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Both DeBat, a former real estate editor for the Chicago Daily News and the Chicago Sun-Times, and Benson, a real estate agent, have personal experience owning condos. In fact, DeBat emailed me that some of the experiences related in the chapters on “Bully Boards” and thefts by association board members were inspired by Benson’s personal experiences with one of her condos.
In the subtitle, “carefree” is in quotes. What was billed when the modern form of condominium ownership was born about 50 years ago as carefree, chic and glamorous isn’t really carefree at all. Steep maintenance fees, restrictions on day-to-day living and limited personal freedoms are three very real costs prospective condominium owners might not have considered. This applies to the many community developments, often gated, that feature single-family houses or town houses. The technical name for such developments is Planned Unit Developments or PUDs. The authors provide a very useful glossary of terms at the end of the book. Read more:
Before you buy into a homeowners association, you should know what you are getting yourself into.
A new homeowner moves into a neighborhood governed by a private association, receives an invitation to a potluck that doubles as an annual meeting and shows up with a bottle of wine and a dish to pass.
Feeling welcomed by the new community, the new homeowner starts paying dues, volunteering to help with neighborhood improvement projects and voting on association matters. But what happens when the homeowner receives a large bill to pay “his share” of the replacement costs for a portion of a road maintained by the association that is washed out?
The homeowner goes back to the governing documents for the association, reads the rules and restrictions, and finds out he was never really a member of the association at all. A fight ensues with his new neighbors and the association, which claims the homeowner behaved like a member, performed acts like a member, paid dues and received benefits like a member, and now must pay for the road replacement — like a member.
A closer reading of the governance documents — which no one has read in years — spells out that the homeowner and a dozen or so of his neighbors were never intended to be members of the association. Further, these houses never used the section of the road being replaced and were supposed to be assessed smaller fees for only a portion of the road maintenance. Read more
CCFJ.NET: CAMS and KICKBACKS – ONLY ALL TOO COMMON!
Opinion by Jan Bergemann
September 27, 2014
I have over the years seen many attempts to “bribe” CAMs, but none as blatant as this postcard:
This postcard was mailed to a myriad of licensed CAM’s in South Florida, offering them a 10% “KICKBACK” – on the postcard politely called “referral fee.” This attempt to get business by “Old School Plumbing” is clearly aimed at licensed CAMs, tempting them not to give the business to the best offer, but giving it to the company that offers the highest “kickback.” Look at the condition of this offer: “Must be an active LCAM with FL DBPR to participate.” Especially since many CAMs are empowered by contract to hire vendors without prior board approval if the amount of the necessary repair (work) is below a certain dollar amount ($500 or $ 1,000 for example), it’s clearly very tempting for any CAM to call this company and quickly earn a “referral fee” – in reality a kickback. This is just one example for the “kickback” scenario that is going on daily in Florida’s community associations. Read more:
Evan McKenzie on Las Vegas Fraud Case:
It makes no sense to put untrained, uncompensated, and often unqualified volunteers in charge of billions of dollars, based on a bogus ideology of privatism.
And all that criminality is in addition to the non-criminal practices of underfunding reserves that exposes owners to enormous risk, and vendors charging ridiculous fees for doing nothing and locking associations into terrible adhesion contracts.
Why is it so hard to put all this together and reach the obvious conclusion that the money side of CIDs is not working? The media have a frame for reporting on the social control conflicts that happen in associations–flags, pets, political signs, religious symbols–but they can’t seem to see the pattern when it comes to the enormous financial problems that leave millions of Americans vulnerable to major economic loss.
It makes no sense to put untrained, uncompensated, and often unqualified volunteers in charge of billions of dollars, based on a bogus ideology of privatism.
By Lanty Wylie — http://godslittlehoa.com/
The Courts are beginning to realize that Non Profits – more especially Homeowners Associations (“HOA”) – are acting like quasi Government entities and should be brought
into a legal construct of accountability. HOA’s charge maintenance fees which, unlike taxes, are not governed by Local Government Law on its use. State Corporate Law
governs HOA’s in most of their activity. IRS rules, for non-profits, are more restrictive, in its use of funds, than state law, in this case.
In a comparison of HOA’s to City Governments in Texas, the HOA Board of Directors are not controlled by open meeting, open record, spending and other laws to protect the
members. An elected City official can go to jail and be fined for violating some of these safe-guards. Whereas, a Board for an HOA can just simply ignore the By-laws, Rules
and Regulations of their HOA. The only remedy would be for an HOA member to go to Civil Court for relief from an errant Board of Directors, or to enforce the Deed
restrictions, rules/regulations, and By-laws of the HOA. It appears, to me, Texas Law prevents you from holding an individual HOA Board member personally liable for his/her
There are about 260,000 HOA’s in the United States. Some HOA’s have foreclosed on homes for as little as $150 in back maintenance fees. The California legislature is set to
pass a bill that prevents an HOA from foreclosing on a property unless the outstanding dues are in excess of $2,500. Other states, including Texas, are looking at the
foreclosure procedures of HOA’s.
