fees. Laws need to be made with no interference from lobby groups to ensure proper regulations. New substantial laws to benefit homeowners is the goal, consumers first, not lobby group members that are profiting off HOAs.
DEAR BOARD MEMBER,
PLEASE ATTEMPT TO FOLLOW THE RESERVE STUDY We do not want to be hit with a huge special assessment. Please notify all owners yearly on the reserve study; percent funded, how much is saved compared to how much is recommended to be saved, what repairs were done compared to the recommended repairs. Please do a reserve budget! A well-funded HOA, is something to put on your listing when you sell! Buyers are starting to look at this, not just the monthly fee. Arizona Real Estate Agents are sharing information with each other on how to better serve their clients, and reserve studies are the most important indicator of the financial health and past management of the HOA.
WE PAY FOR MAINTENANCE THAT IS REQUIRED VIA THE CCRS It’s no different than a house...if it’s not maintained the value will be less. Please use our funds wisely and maintain our property. Please treat all owners the same. Please also represent the truth about what the HOA insurance covers, and what the CCRs dictate.
UNLICENSED AND UNREGULATED HOA MANAGEMENT COMPANIES* Why are HOA management companies on our bank accounts? Why are HOA attorneys lobbying with HOA management companies to keep them unlicensed and unregulated, shouldn’t our attorneys lobby to add protections in the law for the homeowners and the Boards?
HOA ATTORNEY WARNING Make sure you are hiring and using an HOA attorney that will represent the HOA 100%, including holding the management company accountable for their actions. If they will not sue the management company, find one that will.
LAWSUITS They can interfere with the ability to obtain financing on our property. Please hold recall meetings when they are called for by owners, please fix safety issues and maintenance issues promptly, please make decisions that minimize the chance that there will be a lawsuit.
FINANCING ISSUES WITH CONDOMINIUMS If our community loses the ability for buyers to obtain financing, the value of the property will decrease. Please make sure the owner occupancy is tracked correctly, not just by onsite and offsite addresses. Please make sure the percent of owners more than 30 days or more delinquent is accurate. Please help when owners are trying to sell or refinance.
WE WANT MORE FROM YOU AND FROM THE LEGISLATORS Revise HOA management company agreements and add in the protections that are missing in the statutes since they are not licensed or regulated. Remove the indemnification clause for the management company; why pay to defend them if they are negligent? Please obtain your own bids for repairs in the community to try to ensure we are not overpaying, follow the reserve study, make sure there are procedures in place to help prevent embezzlement of our HOA funds. Are you getting copies of the bank statements directly from the bank? Are you checking the bank activity online so you can view the cashed checks? Are all board members reviewing the invoices? In class we were told that the Board can delegate to the management company, but that YOU are ultimately responsible. Changing the law making them accountable is needed. Please take accurate meeting minutes, and don’t allow the management company to modify them before you even get to see them.
FEES CHARGED BY THE MANAGEMENT COMPANY Do you know that the Board can negotiate lower fees for resales? Negotiate lower transfer and disclosure fees! And put a clause in the contract that they are not to charge owners for any other fees. Recent fees I’ve heard of are $20 to tell an owner what the fees are, and $100 to do a pre-closing inspection looking for violations (shouldn’t that be part of the disclosure fee!). And owners should get the fees to sell in writing from the management company. Too many owners have been surprised by additional fees at closing. Be careful with your management contracts; if copies are included, make sure printing is too. Make sure all new board members have copies of the contracts so they don’t pay for coupon books if they are included, so they don’t pay for a termite warranty when there is already one in place.
YOU ARE ON THE BOARD AND HAVE POWER Imagine America where all owners are fined for garbage cans, weeds, parking...and then sued for this, and all neighbors paying the attorney’s bill. If that seems crazy, then why is it ok for 20% of the population? Since we are part of the 20%, consider that when yielding your power. Use your power to make the community a better place to live for all who reside there. Look at other options than to sue owners. Utilize self help, and find out what options the City offers to help owners who can’t afford to maintain their property and are facing violations and potential lawsuits. Filing lawsuits against our neighbors should be a last resort.
Prepared by HOA Savers LLC, www.HOASAVERS.com
*In most states, such as in AZ, HOA management companies are not licensed or regulated.
Angela M. Soles, CPA, PA
8401 Lake Worth Rd., Suite 205
Lake Worth, FL 33467