Who’s Running Your HOA?
This article from the AHRC and affiliate Texas Homeowners Association (click title link above for the full article), a homeowner consumer watch organization, provides the inside line on a growing 90 billion dollar unregulated industry of lobbyist, lawyers and community associations that operate as quasi-governmental identities and does anything but represent association members interest. Read this piece called “Culture of Lies” and other AHRC related links on how some families homes have been foreclosed on by associations at:
http://www.ahrc.com/new/index.php/src/news/sub/article/action/ShowMedia/id/2824
http://www.bizjournals.com/houston/stories/2005/04/25/story8.html -- (Silver Lake community fight to regain control of their HOA from a Johnson Development seated board -- developer of Sienna Plantation, Riverstone, Tuscan Lakes, Silver Lake, etc...)
http://www.ahrc.com/new/index.php/src/news/sub/article/action/ViewComments/mediaid/530
http://www.ahrc.com/new/index.php/src/news/sub/pressrel/action/ShowMedia/id/81
http://www.chron.com/cs/CDA/story.hts/front/1297991 -- (A Houston Chronicle article on the jump in HOA lead foreclosures, includes an interview with Sandy Denton, Sienna Plantation SPRAI manager hired by the Johnson Development Co. to run their HOA under the developer controlled board)
http://www.ahrc.com/new/index.php/src/tools/sub/newsletter/action/display/id/632
Locally, most HOAs along the Sienna Parkway corridor and McKeever Rd. area are independent HOAs and not affiliates of the CAI (Community Associations Institute), but the largest subdivision HOA, Sienna Plantation Residents Association (with nearly 3000 homes), is a member and the current director of this association is finishing the term as president of this organization. Read the linked articles above on the impact of CAI and related groups that work with an industry of lobbyist and lawyers around the country in the “HOA Industry”.
Stay informed and keep in touch!
posted by responsible_dvlpmnt at Monday, May 29, 2006
22 Comments:
From AHRC thread on this issue:
1. Wisdom of Gandhi...
• All business depends upon men fulfilling their promises.
• The language of lips is easily taught: but who can teach the language of the heart.
• Civilization is the encouragement of differences. Civilization thus becomes a synonyn of democracy. Force, violence, pressure, or compulsion with a view to conformity is therefore both uncivilized and undemocratic.
• God is no dictator. He leaves us the freedon to master ourselves.
• God makes no distiinction between his worshippers.
• Peace between countries must rest on the solid foundation of love between individuals. Love gives men a partnership in the cares and needs of others. Hate and competition then yield to co-operation.
• There is only one omnipotent and one omnipresent God. He is named variously and we remember Him by the name which is most familiar to us.
• I am not against wealth. I am against wealth that enslaves.
• There is no such thing as "Gandhism" and I do not want to leave any sect after me. I do not claim to have originated any new principle or doctrine. I have simply tried in my own way to apply the eternal truths to our daily life and problems.
• What are we in this mighty universe? We are less than atoms, and as between atoms there is no use asking which is smaller and which is bigger. Inherently, we are all equal. The differences of race and skin, of mind and body, and of climate and nation are transitory. In the same way, essentially all religions are equal.
• Hinduism tells all people to worship God according to his own faith, and so it lives at peace with all religions.
• Speak the truth and remain non-violent at any cost.
• The Truth is far more powerful than any weapon of mass destruction.
...Quotes from Mohandas Karamchand Gandhi
Born October 2, 1869 - Died January 30, 1948
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More:
2. There have been tyrants and murderers, and for a time they can seem invincible, but in the end they always fall.
"When I despair, I remember that all through history the ways of truth and love have always won. There have been tyrants and murderers, and for a time they can seem invincible, but in the end they always fall. Think of it---always." Mahatma Gandhi
3. Yes,let the march begin! The key word being march.
March for justice, march in the streets, organize and march.
Let us start here in California where this all started with the Davis-Stirling Act.
Organize, alert the media and LET THE MARCH BEGIN in Los Angeles right down Wilshire Blvd, in front of the Federal Building.
and . . .
4. People, we should be very afraid of how our government desires to intern the masses into gated communes of colonialism.
This is a frighteningly realistic article! People, we should be very afraid of how our government desires to intern the masses into gated communes of colonialism.
Sincerely,
P. Flamingo
5. Board of directors and trying to "engrave" their personal tastes and opinions on other people.
Great article! I only wish more people would get involved from other parts of the country besides California and Florida and put a stop to such this senseless "dictatorship".
I am fighting my "board of directors" with everything that I can. The worst thing that can happen to the citizens of our country is when the wrong type of opinionated people get on the board of directors and try to "engrave" their personal tastes and opinions on other people.
How can we bring more attention to the media?
MCC/CRD will be working with other area HOAs to launch a Sienna Parkway Newsletter sometime this year. This newsletter will be delivered to every home in the area of Sienna Parkway and the McKeever Rd. HOAs. This is an independent non-affiliated information source for this region of hwy 6. Stay tuned as we gear up for this alternative source for families and homeowners, taxpayers and voters in this community.
The format will follow that of the MissouriCityChatter.blogspot.com by reviewing and including many local & regional sources of information as well as public submissions on matters impacting our area.
Stay informed and keep in touch!
BTW the Sienna board (HOA non-resident, self-appointed, not elected):
Suzy Mahoney (Sienna Johnson Public Relations/Marketing) -- SPRAI board member
Doug Goff (Johnson Development Senior V.P. and company appointed board pres.) -- SPRAI board member
Mike Smith (Sienna Johnson Development General Manager) -- Current company appointed SPRAI board president
Note: Several requests by homeowners/non-voting members over the last two years to include residents as voting members on this board have been ignored. Another option is to gain 2/3rds majority proxies for an annual meeting and present them. This would force the issue and no doubt spin off additional law suits. It would be nice if the board simply allowed 2 voting seats for residents voted by the nearly 2-3000 homeowners here in the community. This would allow them voting majority while giving minority voting voice to the members who pay nearly 4 million each year in annual dues.
From http://www.ahrc.com/new/index.php/src/news/sub/legis/action/ShowMedia/id/371
Remove Foreclosure Powers of Homeowner Associations
Access to this Home Equity Attracts Specialty Law Firms to a Volume Business
January 16, 2002
By Wendy Laubach
Houston, Texas -
I'm a lawyer, so I hope no one will think I'm engaged simply in lawyer bashing when I make this observation.
There is a common denominator in the most horrible HOA abuse stories that have been hitting the media in recent years.
That common denominator is legal fees: legal fees in the thousands of dollars.
Legal fees that dwarf the size of the original dispute.
The average HOA foreclosure involves less than $1,000 in dispute. The average legal fees awarded exceed $1,000.
Cases are frequently reported in the media in which a few hundred dollars in late dues turns into thousands of dollars of legal fees and results in the loss of a home.
How to fix this problem?
The number one best fix would be to remove the foreclosure power altogether.
After all, what is it that attracts specialty law firms to a volume business in HOA foreclosures?
What attracts them is access to the value of home equity.
Shut off that fuel valve, and you quench much of the fire.
Others today will speak more, I’m sure, about why the foreclosure power is not needed.
I will only observe that my neighborhood civic association has operated for 50 years without a foreclosure power.
We enjoy stable and increasing property values as well as neighborhood harmony.
I think you also will find from the comments today and your independent research that the most successful HOAs find a way to function without actually foreclosing.
They understand that exercising their foreclosure powers is a good way to create an adversarial neighborhood atmosphere, if not expose themselves to ruinous lawsuits.
I have some suggestions for partial cures if the foreclosure power cannot be done away with.
If there must be a lien on homesteads to secure HOA dues, confine the lien to the payment of dues.
Don’t extend it to the collection of penalties or fines, particularly the statutory $200/day fines that some HOAs routine impose for trivial covenant violations such as oil stains on driveways or mildew on garage doors.
If you find that there must be a lien to secure penalties as well as dues, then at least don’t extend the lien to legal fees.
In the American system, the parties typically pay their own legal fees.
It’s a good way to require them to be rational about when they use the expensive court system.
People should not be running up thousands of dollars to fight over hundreds of dollars in dues, just because they can reverse the charges.
It’s an invitation to lawsuit abuse.
Another suggestion is a change to one of the protective provisions in the new HOA law that took effect a few weeks ago.
The new law provides that the HOA must hold a hearing before taking certain enforcement actions, but it makes an exception for a suit to collect dues or a suit to foreclose a lien.
The exception should be removed.
Many suits to collect dues or foreclose liens could be avoided altogether if the parties were just required to talk to each other first.
The law requires that, when a hearing must be held, no legal fees can be run up until it’s finished.
That’s particularly appropriate before a collection or foreclosure suit is filed.
It would prevent the extremely common fact pattern of a dispute over nonpayment of a trivial amount of dues that balloons into a big lawsuit because a lawyer instantly sends out threatening letters and charges $150 a pop.
Pretty soon the suit becomes more about the fees than the dues.
The new law provides what sounds like a limitation on legal fees, but on closer examination it proves to be inadequate to the task.