In Texas, Mrs. Wenonah Blevins, an 82 year old widow, lost her $150,000 homestead because of The Champions Community Improvement Association’s foreclosure. She had failed to pay $814.50 in maintenance fees. There was a lot of extenuating circumstances surrounding her loss.
Another HOA in Texas foreclosed on a home worth about $100,000. It was sold for $448. It seems these foreclosures and sales are a cottage industry for HOA’s and their lawyers.
The Blevins incident, and others, brought a response from the Texas Legislature they passed the Texas Homeowners Protection act. This gives Homeowners a modest protection from these egregious acts of quasi government boards.
The Texas Constitution, in my view, states the eight (8) causes a foreclosure can be brought on your homestead, foreclosure for back HOA dues is not one of them.
Creditor Protection—While Alive
Homesteads are generally not subject to attachment, execution, or forced sale by creditors. If the homestead is sold, the owner has six months to invest the proceeds into
another homestead without the proceeds being subject to creditors’ claims. However, there are eight exceptions to the homestead exemption. Tex. Const. art. XVI, § 50,
Prop. Code § 41.001). Thus, Texas residents are entitled to the security of their home not being taken by creditors unless their creditor falls within one the eight exceptions to
the homestead exemption listed below. If a creditor wrongfully levies against the homestead, both the creditor and the creditor’s law firm may be liable. Vacker v.
Patterson, Boyd, Lowery, Anderholt & Peterson, P.C., 866 S.W.2d 817 (Tex. App.—Beaumont 1993, no writ). (If you have ever contemplated why the Hide-A-Way Lake, Inc., Board of Directors indemnified our law firm – this is your answer, “…both the creditor and the creditor’s law firm may be liable.)
Here are the eight reasons a homestead might be foreclosed.
1. Purchase Money Liens
A purchase money lien is a lien on the homestead securing the purchase price in favor of the seller or lending bank. Purchase money liens are not subject to the homestead exemption, thus permitting the homestead to be foreclosed upon default. Tex. Const. art. XVI, § 50(a)(1); Prop. Code § 41.001(b)(1).
2. Ad Valorem Taxes
A tax lien attaches automatically on the first of every year to all property on which property taxes are owed. Tex. Tax Code Ann. § 32.01 (Vernon 2002). The homestead is not exempt from forced sale to pay delinquent taxes. Tex. Const. art. XVI, § 50(a)(2); Prop. Code § 41.001(b)(2).
3. Mechanic’s and Materialman’s Liens
Mechanic’s and materialman’s liens, liens incurred in connection with improvements made upon the homestead, are valid against the homestead if: (1) a written contract was executed prior to the commencement of improvements or delivery of supplies, (2) the contract is signed by both spouses, and (3) the contract is properly recorded. Tex. Const. art. XVI, § 50(a)(5); Prop. Code § 41.001(b)(3).
4. Owelty of Partition Lien
Owelty of partition liens arise when there is an unequal division of co-tenancy property. For example, an unequal division of the homestead may arise in a divorce where the land on which the family home is situated is larger than the remaining portion of the land. Naturally, the house cannot be cut in half, so in such a scenario, the land may be partitioned unequally to keep the house in tact. Without the unequal partition in such a case, the entire land would need to be sold and the proceeds divided up equally. Upon an unequal division, the cotenant with the lesser-valued portion of property is entitled to a lien against the other co-tenant for the difference in value received. Homesteads are not exempt from owelty of partition liens. Tex. Const. art. XVI, § 50(a)(3); Prop. Code §41.001(b)(4).
The homestead may be encumbered by the refinancing of a valid lien against the homestead, including federal tax liens incurred from tax debt of either spouse. Tex. Const. art. XVI, § 50(a)(4); Prop. Code § 41.001(b)(5). For example, if bank has a purchase money lien against the homestead with an interest rate of 6% annum, the bank may offer homeowners to refinance the lien for an extra 5 years at 5% annum without risking the loss of its lien on the homestead.
6. Home Equity Loan
A home equity loan arises when the homeowner uses an existing homestead as collateral for a loan based on the value of the property. Prior to 1998, a homeowner did not have the ability to use the homestead as collateral for a home equity loan. The recent amendment, permitting home equity loans, places no restrictions on the borrower’s use of the money—it is not required that the loan proceeds be used on the homestead. Leopold at § 27.10.3. Whatever the use of the proceeds, the homestead is not protected against a valid home equity
loan. Tex. Const. art. XVI, § 50(a)(6); Prop. Code § 41.001(b)(6). However, in an effort to protect the homeowner, the Texas Constitution sets forth an extensive list of requirements which a creditor must satisfy before obtaining a valid lien against the homestead. See Tex. Const. art. XVI, § 50(a)(6).
