Paradise Colony Watch

Homeowner Groups' Power to Foreclose Is Under Attack
Lawmakers say boards have gone too far by seizing and selling units over minor disputes.
By Daniel Yi
Times Staff Writer

June 7, 2004

Alarmed by a flurry of horror stories, state lawmakers are rushing to resolve a long-standing complaint about homeowners associations: the power that they have to seize properties without going to court.

By law, associations are entitled to foreclose on the homes of members who fail to pay their dues. Though most residents pay their bills before their houses are actually sold, thousands have lost their homes, sometimes over disputes involving a few hundred dollars.

"It's legalized extortion," said Marjorie Murray, a state advocate for senior citizens, many of whom live in condominiums and private communities run by associations. "Why should homeowners associations have such a power?"

Some homeowners association leaders say they need so-called nonjudiciary foreclosure powers, which allow them to take property without seeking a judge's approval, to keep neighborhoods looking tidy and to protect property values. Without such powers, associations would have little ability to require homeowners to pay assessments that cover the costs of such projects as new roofing in a condominium complex or landscaping services and street maintenance in a gated subdivision.

"Unless and until these debts are collected, the remaining homeowners must make up the difference, and that is unfair to them all," said Skip Daum, a lobbyist for the Community Associations Institute, a trade group whose members include homeowners association boards, community managers and lawyers.

But the Assembly and the Senate, responding to recent high-profile cases, are considering two bills this year that would limit homeowners associations' nonjudiciary foreclosure powers.

"One of the doctrines of our laws is that the penalty or remedy should fit the violation," said Assemblyman Darrell Steinberg (D-Sacramento), whose bill banning nonjudiciary foreclosure passed the Assembly at the end of May. "And taking someone's home obviously should be the last resort."

The controversy over nonjudiciary foreclosure stretches beyond California as legislators from Arizona and Texas, among others, have attempted — with mixed results — to limit the power of homeowners associations. Still, associations in many states can simply auction a property after deeming a bill overdue and filing notices with the county.

An estimated 8 million Californians — about one-fourth of the state's population — live in communities governed by homeowners associations. About 2,500 residential developments governed by associations are built in the state each year, the California Research Bureau says. And 40% of new single-family homes sold are in homeowners associations, the Public Policy Institute of California says.

As they grow in numbers, homeowners associations — a form of private government whose elected board members enforce community rules and levy assessments — have come under criticism, even ridicule, over seemingly trivial regulations, including what lawn ornaments residents are allowed to have or what color they can paint a front porch.

But the ability to take someone's home is such an extraordinary power that its use should be limited, even banned, critics of the practice say. Some associations are too quick to resort to foreclosures, sometimes over relatively small amounts, the critics say. And because the associations have little interest besides recovering the dues they are owed, homes are sometimes sold for pennies on the dollar, leading to huge losses for individual homeowners.

In Tom and Anita Radcliff's case, their association sold their home in less than a year over what began as a $120 bill.

Citing financial and health problems, the couple didn't pay the annual dues. Their Copperopolis, Calif., home, which was appraised at $277,432 and had a $30,000 lien on it, was auctioned for $70,000 in December.

The sale left the retired couple with about $68,000 after subtracting the unpaid assessment and collection fees — and without their house.

"It just didn't occur to me that someone would foreclose over $120," said Anita Radcliff, 64. "It was outside the realm of my reality."

Mike Woodbury, an attorney for their homeowners association, Copper Cove at the Lake Tulloch Owners Assn., said the couple were given warnings and opportunities to avoid the sale. "It is the obligation of the homeowner to pay the assessments," he said.

The couple filed a lawsuit in March, alleging among other things that the foreclosure was an abuse of collection laws. They are being allowed to stay in the home until the lawsuit is resolved.

Melissa Colburn of Chula Vista, Calif., sued her homeowners association after it sold her $230,000 two-bedroom townhome for $5,150.

Colburn, an expert on hazardous materials, said she wasn't receiving her homeowners association bills because of a mail mix-up. She got an eviction notice in late 2002 from the man who bought her home, Carlos Sosa.

"I thought it was a joke," she said. "I almost threw the piece of paper away."

Colburn, 35, settled her lawsuit and reclaimed her townhome at the Villas at Eastlake Shores Owners Assn. But in the process of building her case, Colburn found that her association's law firm, Peters & Freedman, had acted as a trustee in other foreclosures in which Sosa had bought properties.

In one case, Sosa paid $2,515 for a house in Escondido and, in another, $2,987 for a condominium in Bonita, according to property records in Colburn's lawsuit.