The law allows the GREATER of $2,500 or 1/3 the amount in dispute.
First, the average amount in dispute is between $500 and $1,000, so $2,500 in fees is way too high a limit to do much good.
Second, the amount in dispute may not be simply the amount of unpaid dues.
It may not even be the actual cost of remedying some specific covenant default, like an unmowed lawn or unpainted garage door.
The statute unwisely allows HOAs to charge $200 a day for even the most trivial of covenant infractions, and HOAs routinely do charge it.
HOAs will be asking for legal fees equal to 1/3 their penalties.
The fees should be limited to 1/3 the unpaid assessments or 1/3 the actual out-of-pocket cost of fixing a problem, with no $2,500 alternative.
The new law says that HOAs can’t foreclose merely over fines or legal fees, which is a good change.
But there’s a problem with how the protection is supposed to work.
First, HOAs frequently attempt to foreclose over a trivial covenant violation, relying on their statutory right to charge $200/day.
It should not be possible to foreclose over anything less than a very serious covenant violation that seriously threatens the neighborhood.
This would exclude the typical HOA case that alleges a cracked flower pot on the front porch, a stain on the driveway, mildew on the garage door, an unmowed lawn, and so forth.
The statute should empower the court to sanction an HOA and its law firm for bringing a foreclosure action that is deemed, after trial, not to rise to a very high level of neighborhood safety and impact.
Second, when homeowners get behind in dues and try to catch up, HOAs routinely apply the payment first to fees and penalties, leaving some or all of the dues unpaid.
If HOAs were bound by the Federal Fair Debt Collections Practice Act, or the Texas equivalent, they would be required to apply payments to the actual debt rather than to penalties or legal fees.
The statute should be modified to make clear that HOAs must do so.
Otherwise, lawsuits will continue to be filed against homeowners who have cured their delinquency but have not paid huge sums in legal fees.
The new law allows foreclosed homeowners to redeem their property, which is a step in the right direction. However, there is a problem.
The statute provides that part of the price of redemption is to pay “any debt” then owing to the HOA.
I predict that HOAs will not permit homeowners to pay simply the amount they were sued over, plus the fees awarded by the court, which is bad enough.
HOAs will tack on any additional debt they believe can be imposed under their bylaws for additional or ongoing disputes.
The homeowner will never catch up, and the redemption right will prove illusory.
Finally, I have some comments about what needs to be done to ensure that HOAs function democratically.
HOAs are often touted as democratic institutions, and courts often are reluctant to interfere in their governance on the theory that HOAs are quasi-governments in which the homeowners have the right to express their wishes within their association’s own bylaws.
But those rights are routinely taken away by covenants and bylaws that would never pass muster in a real government.
HOA members need an HOA bill of rights.
Homeowners lack freedom of speech within their associations.
Homeowners who start alternative website or circulate flyers are harassed.
They are denied access to the HOA newsletters for which their own dues have paid.
The HOA law should guarantee freedom of speech and assembly.
The franchise needs to be protected.
The basic right of homeowners to vote is threatened by the standard form of bylaws used by most Houston HOAs.
Typical bylaws provide that homeowners cannot vote if an at time the board deems them in violation of any rule.
In the North Glen subdivision, citation letters went out to nearly 2/3 of the neighborhood just before an election.
This is particularly scary when you consider that the HOA law allows changes to the covenants themselves by a mere vote of a majority of members whenever a quorum is present, which may be a tiny fraction of the total property owners.
The HOA law should guarantee that no homeowner can lose his right to vote as long as he owns property in the neighborhood.
Homeowners are threatened with unreasonably vague covenants that serve as the basis for taking away their homes.
In a recent case reported by the Houston Chronicle, a foreclosure suit was filed over an oil stain.
The HOA covenants didn’t prohibit oil stains openly.
What they prohibited was “nuisances.”
No homeowner could possibly have imagined that he could be exposed to foreclosure merely for having an oil stain on his driveway, based on the “nuisance” language in the recorded covenants.
The HOA law should provide that foreclosure actions brought under unreasonably vague standards are void.
Certainly the law should provide that HOAs cannot be awarded their legal fees in cases of this kind.
Finally, the playing field for amending covenants needs to be level.
Currently, the law implies that the statute overrides the majority voting rule required for amending its covenants if it is voting to CREATE an HOA.
It should be equally clear that the vote required for an amendment is overridden by the statute if the neighborhood is voting to DISBAND the HOA and return to a voluntary civic association without liens.
Similarly, residents should have a periodic autmoatic chance to change their minds about whether the HOA regime is right for their neighborhood.
There should be a sunset law for HOAs unless a strong majority of the neighbors vote to keep them periodically.
The period for triggering the sunset law should be shorter for HOAs that have filed foreclosure actions on more than a small percentage of their members in any one year.
____________
1. Your article brought tears to my eyes
Thank you for this excellent article; especially the part about the Homeowner's Bill of Rights. It brought tears to my eyes.
If only we had known what we were in for, before we purchased a "home" in Crystal Pines II, in Durham NC. It has been hell on earth here, with all of our good neighbors abandoning their homes... selling at a loss, and "jumping ship." We are in the process ourselves since it appears hopeless to change human nature.
Reading something as well thought out as this article truly makes me believe that someday, there may be "hope on the horizon" again. To read anything about a "level playing field" and "freedom of speech" and "freedom of assembly" and "access to information and newsletters" brings tears to my eyes.
To think that we, as a country, fought for Freedom of Speech so long ago and have had it taken away so innocuously and in such hidden ways and have the courts uphold it has been mind-boggling, to say the least. The saddest thing of all is that it truly goes back to "human nature;" the"lawyers" have simply played on the all-too-human weakness shown by members of the community, and when someone "is appointed to the board" they "BECOME the BOARD." This is the saddest thing of all.
Please, keep up the good work... and thanks to all the articles written by such grand and effective thinkers as this person.
Thank you again.
Posted Jan 28 2003 8:33AM EST
2. Remove bank busting "arbitration" from homeowner association laws
Ah, such reason you propose -- it is refreshing!
Now, if we can put such as this into some sort of Bill, or Amendment it would be a huge step forward.
Lets work also on removing bank busting"arbitration" in those states, such as California, as a necessary step in filing a lawsuit against unfair practices, such as "selective enforcement of covenants" of an out of control board.
3. I'm taking a copy of this to the hearing before my board.
I'll be taking a copy of this to my hearing on May 28th. I'm sure that the Board will be ruling against me, so after they do I will leave them with a copy of this letter in a last ditch effort to get through to them and then I'll probably have to proceed with my lawsuit against them.
Oh, how fun it is living in an HOA neighborhood!
4. I have treasured every word you have ever told us
Wendy, if you ever ran for President (of the United States), I believe you would win hands down!
Yes, venal lawyers are the bane of our very existence. It is truly said, "first, you must kill all the lawyers." While we cannot do that *literally*, what we *can* do is PUBLICLY EXPOSE their venal corruption for all the world to see.
In the past, you have explained to me and others how to go about first dissolving one's homeowners association, then establishing something much more benign (a "neighborhood civic association", for example). I treasured every word you ever told us and still have all of the details you gave us carefully stored away in a very safe and secure place.
As was discussed back then, the details of each homeowners association contract must first be read very carefully by homeowners who afflicted with venally corrupt BoDs and their lawyers. Then the homeowner (or homeowners) should be absolutely sure they understand their HOA contract's profound legal, social and economic ramifications. While dissolving one's HOA and forming something akin to a neighborhood civic association might not be the appropriate thing to do for *all* HOAs (especially the large and complicated one's), it may well be the exactly right thing to do for the vast majority of HOAs.
Jan
5. Need information on how to remove the board and the Homeowner Association and go to a civic unit.
I completly agree with the article. I am in hopes of getting more information on how to remove the board and the Homeowner Association and go to a civic unit.
I believe that the majority of the board members on my HOA board have no business being there. It has gone to their heads to say the very least.
Not one member of our existing board have been elected, they have all been appointed, which by its self is saying something.
Would it be possible to get the information from Wendy Laubach on how to go about accomplishing the task of removing the board and the HOA?
6. The Madrid Manor Homeowner Association could sell my home for a $100. I already paid but they keep sending the check back
The Madrid Manor Homeowner Association in San Marcos, California is abusive and has been decreed by a Law Firm to working without regard to the Law.
They have put a balance forward on the Monthly bill for $100.00 that was paid in full the month before. I submitted a check for the correct amount and marked paid in full.
They refused the check 3 times. I have submitted it for the 4th time This time on the Bill Pay Internet. I have complained to Consumer Affairs and the Real Estate Board. I am afraid of lawyer retaliation. Sue Loftin Firm is now on the homeowners side. Although we pay for them in our dues.
They take the Boards side and could escalate the events to sell the home for the illegal $100.00 balance forward.
I need help
Any suggestions to thwart this illegal activity??
