Beware of unregulated homeowner associations
Homeowner Associations (HOAs) seem innocuous enough. They regulate house colors, landscaping, and what can be parked in one’s driveway. But what many prospective homebuyers don’t realize is that unregulated HOA’s have far-reaching tentacles that can leave a property owner in foreclosure without knowing it.
Many states have no laws governing homeowner associations. This essentially leaves HOAs to their own devices. It means they have no fiscal accountability to those who reside in communities they govern. It can leave homeowners with little legal recourse when an HOA board decides to take their home for nonpayment of HOA fees.
“In roughly half of the states in the U.S., HOAs are permitted ‘non-judicial foreclosures’ if owners lapse on their dues. Homeowners in these states have no right to a hearing or to confront their HOA board, or any of the protections usually afforded people to defend themselves against creditors. Over a prescribed period of time, a homeowner late on a payment will first be mailed a letter of default, then a letter of sale, and then the home will subsequently be sold at auction,” warns the International Association of Certified Home Inspectors. Their undated report investigating the dark side of HOAs, tells of Chicagoan Wally Kuchlewski, a 67-year-old machinist, who returned to his condominium and found all his possessions on the street. “His HOA had foreclosed on his home in response to $4,000 in unpaid dues — that had drastically risen from $640 — to cover the HOA’s attorney’s fees. The distraught Kuchlewski gunned down the secretary of the condominium board, killing her and wounding a bystander. Although extreme, Kuchlewski’s actions nevertheless demonstrate the escalating opposition to the unchecked authority wielded by HOAs,” the story noted.
In a March 7, 2017 story, Huffington Post reported that a homeowner in Nashville was threatened with legal action by her HOA for using the name of her subdivision on her personal Facebook neighborhood page.
As previously reported, several residents of Creekside Village in Grain Valley, Missouri alleged they had many problems due to their HOA and property management company.
Russell and Bobbie O’Hare claimed many problems surfaced after they purchased their dream home. They also questioned the way their HOA spent their dues. The end result was a lawsuit filed against them, which settled out of court. The O’Hare’s reportedly filed for bankruptcy during their ordeal.
Don’t ignore HOA mail and notices
Ingrid Boak of Lexington, Kentucky learned the hard way how powerful an HOA can be. As Reuters reported, Masterson Station Neighborhood Association had foreclosed on Boak’s $120,000 home because she owed $288 in HOA dues.
“Boak says she does not remember seeing a foreclosure notice, and no one served her papers in person. She likens the experience to her father’s in East Germany, where the communist state took away property rights. ‘Now I’m 75, and the same thing is happening to me, in America,’ she says. With her once-good credit damaged, she is unable to buy another house, and now rents her old one from the new owner for $900 a month,” according to the Reuters story.
While some states regulate HOAs, others don’t. Despite the lack of oversight, HOAs still must follow federal law in regard to the Fair Housing Act and Servicemembers Civil Relief Act. They must also follow the US Bankruptcy Code and the Fair Debt Collection Practices Act. All HOAs must follow the Freedom to Display the American Flag Act as well.
Before signing a purchase offer on a home governed by an HOA, the best practice is to thoroughly check the laws of the state, review all HOA rules and regulations, and also speak with members of the community.