Colburn accused the law firm and Sosa of colluding to sell foreclosed homes at rock-bottom prices. Sosa and David Peters, of Peters & Freedman, denied the charges in court filings.

Sosa did not return calls, and Peters declined to comment specifically on the case, citing the settlement's confidentiality agreement.

"Foreclosure is a small part of our business," said Peters, whose firm represents nearly 600 associations in Southern California. "It is certainly not a profitable part of our business."

But it would have been a potential windfall for Sosa, who stood to make as much as 20 times his investment. Colburn said her townhome had nearly $100,000 in equity after subtracting the $130,000 in mortgage still owed to her bank.

Experts say such profits are possible in part because auctions held by homeowners associations are not widely advertised, and associations are typically interested only in recovering the dues and collection fees they are owed. By law, the bids start at the amount owed, and any anything above that goes to the original homeowner. The buyer assumes some prior liens, such as the mortgage.

California homeowners associations can auction a property in as little as six months — far more quickly than county tax collectors, for example, who must give homeowners five years to pay. Their power is similar to that of a mortgage bank, which technically owns a home until its loan is paid and can auction a property without a judge's review if the borrower defaults.

Actual sales of homes are rare. About 1% of all foreclosure actions begun by homeowners associations end with the home being sold, according to the Community Associations Institute, which conducted a survey in 2002. Most homeowners faced with the prospect of losing their home at auction pay their debts, the trade group maintains.

But based on the institute's numbers and estimates of the number of California homes that are governed by homeowners associations, that 1% represents several thousand foreclosed homes in recent years.

Hundreds of thousands of others are threatened with the action every year. And because there is no judge reviewing the process, the critics say, those who believe they are being wrongfully targeted have little choice but to pay their associations or file costly lawsuits.

Lawmakers would like to curb the trend and offer some protection for individual homeowners.

A bill introduced by Sen. Denise Ducheny (D-San Diego) would prohibit homeowners associations from foreclosing for debts of less than $2,500 and assure that those who are drawn into foreclosure receive at least a portion of their equity: up to $50,000 for a single adult, $75,000 for a family and $150,000 for senior citizens.

The Senate passed the bill unanimously last month. Ducheny's bill is likely to be combined into a compromise bill with Steinberg's Assembly bill, which passed 69 to 10 and seeks to ban the practice altogether. A final version should reach the governor's desk later this year.

"There is an increasing share of our population who" live in places with homeowners associations, Ducheny said. "And that raises all sorts of question about how they are governed which the Legislature has considered [in the past]…. But nothing is as visceral as someone losing their home."

Copyright 2004 Los Angeles Times

High court ruling backs homeowner

Rocky Mountain News

Man wasn't bound by association's deal, is entitled to legal fees

By Karen Abbott, Rocky Mountain News
May 25, 2004

Erik Krystkowiak didn't want anyone to build a 160-unit apartment complex across the street from his Colorado Springs home.

He said so, repeatedly, in 1998 meetings of the City Council and planning commission, even though his homeowners association signed a deal with the developer to stop fighting the project.

Colorado Springs turned down the apartment complex proposal.

The developer, W.O. Brisben Companies Inc., sued Krystkowiak for interference with a contract, seeking millions of dollars in damages.

Krystkowiak won. The El Paso County District Court threw out the developer's lawsuit, citing a 1984 Colorado Supreme Court ruling that upheld citizens' First Amendment rights to petition their government in opposition to developments.

The district court judge said Brisben's lawsuit was filed in retaliation for Krystkowiak's outspoken opposition to the apartment complex.

But the district court refused to make Brisben pay Krystkowiak's attorneys' fees under technical legal rules having to do with Brisben's claim that, because the homeowners association signed a contract to stop fighting the apartment complex, Krystkowiak was bound by it even though he refused to sign it personally.

The Colorado Supreme Court ruled Monday that Krystkowiak had the right not only to join the home-owners association, but to detach himself from it when it no longer represented his views.

That meant Krystkowiak never signed away his First Amendment rights to petition the government when the homeowners association signed the deal with the developer.

Because Krystkowiak was sued for exercising those rights, he is entitled to attorneys' fees, the court said.

"The right to petition has been characterized as one of the most precious liberties protected by the Bill of Rights," the Supreme Court said.

The high court sent the case back to El Paso County District Court for a determination of Krystkowiak's attorneys' fees.

Copyright 2004, Rocky Mountain News. All Rights Reserved.

News 3 Investigation: Part 2

Missing Money: HOA Managers Accused of Embezzling Funds

May 20, 2004

Sixty percent of all people in the Las Vegas Valley live under the rules of some sort of homeowner's association. The mini-governments watch over developments, collect fees and fines from people who break the rules. But as News 3 Investigator Darcy Spears found, the associations can't always be counted on to manage that money properly.