This restrictive covenant was passed in May, 2005. This comment on it came from a poster on another blog-site:
Sienna has even gone as far to update their Covenant to include the following. Notice they say ” rights-of-ways within or adjacent to the Properties”. This means they want to restrict free speech in or out of Sienna. Here is Proof that SDJ wants to limit free speech. Check section 2, they specifically don’t want owners to “assemble for the purpose of spreading propaganda”. “PROPAGANDA: Material disseminated by the advocates or opponents of a doctrine or cause” They don’t wany anything expressed that opposes their views. If you take this latterly you are not even allowed to have web site that opposes them. It would be easy for Sienna to enforce this rule on anyone that runs a web site or opposes their views.
SIENNA PLANTATION RESIDENTIAL ASSOCIATION, INC. RULES AND REGULATIONS REGARDING DISSEMINATION OF
INFORMATION IN AREAS OF COMMON RESPONSIBILITY Adopted:
The following Rules and Regulations Regarding Dissemination of Information in Areas of Common Responsibility (the “Rules”) are promulgated by the Board of Directors of the Sienna Plantation Residential Association, Inc. (the “Association”),pursuant to the authority found in the Declaration of Covenants, Conditions and Restrictions for Sienna Plantation Residential Association, Inc., recorded under Clerk’s File Number 9734406 in the Official Public Records of Real Property of Fort Bend County, Texas (the “Declaration”) and the Articles of Incorporation of the Association, filed with the Texas Secretary of State on the 9th of June, 1997. Unless otherwise specified herein or if the context clearly indicates otherwise, the words used in these Rules shall have the same meaning as set forth in the Declaration.
An Area of Common Responsibility is owned, maintained and/or controlled by the Association. Area of Common Responsibility, as defined in the Declaration, means the “Common Area, together with those areas, if any, which by contract or agreement become the responsibility of the Association. Road rights-of-ways within or adjacent to the Properties may be part of the Area of Common Responsibility.”
Common Area, as defined in the Declaration, means “any and all real and personal property and easements and other interests therein, together with the facilities and improvements located thereon, now or hereafter owned by the Association for the common use and enjoyment of the Owners and Occupants.”
The Association hereby adopts the following Rules: 1. No Owner and/or such Owner’s guests, invitees or agents may disseminate, post, or otherwise display or distribute any written information (including, but not limited to banners, handbills, newsletters, flyers, leaflets and the like) of any nature, content or kind, in or on an Area of Common Responsibility.
2. No Owner and/or such Owner’s guests, invitees, or agents may engage in any of the following activities in any Area of Common Responsibility: (a) picketing, (b)otherwise spreading propaganda, (c) using sound and/or voice amplifying devices(including, but not limited to microphones, amplifiers, or other similar devices), and/or (d) causing or encouraging persons to assemble for the purpose of spreading propaganda; provided, however, any such activities listed in this Section 2 shall be permitted so long as such activities are commenced in furtherance of a Community Sanctioned Event, as defined below.
3. A Community Sanctioned Event shall mean an event or activity approved by the Board of Directors and/or General Manager of the Association, which event or activity is (i) a fundraising, charity, pledge, drive or similar event sponsored and/or organized by the Association, the Declarant, other organization approved by the Association, or an organization defined under Section 501©(3) or 501©(4) of the Internal Revenue Code, or their successor statutes, or (ii) sponsored and/or organized by the Association for the benefit and/or enjoyment of the Owners and/or the community.
4. The determination of whether an Owner or such Owner’s guests, invitees, or agents are in violation of these Rules shall be made by the Board of Directors of the Association and/or the General Manager of the Association, in their sole and absolute discretion.
5. If an Owner or such Owner’s guests, invitees, or agents engage in activity prohibited by these Rules, the Association, pursuant to and to the extent of the authority granted in the Declaration may, take one or more of the following actions:
(a) suspend the enjoyment rights of such Owner with respect to the Common Areas for any period not to exceed sixty (60) days subject to notice that may be required by applicable law;
(b) consider a person who enters upon and is present in an Area of Common Responsibility for a purpose in violation of these Rules a trespasser; (c) impose fines, upon notice and opportunity to cure as may be required by Texas law; and/or (d) remove and/or dispose from the Areas of Common Common Responsibility any items that are placed and/or posted in the Areas of Common Responsibility in violation of these Rules; in doing so the Association or its agents shall not be subject to any liability for trespass, other tort or damages in connection with or arising from such removal and/or disposal nor in any way shall the Association or its agent be liable for any accounting or other claim for such action.
6. “Owner” shall not include the Association, the Declarant, or any of their respective agents, successors, designees, replacements or assigns.
Look what showed up on "The Missing Amendment" website:
http://www.themissingamendment.org/archives/freespeech_online.3.htm
Spat Over Apartments Could Impact Free Speech On The Web
It seemed an unlikely hinge upon which Texans' constitutional right to anonymous free speech might swing: How many apartment units should the developers of Sienna Plantation be allowed to build, and where should they be located?
Full story - Fort Bend Now
Posted Thu Oct 27 07:36:09 EDT
and http://www.themissingamendment.org/archives/freespeech_online.2.htm
Developer files lawsuit over Web site statements
MISSOURI CITY - A developer is suing a Sienna Plantation resident for defamation, accusing the resident of using a Web site to fabricate opposition to the developer's plans to build apartments.
Full story - Chron.com
Posted Sat Dec 17 09:26:29 EST
Ck this article out from blogHouston:
http://www.bloghouston.net/item/2487
(the comments are pretty interesting)
Ck this one out from http://distressed-homeowner.tripod.com/id19.html:
Homebuilder loses slander lawsuit
By CHRISTOPHER QUINN
The Atlanta Journal-Constitution
A lawsuit backfired on a Cherokee County homebuilder who sued a customer for complaining that work on his home was unfinished and shoddy.
Builder Kathy Nicotra sued Don Akridge for slander and interfering with her business, but Akridge fought back, countersuing Nicotra for breach of contract and warranty and negligent construction of his $485,000 home in the Lake Sovereign neighborhood.
A Cherokee County Superior Court jury sided with Akridge last month, finding that he did not slander Nicotra. The jury awarded him $36,000 for his claims.
"The little guy can win," Akridge said of his three-year fight.
Congratulations Mr. Akridge, from all of us at HADD!
See this homeowners advocacy group at:
http://groups.yahoo.com/group/TheTHomeownersAGroup
I have no problem with the association's foreclosure powers. And I like the idea that there are big penalties if my fellow homeowners don't pay their assessment -- WHY? BECAUSE OTHERWISE I END UP PAYING FOR THOSE DEADBEATS!!!!!
WHY DO FEEL SO SORRY FOR DEADBEATS? Yes the assessments are expensive, but it's really not much compared to their mortgage payment, car payment etc...
Wake up and realize that if you weaken the collection powers of HOAs that honest people like me are going to end up subsidizing a bunch of deadbeats. IF YOU DON'T WANT TO LOSE YOUR HOUSE -- PAY YOUR BILL!!!!
I think the problem comes with selective enforcement issues and other concerns from screening selection on the committees (as is the current practice) that make these decisions, especially given recent news in one community that the volunteers aren't all volunteers. On at least one committee (a chair position) is paid as a sub-contractor. This could be viewed as a conflict of interest when these advisory groups are advertised as "volunteer committees" for residents and homeowners to serve on.
Signed a deadbeat who pays all her/his bills (no matter how selective the enforcement). . . ; )
My law firm handles a significant number of HOA collections. 99% of them are folks that didn't pay the annual assessment and a large number of those are repeat customers (they pay late every year). Very very few foreclosures arise out of covenant enforcement.
Also, new communities always stay under developer control until the community is sufficiently built out -- its no surprise, it's in the association documents you received when you bought your house. The developer has spent tens of millions of dollars and will want to retain control until "cashing out". At that point control is turned over to residents. Sienna is already moving in this direction with the appointment of neighborhood reps.
You may be interested to know that the neigborhood rep. program does not provide voting representation on the board and when development issues come up that may hurt our property values the HOA should be representing the homeowners interest, and they aren't.
This article by attorney Wendy Laubach counters your industries claims and I believe a good friend of hers David Kohne faught a case you claim rarely happens all the way to the TX Supt. Ct.
I will post both below. BTW, are you a CAI affiliated law group (if you are I think your bias/association should be exposed before you post). Don't pretend to be a homeowner advocate:
Remove Foreclosure Powers of Homeowner Associations
Access to this Home Equity Attracts Specialty Law Firms to a Volume Business
January 16, 2002
By Wendy Laubach
Houston, Texas -
I'm a lawyer, so I hope no one will think I'm engaged simply in lawyer bashing when I make this observation.
There is a common denominator in the most horrible HOA abuse stories that have been hitting the media in recent years.
That common denominator is legal fees: legal fees in the thousands of dollars.
Legal fees that dwarf the size of the original dispute.
The average HOA foreclosure involves less than $1,000 in dispute. The average legal fees awarded exceed $1,000.
Cases are frequently reported in the media in which a few hundred dollars in late dues turns into thousands of dollars of legal fees and results in the loss of a home.
How to fix this problem?