7. Reverse Mortgage
A reverse mortgage is a home equity conversion strategy which uses the homestead as collateral for a loan in which the property owner receives a lump sum payment or regular periodic payments and in exchange the property owner gives up all or some of the home’s equity. The mortgage is payable upon the death of the borrower or upon the abandonment of the homestead. Tex. Const. art. XVI, § 50(k)-(p). Prior to 1997, the use of the homestead as collateral for a reverse mortgage was prohibited. Now, a homestead used as collateral for a valid reverse mortgage is not protected against forced sale while in the hands of the borrower or any survivors claiming a survivor’s homestead. Tex. Const. art.
XVI, § 50(a)(7); Prop. Code § 41.001(b)(7). However, the Texas Constitution provides an extensive list of requirements that must be satisfied prior to entering into a valid reverse mortgage. See Tex. Const. art. XVI, § 50(k)-(p).
8. Preexisting Lien
A lien which existed against the property prior to it becoming a homestead may have priority. Stevenson v. Wilson, 163 S.W.2d 1063 (Tex. Civ. App.—Waco 1942, no writ).
B. Creditor Protection—After Death
The homestead exemption which the homeowner could claim while alive passes to the deceased homeowner’s survivors. The homestead claimant’s surviving spouse, minor children, and unmarried adult children residing with the family are entitled to a survivor’s homestead. Creditors of the decedent are unable to reach the homestead property to satisfy the debts of the decedent, unless they fall within one of the eight exceptions listed above. Prob. Code § 283. The survivor’s homestead entitles the surviving spouse and minor children, but not unmarried adult children residing with the family, to special occupancy rights. Prob. Code §284.
Now, is the homestead foreclosure practice unconstitutional? There seems to be a violation of Article XVI, Section 50, of the Texas Constitution. In my view, Contracts
involving one party are unconstitutional! At closing you are not creating a contract, you are agreeing to one already created by the developer of your property. This is the work-around that is used:
A one-party Contractual Lien is created and placed on property by a developer to “run with the land,” a covenant. *There is no way around the developers Contractual Lien on
property under current caselaw.
There are several ways to own property within an HOA and not belong or subscribe to its membership. At Hide-A-Way Lake Club, Inc., the Church, a Texas non-profit Corporation, owns property and does not belong to the membership, nor does it pay dues, even though this, in my view, violates the original Deed Restrictions that “run with the land.” The Church has free access and egress to its property and enjoys all the benefits of the HOA. Another way for a non-member to own property would be for a bank to foreclose on any property. The bank would now own the property and would not belong to the HOA. Even if a Board of Directors clearly violated established Deed Restrictions regarding property ownership, construction, and Club membership, the HOA would have to allow the property owner, the bank or the Church access and egress to their property. However, the non-member property owner would not have membership privileges to the Golf Club and various other amenities, and so on. To seek a redress of any alleged grievance, a property owner-member must go to civil court for relief.
So, the Supreme Court of Texas has ruled for a “One Party Contractual Lien.” The Texas Legislature will be asked to take up this matter in its next session. If history is any judge, the Texas Legislature will not act in any meaningful way. The next step will be the 5th Federal Circuit Court in New Orleans. It appears, to me, this matter will hang in limbo until a Federal Court brings these conflicting legal views into focus. Should a Federal Court up-hold the Texas Constitution, in this matter, Hide-A-Way Lake, Inc., has a viable City government is in place. Except for the debt of HAWL, it would be an easy transition.
That all said: The very existence of Texas Home Owners Associations depends on the ability to foreclose on property for non-payment of maintenance fees. However, many HOA’s have run roughshod over their members by neglecting to elect responsible Board Members that will obey State Laws, the By-laws, Rules, and Regulations of the Association. The solution here would be for the State to treat those maintenance fees as the state treats taxes and hold those errant Board Members accountable as we do our City leaders with stiff penalties, fines and jail for violating open meeting law, deed restrictions, rules /regulations of the HOA, and other egregious acts.
(1) In 1987 a caselaw, Inwood vs. Harris 736, SW2d 632 (Tex. 1987) create “contractual liens.” This is a one party contract with “empty” lien rights placed on land prior to future development. Foreclosure only for nonpayment of maintenance fees. This appears to be another incident of Courts making law.
(2) Hide-A-Way Lake Club, Inc., is a Home Owners Association in East Texas.
Note: The opinions are my own.
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