You might call the subject of our story a property "mis"manager. He's been hired by many associations over the past 14 years, but has essentially operated under the radar screen. He's had some blips here and there, but nothing that sounded the alarm until now. And that may be the root of the problem.

Picture this, a property manager is accused of stealing about $100,000 from a homeowner's association.

"We were pretty clear about what was going on."

When they catch on and threaten legal action, he coughs up the cash, making the case less than interesting for Metro fraud.

"Even though they look at it, I think they see other things as a greater priority."

So what happens to the man caught with his hand in association coffers? So far, nothing, which frustrates Mariposa board member, Aimee Pantea and her husband Romy to no end.

"I think it was fear that made him return it. Is that right that somebody could get caught and then return it and then say, okay, no foul, no crime? it seems ridiculous to me!"

The Panteas filed 3 complaints, which are still under investigation, by the state real estate division.

"Even when they knew the money was missing, they didn't do anything. And now we're 3 or 4 months later and there's still been nothing done. We did this as private homeowners to make this happen and I think that's the part that we're concerned about because if it could happen here, it could happen anywhere."

Senator Mike Schneider sponsored much of the state's homeowner association law. "This isn't one little isolated case. This is going on across the valley in a lot of homeowner associations and it's something that needs to be looked at. And it's been something that has stayed underneath the radar screen for so long."

But has it? Not in the case of the man accused of embezzling from Mariposa. Thomas Wrath of A&A management has been on attorney Jay Hampton's and the real estate division's radar screen for years. "I've dealt with Mr. Wrath on 3 different occasions, and in each instance it was a situation where the association was trying to get information from Mr. Wrath--either records or money or both."

Members of Spanish Villas HOA accused Wrath of ineptitude, incompetence, dishonesty and mishandling money. Paradise Springs, also represented by Jay Hampton, reported missing money too.

"In the end there was $20,000 or $30,000 that they really never could justify where it went and Mr. Wrath never provided an explanation for it."

In all, Wrath had six complaints filed against him with the real estate division before Mariposa's. All were closed for insufficient evidence or lack of jurisdiction. One resulted in a letter of warning. The only time the real estate division took formal disciplinary action against Wrath was when they found he was unlicensed. They sent him a cease and desist order, but he kept operating as a property manager in direct defiance of that order. Even so, the real estate division allowed him to become relicensed after paying fines and taking some classes.

"Just the fact that he's taken money out of an association's reserve fund should be the end of the story. And I don't think he should be managing associations here."

So what does Tom Wrath have to say about all this? He referred us to his attorney who refused to return calls, so we tracked him down with our hidden camera to give it one last try.

"Tom?"

"Hi."

"Hi, I'm Darcy Spears. Your attorney is not returning my phone calls, and I just wanted to come by and see if there was any possibility if we could talk to you since she's not talking."

"Nope. She says to keep my mouth shut."

"There are people that are going on camera that are saying you're stealing money from HOA's."

"It's not true."

"It's not true?"

"No."

"They're saying it on camera, though, and that's why I want to make sure that--you know--I'd like for you to be able to respond."

"They're lying and my attorney will be able to use that in our suit against them."

"You've never embezzled money from anyone?"

"No, not a dime."

It's important to note that Tom Wrath has not been criminally charged with anything at this point in regard to Mariposa's allegations of embezzlement. There is a civil lawsuit in progress. I spoke to members of two other HOA's that have operated under Tom Wrath's management. Casa Vegas homeowners are having an audit due to missing money, and Spanish Villas residents were just informed their dues are going up, because the association is allegedly broke.

There is a Real Estate Commission that was created in the last legislative session to rule on disputes with homeowner associations and property managers. We all pay three dollars a door for that commission to step in in cases like this. They'll begin conducting hearings this summer.

Home Owners Association Problems
Michael Geeser, Consumer Editor

(Jun 1) -- Homeowner's associations have become commonplace around the valley. Whether or not your neighborhood has one, it seems everyone has an opinion about them. There is a misconception about HOA's that no one likes them and they create hardships for residents. That may be true in a few cases, but a study from the state ombudsman's office tells a different story.

According to a survey, 92% of the HOA residents they polled in the Valley said they enjoy living in their community. To peacefully co-exist in an association, David Stone of Nevada Association Services says homeowners need to do things -- pay their assessments on time and read the CC&R's. "Most people do like living in a homeowner's association, I know I do, my friends who live in HOAs certainly do. They follow the rules, pay their HOA assessment and they live in a nice clean area. Now there are exceptions, renegade boards that feel like they need to be walking around at night with clipboards, that does happen but its highly, highly unusual," he says.