The number one best fix would be to remove the foreclosure power altogether.
After all, what is it that attracts specialty law firms to a volume business in HOA foreclosures?
What attracts them is access to the value of home equity.
Shut off that fuel valve, and you quench much of the fire.
Others today will speak more, I’m sure, about why the foreclosure power is not needed.
I will only observe that my neighborhood civic association has operated for 50 years without a foreclosure power.
We enjoy stable and increasing property values as well as neighborhood harmony.
I think you also will find from the comments today and your independent research that the most successful HOAs find a way to function without actually foreclosing.
They understand that exercising their foreclosure powers is a good way to create an adversarial neighborhood atmosphere, if not expose themselves to ruinous lawsuits.
I have some suggestions for partial cures if the foreclosure power cannot be done away with.
If there must be a lien on homesteads to secure HOA dues, confine the lien to the payment of dues.
Don’t extend it to the collection of penalties or fines, particularly the statutory $200/day fines that some HOAs routine impose for trivial covenant violations such as oil stains on driveways or mildew on garage doors.
If you find that there must be a lien to secure penalties as well as dues, then at least don’t extend the lien to legal fees.
In the American system, the parties typically pay their own legal fees.
It’s a good way to require them to be rational about when they use the expensive court system.
People should not be running up thousands of dollars to fight over hundreds of dollars in dues, just because they can reverse the charges.
It’s an invitation to lawsuit abuse.
Another suggestion is a change to one of the protective provisions in the new HOA law that took effect a few weeks ago.
The new law provides that the HOA must hold a hearing before taking certain enforcement actions, but it makes an exception for a suit to collect dues or a suit to foreclose a lien.
The exception should be removed.
Many suits to collect dues or foreclose liens could be avoided altogether if the parties were just required to talk to each other first.
The law requires that, when a hearing must be held, no legal fees can be run up until it’s finished.
That’s particularly appropriate before a collection or foreclosure suit is filed.
It would prevent the extremely common fact pattern of a dispute over nonpayment of a trivial amount of dues that balloons into a big lawsuit because a lawyer instantly sends out threatening letters and charges $150 a pop.
Pretty soon the suit becomes more about the fees than the dues.
The new law provides what sounds like a limitation on legal fees, but on closer examination it proves to be inadequate to the task.
The law allows the GREATER of $2,500 or 1/3 the amount in dispute.
First, the average amount in dispute is between $500 and $1,000, so $2,500 in fees is way too high a limit to do much good.
Second, the amount in dispute may not be simply the amount of unpaid dues.
It may not even be the actual cost of remedying some specific covenant default, like an unmowed lawn or unpainted garage door.
The statute unwisely allows HOAs to charge $200 a day for even the most trivial of covenant infractions, and HOAs routinely do charge it.
HOAs will be asking for legal fees equal to 1/3 their penalties.
The fees should be limited to 1/3 the unpaid assessments or 1/3 the actual out-of-pocket cost of fixing a problem, with no $2,500 alternative.
The new law says that HOAs can’t foreclose merely over fines or legal fees, which is a good change.
But there’s a problem with how the protection is supposed to work.
First, HOAs frequently attempt to foreclose over a trivial covenant violation, relying on their statutory right to charge $200/day.
It should not be possible to foreclose over anything less than a very serious covenant violation that seriously threatens the neighborhood.
This would exclude the typical HOA case that alleges a cracked flower pot on the front porch, a stain on the driveway, mildew on the garage door, an unmowed lawn, and so forth.
The statute should empower the court to sanction an HOA and its law firm for bringing a foreclosure action that is deemed, after trial, not to rise to a very high level of neighborhood safety and impact.
Second, when homeowners get behind in dues and try to catch up, HOAs routinely apply the payment first to fees and penalties, leaving some or all of the dues unpaid.
If HOAs were bound by the Federal Fair Debt Collections Practice Act, or the Texas equivalent, they would be required to apply payments to the actual debt rather than to penalties or legal fees.
The statute should be modified to make clear that HOAs must do so.
Otherwise, lawsuits will continue to be filed against homeowners who have cured their delinquency but have not paid huge sums in legal fees.
The new law allows foreclosed homeowners to redeem their property, which is a step in the right direction. However, there is a problem.
The statute provides that part of the price of redemption is to pay “any debt” then owing to the HOA.
I predict that HOAs will not permit homeowners to pay simply the amount they were sued over, plus the fees awarded by the court, which is bad enough.
HOAs will tack on any additional debt they believe can be imposed under their bylaws for additional or ongoing disputes.
The homeowner will never catch up, and the redemption right will prove illusory.
Finally, I have some comments about what needs to be done to ensure that HOAs function democratically.
HOAs are often touted as democratic institutions, and courts often are reluctant to interfere in their governance on the theory that HOAs are quasi-governments in which the homeowners have the right to express their wishes within their association’s own bylaws.
But those rights are routinely taken away by covenants and bylaws that would never pass muster in a real government.
HOA members need an HOA bill of rights.
Homeowners lack freedom of speech within their associations.
Homeowners who start alternative website or circulate flyers are harassed.
They are denied access to the HOA newsletters for which their own dues have paid.
The HOA law should guarantee freedom of speech and assembly.
The franchise needs to be protected.
The basic right of homeowners to vote is threatened by the standard form of bylaws used by most Houston HOAs.
Typical bylaws provide that homeowners cannot vote if an at time the board deems them in violation of any rule.
In the North Glen subdivision, citation letters went out to nearly 2/3 of the neighborhood just before an election.
This is particularly scary when you consider that the HOA law allows changes to the covenants themselves by a mere vote of a majority of members whenever a quorum is present, which may be a tiny fraction of the total property owners.
The HOA law should guarantee that no homeowner can lose his right to vote as long as he owns property in the neighborhood.
Homeowners are threatened with unreasonably vague covenants that serve as the basis for taking away their homes.
In a recent case reported by the Houston Chronicle, a foreclosure suit was filed over an oil stain.
The HOA covenants didn’t prohibit oil stains openly.
What they prohibited was “nuisances.”
No homeowner could possibly have imagined that he could be exposed to foreclosure merely for having an oil stain on his driveway, based on the “nuisance” language in the recorded covenants.
The HOA law should provide that foreclosure actions brought under unreasonably vague standards are void.
Certainly the law should provide that HOAs cannot be awarded their legal fees in cases of this kind.
Finally, the playing field for amending covenants needs to be level.
Currently, the law implies that the statute overrides the majority voting rule required for amending its covenants if it is voting to CREATE an HOA.
It should be equally clear that the vote required for an amendment is overridden by the statute if the neighborhood is voting to DISBAND the HOA and return to a voluntary civic association without liens.
Similarly, residents should have a periodic autmoatic chance to change their minds about whether the HOA regime is right for their neighborhood.
There should be a sunset law for HOAs unless a strong majority of the neighbors vote to keep them periodically.
The period for triggering the sunset law should be shorter for HOAs that have filed foreclosure actions on more than a small percentage of their members in any one year.
Geneva Davis Case:
Case No: 06-01-00028-CV - Geneva Brooks v Northglen Associaition
Texas
Municipal Court
County of Harris County
Branch: Court of Appeals
GENEVA BROOKS d/b/a COMMITTEE TO REMOVE THE BOARD
DIANE HIGGINS
PAULINE WHITE
DON YUST
VIRGINIA YUST
AURELIO OJADA
ANTHONY MCBRIDE
AND SUSAN AUCLAIR
v.
NORTHGLEN ASSOCIATION
Summary
Geneva Brooks and other lot owners (lot owners) appeal from the trial court's summary
judgment granting declaratory relief in favor of Northglen Association, a homeowners' association (Northglen). The case as it stands on appeal concerns the authority of Northglen to levy and accumulate assessments against the lot owners and increase the amount of those assessments for maintenance purposes, and the authority of Northglen to foreclose liens securing those assessments against the homesteads of the lot owners who default in payment of the assessments.
Causes of Action: An appeal
Lawsuit Text
In TheCourt of Appeals
Sixth Appellate District of Texas at Texarkana
GENEVA BROOKS d/b/a COMMITTEE TO REMOVE THE BOARD, DIANE HIGGINS, PAULINE WHITE, DON YUST, VIRGINIA YUST, AURELIO OJADA,
ANTHONY MCBRIDE, AND SUSAN AUCLAIR, Appellants
NORTHGLEN ASSOCIATION, Appellee
On Appeal from the 129th Judicial District Court
Harris County, Texas
Trial Court No. 98-06564
Before Cornelius, C.J., Grant and Ross, JJ.
Opinion by Chief JusticeCornelius
Dissenting Opinion by Justice Grant
O P I N I O N
Geneva Brooks and other lot owners (lot owners) appeal from the trial court's summary
judgment granting declaratory relief in favor of Northglen Association, a homeowners' association (Northglen). The case as it stands on appeal concerns the authority of Northglen to levy and accumulate assessments against the lot owners and increase the amount of those assessments for maintenance purposes, and the authority of Northglen to foreclose liens securing those assessments against the homesteads of the lot owners who default in payment of the assessments.
This suit was originally commenced by Northglen, a homeowners' association for the
Northglen residential subdivision in Harris County. Northglen sought injunctive and declaratory relief against lot owners Geneva Brooks, Diane Higgins, Pauline White, Don Yust, Virginia Yust,Aurelio Ojeda, Anthony McBride, and Susan Auclair, because of their efforts to remove Northglen's board of directors. These efforts were allegedly directed against the directors because the board had instituted legal action against some of the lot owners for violating the restrictive covenants applicable to the subdivision. The suit accused the lot owners of spreading false rumors about the directors and interfering with the board's operations. The lot owners counterclaimed against Northglen, adding the individual directors as parties. The lot owners sought in the counterclaim declaratory relief pertaining to the assessment and collection of subdivision maintenance fees. The parties have dismissed all causes of action against each other except those related to the validity of the subdivision maintenance fees.
The trial court held that the maintenance fees for Northglen Sections one, two, and three
could be raised without limitation as determined by the subdivision board. The lot owners challenge this ruling in Issue Two. The trial court held that as to Sections four, five, and six, the amount of increases in maintenance fees that could legally be imposed were limited by the deed restrictions, but that Chapter 204 of the Texas Property Code permits Northglen to accumulate all increases authorized but not assessed in prior years and assess the cumulative total against the lot owners. This ruling is challenged in Issue One and Issue Three. The lot owners also challenge the trial court's ruling that the board may assess fees for late payments in addition to any penalties authorized by the restrictions. Issue Four challenges whether any additional liens authorized by Chapter 204 of the Texas Property Code may be foreclosed against a homestead interest. Issue Five challenges the award of attorney's fees to the lot owners if the case is reversed.
ISSUE ONE
The trial court held that Northglen may increase the assessments for Sections four, five, and
six, without a vote of the membership, to $120.00 per lot per year, plus the increase in the consumer price index per year or ten percent more than the prior year's assessment, whichever is greater. The court further held that the board could accumulate the authorized but unassessed increases as allowed by Tex. Prop. Code Ann. § 204.010(a)(16) (Vernon Supp. 2002).
The lot owners agree that the court properly interpreted the restrictive covenants for Sections four, five, and six as to the allowable increases, but disagree with the court's determination that Northglen's board had authority to accumulate and assess all increases under the authority of the statute. The lot owners argue that the court improperly interpreted the statute, or in the alternative, the statutory provision is unconstitutional as impairing the obligation of contracts under U.S. Const. art. I, § 10 and Tex. Const. art. I, § 16.
The pertinent provision of the restrictive covenants for Section four reads as follows:
Until January 1 of the year immediately following the conveyance of the first Lot to an Owner, the maximum annual assessment shall not exceed Ten ($10.00) Dollars per month, or One Hundred Twenty ($120.00) Dollars per annum, per Lot: provided, however, that from and after January 1 of the year immediately following the conveyance of the first Lot to an Owner, the Board of Directors of the Association shall be empowered to increase said rate as the needs of the Association require; except that if any such increase shall cause the annual assessment to be greater than the aforesaid $120.00 plus the rise, if any, of the Consumer Price Index as published by the United States Department of Labor for the preceding month of July; or more than One Hundred Ten (110%) percent of the amount assessed in the preceding calendar year, whichever is greater, then shall such an increase require the vote of two-thirds (2/3) of each class of members of the Association who are voting in person or by proxy, at a meeting duly called for that purpose.
The provisions for Sections five and six are substantially the same. The lot owners contend
that if the assessments are accumulated under Tex. Prop. Code Ann. § 204.010 (Vernon Supp. 2002), it would allow an increase of at least ten percent for every year the deed restrictions were in force (sixteen years) with interest compounded. They contend this would permit the annual assessment for these sections to increase from $120.00 per lot per year to more than $550.00.
Tex. Prop. Code Ann. § 204.010 provides, in pertinent part, as follows:
(a) Unless otherwise provided by the restrictions or the association's articles of incorporation or bylaws, the property owners' association, acting through its board of directors or trustees may:
(16) if the restrictions allow for an annual increase in the maximum regular assessment without a vote of the membership, assess the increase annually or accumulate and assess the increase after a number of years.
Reading the plain language of the statute and the pertinent portions of the restrictive
covenants for Sections four, five, and six, we agree with the trial court's determination. The
restrictions for these sections do not expressly "provide otherwise" to the statutory authorization, so accumulation of the previously authorized but unassessed annual increases is allowed. The phrase "unless otherwise provided" or similar language, when used in a statute, usually refers to other statutes pertaining to the same subject matter. Here we construe the language to refer to other statutes on the same subject matter, or to agreements or restrictions applicable to the subdivision.
We can find no instance where silence on the subject has been construed as "otherwise providing."
The lot owners argue that the original provision allowing for the assessments and the annual
increases in itself is an exclusive method of making the assessments and increases, and so it effectively "provides otherwise" to the statutory provision authorizing accumulation. We disagree. The deed restrictions in no way either authorize or prohibit accumulation. They are completely silent on that subject.
As we have already noted, we do not believe that silence on the subject of accumulation may reasonably be construed to be a positive or express provision that accumulation is not permitted. Indeed, it seems that if the Legislature had thought that the original assessment provision itself denied the authority to accumulate, it would not have used the phrase "unless
otherwise provided" in the statute authorizing accumulation. That the Legislature felt it necessary to use these words indicates, we think, that it did not believe that the bare provision for annual assessments necessarily prohibited accumulation.
The lot owners argue that if Chapter 204 of the Texas Property Code gives homeowners'
associations authority to accumulate and assess maintenance fees where the original deed restrictions do not, the statute would be unconstitutional as a retroactive law and because it impairs the obligation of contracts in violation of Article I, § 10 of the United States Constitution and Article I, § 16 of the Texas Constitution.
Article I, § 10 of the United States Constitution provides:
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law
impairing the Obligation of Contracts, or grant any Title of Nobility.
Article I, § 16 of the Texas Constitution provides:
No bill of attainder, ex post facto law, retroactive law, or any law impairing the obligation of contracts shall be made.
Although both the United States and Texas Constitutions prohibit laws that impair the
obligation of contracts, it is now well settled that state police power regulations dealing with physical things such as land or natural resources are valid even if they have incidental effects on pre-existing contracts, if those laws or regulations are exercised in the interest of the public welfare. Barshop v. Medina County Underground Water Conservation Dist., 925 S.W.2d 618 (Tex. 1996).
As stated by the United States Supreme Court in Henderson v. Thompson, 300 U.S. 258, 57 S.Ct. 447, 81 L.Ed. 632 (1937), the Texas Constitution has never been held to invalidate a police power statute dealing directly with physical things in the interest of the public welfare that touch only indirectly on contractual relationships that attached to those physical things before the statute or regulation was enacted. In so holding, the United States Supreme Court distinguished the Texas Supreme Court case of Travelers Ins. Co. v. Marshall, 124 Tex. 45, 76 S.W.2d 1007 (1934), by pointing out that in that case the law directly affected contracts by placing a moratorium on their enforcement.
So the law involved in Travelers v. Marshall did not merely incidentally affect a contractual provision relating to specific physical things, but directly and explicitly abrogated specific provisions of pre-existing contracts. Subsequent to the decision in Travelers v. Marshall, Texas courts have consistently followed the reasoning set out in Henderson v. Thompson. See Barshop v. Medina County Underground Water Conservation Dist., 925 S.W.2d 618; Tex. Water Comm'n v. City of Fort Worth, 875 S.W.2d 332 (Tex. App.-Austin 1994, writ denied); Tex. State Teachers Ass'n v. State of Texas, 711 S.W.2d 421 (Tex. App.-Austin 1986, writ ref'd n.r.e.); Kilpatrick v. State Bd. of Registration for Prof'l Eng'rs, 610 S.W.2d 867 (Tex. Civ. App.-Fort Worth 1980, writ ref'd n.r.e.); Andrada v. City of San Antonio, 555 S.W.2d 488, 491 (Tex. Civ. App.-San Antonio 1977, writ dism'd); State Bd. of Registration for Prof'l Eng'rs v. Wichita Eng'g Co., 504 S.W.2d 606 (Tex. Civ.
App.-Fort Worth 1973, writ ref'd n.r.e.); Dovilina v. Albert, 409 S.W.2d 616 (Tex. Civ.
App.-Amarillo 1966, writ ref'd n.r.e.). As noted by the court in Andrada v. City of San Antonio, 555 S.W.2d at 491, and as quoted from the opinion in Manigault v. Springs, 199 U.S. 473, 26 S.Ct. 127, 50 L.Ed. 274 (1905), "The interdiction of statutes impairing the obligation of contracts does not prevent the State from exercising such powers as are vested in it for the promotion of the common weal, or are necessary for the general good of the public, though contracts previously entered into between individuals may thereby be affected . . . in other words, . . . parties, by entering into contracts may not estop the Legislature from enacting laws intended for the public good."
Here, Section 204.010 of the Texas Property Code is not directed to any specific kind of
contracts, and it does not directly contradict any contractual provision prohibiting the accumulation of assessments. Indeed, it expressly does not authorize accumulation of assessments if the applicable agreements provide otherwise. Therefore, in authorizing the accumulation of assessments it does not impair the obligation of the homeowners' agreements with the subdivisions in the constitutional sense.
The lot owners argue that the statutory provisions of Chapter 204 do not pertain to physical
things and were not enacted to promote the common good under the police power, and therefore they violate the provisions against the impairment of contracts. We disagree. Zoning regulations affecting residential subdivisions as well as commercial developments are proper exercises of the police power and are valid even though they may affect or modify the provisions of previously executed contracts. See Biddle v. Bd. of Adjustment, 316 S.W.2d 437 (Tex. Civ. App.-Houston 1958, writ ref'd n.r.e.). Although Chapter 204 is not a zoning ordinance, it was enacted to promote the public welfare with regard to the property owners associations' ability to better provide services to the homeowners, maintain the common area facilities, and provide for the common security and restriction enforcement. Section 1(b)(3), (4) of the Statement of Legislative Policy (1) provides, for
example:
(3) it is in the best interest of residential real estate subdivisions that a procedure be
available to readily facilitate increases in the amount of the regular or special
assessments to allow the property owners' associations to better provide services to
the subdivisions; and (4) restrictions that severely limit the amount of the regular
assessment may result in the inability of an ineffective property owners' association
to maintain common area facilities, including swimming pools, tennis courts,
clubhouses, greenbelt areas, or jogging trails, or to provide services, including
streetlights, security, architectural control, and deed restriction enforcement.
We must initially presume that a legislative enactment is constitutional. Barshop v. Medina CountyUnderground Water Conservation Dist., 925 S.W.2d at 629. The Texas Property Code, Section 204.010, provides that public policy considerations require the adoption of the procedure allowing the modification of existing property restrictions in residential subdivisions.
As this statute is an expression of public policy for the promotion of the public welfare, and only incidentally affects pre-existing contracts, we find that it does not violate the United States or Texas Constitutional provisions prohibiting laws that impair the obligation of contracts. For the same reasons, we find that Chapter 204 is not unconstitutional as a retroactive law.
The lot owners mention in their brief that Chapter 204 may offend the due process and equal protection clauses, but the issue is not briefed so we will not consider it.
ISSUE TWO
The lot owners contend the trial court erred in holding that the restrictions for Northglen
Sections one, two, and three permit the association's board to increase the annual assessments without limitation and without a vote of the lot owners.
Restrictive covenants for residential subdivisions are subject to general rules of contract
construction. Pilarcik v. Emmons, 966 S.W.2d 474, 478 (Tex. 1998). Whether the restrictions are ambiguous is a question of law for the court to determine. An ambiguity is not present simply because the parties advance conflicting interpretations of the restrictions. No party here contends the restrictions are ambiguous. Because the interpretation of the restrictions turns on contract construction-a question of law-we review the decision of the trial court de novo. Ostrowski v. Ivanhoe Prop. Owners Improvement Ass'n, 38 S.W.3d 248, 252-53 (Tex. App.-Texarkana 2001, pet. denied); Highlands Mgmt. Co. v. First Interstate Bank of Tex., N.A., 956 S.W.2d 749, 752 n.1 (Tex. App.-Houston [14th Dist.] 1997, pet. denied).
We recognize several principles of contract construction as being applicable to this dispute.
Our primary concern is to give effect to the written expression of the parties' intent. The contract must be considered as a whole, and each part of the contract should be given effect. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex. 1994). It is the intent, expressed or apparent, in the writing that is controlling. New Caney Indep. Sch. Dist. v. Burnham AutoCountry, Inc., 30 S.W.3d 534, 539 (Tex. App.-Texarkana 2000, pet. denied). A restrictive covenant must be liberally construed to give effect to its evident purpose and intent. Tex. Prop. Code Ann. § 202.003(a) (Vernon 1995);
Benard v. Humble, 990 S.W.2d 929 (Tex. App.-Beaumont 1999, pet. denied); Candlelight Hills Civic Ass'n v. Goodwin, 763 S.W.2d 474, 477 (Tex. App.-Houston [14th Dist.] 1988, writ denied).
As to Northglen Section one, the pertinent language of the assessment provision is as follows:
2. Annual Assessment or Charge. Each Lot in said Subdivision,when said Lot is certified by the Subdivision Engineer to be a completed building site, is hereby subjected to an annual maintenance charge and assessment not to exceed $10 per month or $120 per
annum, for the purpose of creating a fund to be designated and known as the "maintenance fund," which maintenance charge and assessment will be paid by the Owner or Owners of each Lot within saidSubdivision, and any annexed areas, to Northglen Association in advance, annually, commencing as to all Lots on the first day of eachmonth following their certification of completion. The rate at which each Lot will be assessed will be determined annually by the Board of Directors of Northglen Association at least thirty (30) days in
advance of each annual assessment. Said rate and when the same is payable may be adjusted from year to year by said Board of Directors as the needs of the Subdivision may in the judgment of the Directors require.
As to Northglen Section two, the pertinent language of the assessment provision is as
follows:
2. Annual Assessment or Charge. Each Lot in said Subdivision, when said Lot is certified by the Subdivision Engineer to be a completed building site, is hereby subjected to an annual maintenance charge and assessment not to exceed $10 per month or $120 per annum, for the purpose of creating a fund to be designated and known as the "maintenance fund," which maintenance charge and assessment will be paid by the Owner or Owners of each Lot within said Subdivision, and any annexed areas, to Northglen Association in advance annually, commencing as to all Lots on the first day of the month following their certification of completion. The rate at which each Lot will be assessed will be determined annually by the Board of Directors of Northglen Association at least thirty (30) days in
advance of each annual assessment. Said rate and when same is payable may be adjusted from year to year by said Board of Directors as the needs of the Subdivision may in the judgment of the Directors require.
Although the trial court's reasoning is not set forth in its findings of fact or its judgment, its
ruling that Northglen's board of directors has unlimited authority to raise the annual maintenance assessment against each lot violates the principles of contract construction by which we are bound. We may not consider only the language in the restriction that permits the board to determine annually the rate at which each lot shall be assessed and simply ignore the language providing that the assessment shall not "exceed $10.00 per month or $120.00 per annum." Northglen contends that the stated limit, not to exceed $120.00 per lot per year, is applicable only until the "maintenance fund" referred to therein is fully funded, and after that occurs, the board has unlimited authority to determine additional maintenance assessments as it sees fit. The effect of this reasoning, however, would be to create two separate funds: one, the maintenance fund, limited to a maximum of $120.00 per lot per year; and two, another fund whose sources of revenue would be any amount assessed by
the board and collected from the lot owners over and above the maintenance fund amount.
The quoted language and language from other parts of the restrictions simply will not support such a construction. The language can only be reasonably read as creating one fund, the "maintenance fund." There was no evidence before the trial court that Northglen keeps two separate maintenance funds. Further, in another part of Section two's restrictions, in which disbursement of the funds collected by the association is authorized, the language clearly refers to only one fund from which the association's expenditures are authorized. See, for example, subsequent language fromArticle VI. (2), for Section 2:
Northglen Association shall use the proceeds of said maintenance fund for the use and benefit of all residents of said Subdivision, as well as those of all subsequent sections of the Subdivision annexed as hereinafter set forth. Such uses and benefits to be provided by said Association may include, by way of clarification and not limitation, any and all of the following: acquisition, construction and maintaining parks, parkways, rights-of-way, easements, esplanades and other public areas; supervising and contracting for the collection and disposition of garbage, ashes, rubbish and the like; maintenance of any Common Area; payment of all legal charges and expenses in connection with the enforcement of all recorded charges and assessments, covenants, restrictions and conditions affecting said property . . . .
The language permits expenditures for the stated purposes only from the proceeds of the "said maintenance fund," and not from any other source. The language does not authorize collection of or disbursement of any other fund for subdivision purposes.
Further, consistent with our obligation to give effect to all of the contract's terms, we may
not ignore the "not to exceed" language that imposes a limitation of the amount of assessments the association may assess. The maintenance fund assessments may not exceed $120.00 per lot per year. The trial court's judgment in this regard simply ignores the contractual limitation. Such a result cannot be reconciled with the language of the restrictions.
We disagree with the decision of the court in Samms v. Autumn Run Cmty. Improvement
Ass'n, 23 S.W.3d 398 (Tex. App.-Houston [1st Dist.] 2000, pet. denied). One of the issues in that case was the authority of the association to increase annual maintenance charges in the subdivision. The assessment provision in the restrictions involved in that case were almost identical to those here as they pertain to Sections one and two. In determining that the assessment provision gives the association the right to change the annual assessment every year as it sees fit, the court set out a portion of the provision emphasizing the language that allows an annual determination by the board
of the rate at which each lot will be assessed, and that allows the board to adjust the rate from year to year as the needs of the subdivision may, in the board's judgment, require. Although the language emphasized by the court, standing alone, would support its conclusion, the court ignored other language, including the "not to exceed" language in the same paragraph. The opinion also fails to consider that the effect of its ruling is to create two maintenance funds and another account of any amount over the "fully established" maintenance fund, which is nowhere authorized by the restrictions set out in the opinion.
As we noted earlier, in view of the "not to exceed" language, the evident intent of the
restrictions to establish only one maintenance fund, and the specific language limiting authorized expenditures for subdivision purposes to the maintenance fund, we conclude that the restrictions in our case do not permit unlimited increases in the rate at which each lot may be assessed. We are not permitted to isolate certain passages from the restrictions, emphasize them, and conclude to the contrary. We therefore conclude that the trial court erred in this regard.
In making our conclusion that the restrictions for Sections one and two do not allow the
association to raise the assessments above the "not to exceed" figure of $120.00 annually, we are not ignoring the language that allows the board to adjust the rate of the assessments from year to year. Rather, we construe this particular language to mean that the board may adjust the amount of the assessments within the "not to exceed" amount, and adjust and set the time when such assessments may be due.
In the Section three restrictions, the draftsman employed the same "not to exceed" language, i.e., that each lot in the section is subjected to an annual maintenance assessment not to exceed $10.00 per month or $120.00 per annum, for the purpose of creating a fund to be designated and known as the maintenance fund. The restrictions contain language authorizing the board to increase the maintenance charge as the needs of the subdivision require, but limits any increases in the annual assessment rate to ten percent per annum unless approved by a majority of both classes of membership voting at a meeting called for that purpose. The restrictions also state that the association shall "use the proceeds of said maintenance fund for the use and benefit of all residentsof said Subdivision . . . ."
Again, giving effect to all the language contained in the restrictions, we conclude that the
intent is to limit the assessments to a maximum of $120.00 per lot per year, and that more than a ten percent increase per year would require approval of the lot owners at a meeting called for that purpose. The lot owners' Issue Three is sustained as to Section three of Northglen.
Northglen contends that the Texas Property Code permits it to increase the maintenance
assessment notwithstanding the limitations contained in the restrictions. As we have previously noted, Tex. Prop. Code Ann. § 202.003(a) requires a liberal construction of the provisions of restrictive covenants. Northglen points out that the stated legislative policy that precipitated the enactment of Chapter 204 of the Texas Property Code, combined with the required liberal interpretation of the restrictions, gives it the right to increase maintenance fees without the prior approval of the lot owners. In enacting what would become Chapter 204, the Legislature specifically set out its policy determination:
(a) Public policy considerations require that a procedure be available to allow for the
extension of, addition to, or modification of existing property restrictions in residential real estate subdivisions.
(b) The legislature finds that:
(1) property owners' associations serve to benefit residential real estate
subdivisions and assist in avoiding the problems described by Section 201.002,
Property Code;
(2) there is a special relationship between property owners' associations and
the property owners within the subdivision;
(3) it is in the best interest of residential real estate subdivisions that a procedure be available to readily facilitate increases in the amount of the regular or
special assessments to allow the property owners' associations to better provide
services within the subdivisions; and
(4) restrictions that severely limit the amount of the regular assessment may
result in the inability of an ineffective property owners' association to maintain
common area facilities, including swimming pools, tennis courts, clubhouses,
greenbelt areas, or jogging trails, or to provide services, including streetlights,
security, architectural control and deed restriction enforcement.
(c) The purpose of this Act is to:
(1) provide a less burdensome procedure for extending the term of, adding to
or modifying residential real estate restrictions by approval and circulation of a
petition by a property owners' association.
Tex. Prop. Code Ann. § 204.001 historical note (Vernon Supp. 2002) (emphasis added) [Act of May 27, 1995, 74th Leg., ch. 1040, § 2, 1995 Tex. Gen. Laws 5170-5175].
Subsection (c)(1) specifically states that the purpose of the act is to provide a less
burdensome procedure for changing or adding to restrictions, which is by approving and circulating a petition. Further, we emphasized the phrase "extending the term of, adding to or modifying" because that or a similar phrase is used in subsequent sections of Chapter 204. For example, Section 204.003:
An express designation in a document creating restrictions applicable to a residential
real estate subdivision that provides for extension of, addition to, or modification of
existing restrictions by a designated number of owners of real property in the
subdivision prevails over the provisions of this chapter.
Tex. Prop. Code Ann. § 204.003 (Vernon 1995) (emphasis added). This section was addressing the problems recognized in Section 1(a) of the legislative policy statement, i.e., extending, modifying, or adding to existing restrictions. It specifically states that if such procedures are provided in the restrictions, they prevail over this chapter. The same phrase appears again in Tex. Prop. Code Ann. § 204.005 (Vernon Supp. 2002), both in the title of the section, "Extension of, Addition to, or Modification of Existing Restrictions," and, more importantly, in the language of the statute itself:
(a) A property owners' association has authority to approve and circulate a petition
relating to the extension of, addition to, or modification of existing restrictions. A
property owners' association is not required to comply with Sections 201.009-201.012.
(b) A petition to extend, add or modify existing restrictions approved and circulated
by a property owners' association is effective if:
(e) A property owners' association that circulates a petition must notify all record
owners of property in the subdivision in
_______________
I think this and your affiliations counter your position well. Good luck on rebuttal
I'm always leery when people want to change laws because of specific incidents or abuses. The Citizens Against Lawsuit Abuse are always quick to jump on seemingly outrageous jury verdicts as a reason we need tort reform, basically taking away the rights of all citizens due to the abuses of a few. Unfortunately, when these cases are overturned or vacated they never make the front page. If there is a widespread pattern, fine, but legislating from anecdotes is not a way to formulate good policy.
I've read the article before. I don't deny that abuses occur (no system is perfect) but I think eliminating the foreclosure remedy altogether is a drastic measure. The proposed caps on collection costs basically make small claims uncollectible -- meaning the association has little leverage to enforce covenants at all -- and maybe that's your point. But if you don't want to allow associations to enforce covenants, there's no point to the association existing to begin with -- and maybe that's your point as well. Our legal system does not handle small claims of any type efficiently. If someone owes you $500 or $1000, there is little you can do to efficiently collect under our present legal system. Some have suggested arbitration, but you'll hear horror stories aplenty about how arbitration works in the construction industry.
If your neighbor opens a junkyard on his front lawn, don't you want your association to have some tools to protect your property value? If not fines and foreclosure, what tools would you propose to compel homeowners to comply with the restrictions?
"If your neighbor opens a junkyard on his front lawn, don't you want your association to have some tools to protect your property value? If not fines and foreclosure, what tools would you propose to compel homeowners to comply with the restrictions?"
Fines should be more than adequate and what is more important is that democracies should not allow quasi-governmental entities to exist without adequate "real" representation (at large elected, not by proxy, homeowners--at least minority rep. until build out is finished. It is a complete waste of time to bring anything up before a un-elected, non-resident, self appointed board that is incorporated as a business). Here's another article on a "high-jacked" HOA board and subsequent lawsuit that feeds the industry pockets. BTW these are real case studies and hardly anecdotal (contrary to the CAI/ULI industry think tank claims):
Silver Lake, another Johnson Dev. community- http://www.bizjournals.com/houston/stories/2005/04/25/story8.h
This is an article from the AHRC (affiliate of the Texas Homeowner's Association) and a near million hit website (http://www.ahrc.com/new/index.php/src/news/sub/article/action/ShowMedia/id/2845 --- for full article):
HOMEOWNER ASSOCIATION COMMUNITIES: DYNASTIES OF DYSFUNCTION
April 29, 2006
By Donie Vanitzian (View author info)
Copyright Donie Vanitzian, BA, JD
In centuries past, an emperor could decide the fate of an entire community with nothing more than a nod of his head. Some believe a similar system exists today, but instead of one emperor there are boards of emperors who on a whim can decide the fate of an entire community of homeowners.
A quasi-judicial authoritarian panel is established called a "board of directors" which has an unmatched gift for political maneuvering. Directors don't need campaign contributions to stay in power because association operating funds can be plundered at will. The unchecked controls to distribute, gather, and process ballot and proxy votes ensures the imperial board continues its reign. Like dynasties of old, homeowner associations can fall prey to a debauched mistreatment of its owners.
MANAGERS OF MODERN TYRANNY
In the face of crumbling individual rights, censorship is encouraged and laws are passed that further prejudice homeowners. Not unlike feudal systems, boards delegate their authority to handpicked aiders and abetters who carry out their demands. Rebels, dissidents, and rivals of those in control are easily silenced or alienated from the faithful followers. In struggling to fight their aggressors, owners are peppered with intimidating salvos delivered by modern day lackeys like lawyers, managers and industry vendors. The job of aiders and abettors in the pecking order is to push through the board's agenda. As those minions become autonomous, the result is a wholesale disenfranchisement of those who are not part of the "chosen" few.
YOUR COOKIE, THEIR FORTUNE
Confronted by aggressive sales techniques, owners are seduced into an illusionary world of affordable housing developments. Frequently, buyers are led to believe they are buying a house "and" a community. Such synthetic communities should be viewed as "commodities" that are in turn reaped by another commodity called "buyers." Of course, the ultimate commodity permeating this housing scheme is money.
Because voluntary purchases are difficult to regulate, buyer problems usually surface after parting with thousands of dollars in down payments. No owner wants to admit they failed to adequately investigate what they bought; yet buyers have been known to do just that.
Some buyers may seek to justify their bad decisions by overestimating the definition of "value." No doubt believing they are graduating from the middle-class, new owners are quick to brag to friends that they have just purchased a condo packed with amenities. Irrespective of whether the buyer uses that gym or lap pool, they still boast of it. While wanting to leave others with an impression of accomplishment, little thought is given to the maintenance, risks and liabilities of all those "extras" accompanying their purchase. Owners choosing to ignore these added financial obligations later find themselves strapped for cash and unable to make ends meet. Unfortunately, the "largeness" of a development is often mistakenly analogized to the owner's personal success. Quite the opposite is true.
HUNTER AND HUNTED
"When a man wants to murder a tiger he calls it sport; when a tiger wants to murder him he calls it ferocity." George Bernard Shaw.
Generally, community association industries are parasitic businesses, constantly blurring the line between profit and profiteering. This has resulted in the evolution of an industry that does little more than look and act indispensable. Sucking the lifeblood from owners held hostage by a defective legal system, it is an organism that has perfected taking advantage of those that are most vulnerable.
Without the legislative mandate that owners must belong to the association and pay fees, the organism feeding and growing on those laws would shrivel up. Unable to otherwise nourish itself, the industry can be found wallowing below the association's bowels eagerly living off its excess and swallowing whatever morsels it sucks from its host. It is the homeowner's personal wealth that feeds those parasites which contribute nothing of consequence to the owners' well being. Like traditional hunters, the industry's survival depends on eating their kill.
THE GREAT WALL OF INEQUITY
Beige paint and potholes aside, artificially created communities undermine the social system as non-board member owners are relegated to positions of second-class citizenry. Built into this artificial aura of community is an unspoken association ranking order that is arbitrarily decided by a few persons perceived to be oh-so-important. This ranking order frequently reflects the wishes of influential members rather than the merits of those elected to the board or the "real" majority. Such living environments promote exploitation of those under it. Here, an owner's life can become subject to power-mad rulers with the means and ability to ruin and financially devastate them.
Only the owner has a vested interest in property, yet, outside vendors are often allowed to wield their influence on directors. This leaves owners who are lowest in the social order with minimal bargaining power over their living environment and assets. Because owners essentially relinquish control of their assets to those who have been elected to the board, the owner is burdened with a double financial risk.
"The owner's financial crisis differs substantially from the association's financial crisis. An association always has 'cash requirements,' and by law it can raise cash on demand from each owner. Even with this ability, these communities can remain in a constant flux of not being able to meet its liabilities. This means that a 'gain' for the association results in a corresponding 'loss' for each owner, subjecting seniors in particular to potential personal financial distress." T.Foster Real Estate Broker and Personal Financial Planner
As almost nothing in a community setting is designed to be resolved to the satisfaction of all owners, nearly every financial crisis a board faces can keep recurring. In this oppressive regime, owners become dispensable pawns.
MULTI-HEADED DRAGONS
For all the pomp and circumstance extolling spectacular benefits of community living, it is for the most part, excruciatingly boring, repetitive, time-consuming, and expensive, all, with little or no tangible return for owners.
Owners at odds with their association are similar to a minority shareholder taking on a corporate monster whose personality is both dysfunctional and manic. Picture a five-member board of directors, each with a different personality. As the board changes, so do the personalities of its directors. The multiple personalities of each successive board serve to hinder owner autonomy.
The stakes are high for homeowners and an unintentional mistake or error in judgment can have devastating results. The owner's position is instantly prejudiced not only by statute and case law, but also by the inferior status this environment accords. His membership is contingent on restrictions and rules he may not have seen, agreed to, or know to exist. Depending on the rules of any given association, fines, liens, and foreclosures can all occur. Yet, by law the owner must subscribe in order to belong to this fictional entity.
NO TIME FOR TEA
At first it may be unclear and frustrating figuring this out, but homeowners must understand the relevance of their inferior status in relation to the association and its board of directors. Start by treating the corporate association-entity for what it legally is -- a corporate fiction created to operate a business. That business is the "association." Next, view the board of directors like any other corporate board, except here, each director is "expected" to be in a "conflicted" position because they are both homeowner and director. When approached by the multiple personalities responsible for the owner's demise one must remember it is impossible to reason with a "fiction."
Given the large turnover in such developments, accomplishing anything becomes a feat in itself. In this atmosphere, it is a challenge for the owner to merely stay on track and stick to a viable game plan for emotional, financial, and physical survival. The corporate entity's adeptness lies in creating confusion and frustrating the opposition. Owners are the opposition. "Every problem the owner encounters steals days, weeks, months, and years away from their life - none can be recovered."
THE TAO OF TERRITORIAL RULE
Each newly elected board establishes its own dynasty and conquers the membership anew. In a real dynasty, mistakes in an emperor's judgment might lead to the downfall of the regime. In an association such mistakes might systematically be ignored or recur at great cost to owners, but the board goes on.
Directors can be influenced by irrational recommendations from those who lack the skill or expertise to render advice, while others succumb to a mob psychology resulting in poor decision-making and costly mistakes. "Once the psychological investment is made, more often than not, boards are loath to back down, even if doing so is the right thing to do."
By exploiting a failed legal system, boards avoid responsibility for their incompetence and greed by blaming global economics and deteriorating infrastructures. Circumventing political disorder while ensuring control of burgeoning fiefdoms, over-confident boards take office by dynastic succession while bypassing scrutiny over an election process. In many associations each new board will consume the financial surpluses accumulated during their predecessors' term and then invoice owners for more. When the board's system of alliances proves untenable, it often plunges into a condition of internal anarchy. Actions like these can result in the indefinite rise of owner assessments and fees to replenish operating accounts in order to stay solvent. As these internal control-monopolies thrive and property is debased, each owner's emotional currency is tested in ways they never thought possible.
Boards act to benefit the association and not the owners who are responsible for bankrolling the fictional enterprise. Uprisings by owners are gaining ground because their finances and hardships are discounted and their assets are at risk. High-density over-building, concentrations of noise, water, and traffic pollutants are aggravated by population migration. With each passing year, owners watch their property-related payouts and taxes increase while their property rights are reduced.
Self-assured directors are sustained primarily by virtue of their own use and misuse of homeowner funds. This abuse is virtually unchecked because there is no meaningful statutory accountability. An owner's only weapon to dislodge entrenched directors or those managing these dysfunctional dynasties entails the constant overthrow of those in power. Abolishing a system of exploitation takes extensive planning, consistent dedication and the financial means to sustain oneself during this time.
PERVERSION OF THE FITTEST
Something happens to owners when they are in an environment like this. By virtue of nothing more than a "membership" people who might otherwise champion against civil liberty violations or other medieval actions, find themselves promoting if not dispensing toleration of unacceptable behaviors. When aiders and abettors praise an errant board's "wisdom" or propagandize their perceived successes, it is accomplished at a great loss to owners.
In general, homeowners living in communities are "followers" and most reserve a special brand of contempt for their leaders and rulers. Those playing the part of "director" routinely fancy themselves as possessing a type of scholarly acumen, when in reality they sport nothing more than a pedestrian intellect and paint-by-numbers leadership ability. Incredibly, no matter how incompetent these leaders are, owners continue to support them.
INVASIONS
Ongoing intrusions and interferences into the lives of owners consisting of meetings, hearings, violations, warnings, intimidation, and restrictions serve to distort reality. These surroundings produce an abhorrent stimulus that elicits a conditioned response by its residents all in the name of "belonging."
The intensity of living under the rule of an association has the ability to transform personalities. It deliberately impairs natural characteristics on an interpersonal level to instead value and perceive events in a certain manner in order to be accepted and fit in. This occurs even if that type of acceptance is contrary to one's own philosophical and moral beliefs.
Even in the midst of pandemonium, owners must ferret out and stockpile evidence for use at a moment's notice. Obtain and keep as much information from as many sources as possible, particularly meeting minutes.
Wanting to protect their interests, owners looking for solace by hiring an attorney may find that reliance misplaced. Cost aside, owners complain that information provided to their attorney was rejected early on, but during litigation turned out to be critical. By then it was too late to develop evidence in a meaningful manner.
The association's well-funded arsenal of legal weapons is constantly replenished. Lawyers, letters meant to frighten, restraining orders, lawsuits, fines, penalties, assessments, liens, judicial and non-judicial foreclosure are at the ready. Like emperors who killed not only their victims but also their families, boards have the ability to legally destroy any owner. Then like rats deserting a sinking ship, directors cut their losses. They KNOW what's coming down the pike -- they sell their property and disappear.
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