When those cases arise, the state ombudsman's office now has a five-member commission in place to handle those cases. Disputes among homeowners and associations can usually be traced back to one document, the CC&R's. Those covenants, conditions and restrictions almost always contain the answer. But they aren't helping one homeowner who followed the rules, but received a cease and desist order anyway.

Rebecca Whitlock's home looks like a slice of paradise carved out of the Las Vegas Valley. She lives in the Desert Shores community with a backyard view of cool, blue water. The addition she built adds to the entire setting. But there is one group that doesn't like her patio cover and balcony -- her homeowner's association. In fact, they've asked her to take it down, stating she never received permission to put it up.

The fact is, she did, and has the document to prove it. At the time of construction, Whitlock received permission from the Desert Shores Association. Then after it was up, the board decided she didn't go to a sub association for permission. The reason for that; there was no sub association in place.

"I got an approval letter from Desert Shores," says Whitlock, "Which was running Harbor Cove Association at that time, so I submitted my application and got approval. So I didn't think anything but that I was approved."

Things got progressively worse, eventually winding up in arbitration. And what did the arbitrator, Richard McCall decide? He decided that Rebecca should have to take down the addition. "This is one I would like to not see go this way because it looks like it wasn't a common sense decision," says Nevada State Ombudsman Eldon Hardy.

8 On Your Side asked the association board president to speak with us but we were referred to their attorney Jay Hampton. In a written statement, he said, "We put the facts in front of the arbitrator and let him make the decision."

Whitlock's attorney has since filed an appeal, which means for now the addition will stay up as the case goes to trial. But Whitlock says the past few years have been a living hell, thanks to her association board, vindictive neighbors and an arbitrator's decision that left a few people shaking their heads.

"This is like living in a communist country, these rules are to help us not make enemies out of neighbors," says Whitlock. "It does seem like something went wrong in this whole process, and I would like to see it corrected," Hardy adds. Whitlock and her attorney will get their chance to try and correct it when the case goes before a jury.

THE RAVAGED LAND

The Legacy of the Davis-Stirling Act

May 22, 2004

By Dan Ackroyd
San Diego, California -

Nobody will ever know the full extent and depth of the damage that the Davis-Stirling Act has inflicted on the citizens of California in the last 19 years. The stolen homes, the homeowners thrown out on the street, the millions sucked from peoples' bank accounts by CAI lawyers, the emotional turmoil and anguish that racked homeowners' nights and haunted their days. None of this can ever be fully calculated

Yet the veil has been partially lifted due to the research spearheaded by Melissa Colburn in San Diego County. She herself woke up one sunny San Diego morning and found out that the condo that she was living in had been sold at a foreclosure sale about 8 months before.

It was the Davis Stirling Act that made this possible.

In 1984, Willie Brown, the all-powerful speaker of the Assembly, wanted to reward Larry Stirling, a Republican member, for supporting him on a piece of legislation. Brown offered Stirling a 'Select Committee' of his choosing. After several suggestions, Brown hit upon the idea of doing homeowner associations.

This necessitated that the bill would eventually go through the Assembly Housing Committee. Gray Davis was its chair. Thus, the Davis Stirling Act was born.

Over the coming months, as homeowners mowed their lawns and kept the noses of their children clean, a small group of lawyers was secretly closeted with Katherine Rosenberry, plotting the legal and financial takeover of peoples' homes. They knew that this was an unprecedented, golden opportunity to take hold of the goose that would lay them the golden eggs.

And Katherine Rosenberry was the perfect choice to lead them into that golden future.

She had been the national president of Community Associations Institute - CAI. This high-sounding name masked a much more down to earth purpose - money, and lots of it. It was akin to appointing the head of Phillip Morris to be in charge of drawing up an anti-smoking campaign.

She and her fellow CAI lawyers went to work with a vengeance. They gave homeowner associations the awesome power of being able to put a lien on a home and then foreclosing on it without ever going near a court of law. Homeowner associations were authorized to fine homeowners for breaking the rules - and the CAI lawyers made sure that there were plenty of rules that a homeowner could trip up on.

Rosenberry and the CAI lawyers made sure that the homeowner was hemmed in on every side, and that the only recourse available to a homeowner for aberrant boards was filing a lawsuit - where, of course, the homeowner would need a lawyer again. The prospect of filing a suit was made even more daunting by including an attorney fee provision in the Davis Stirling Act. The losing party would have to pay the attorney fees of the winning party. Not only did this send shivers up the spine of any homeowner who thought of suing his association, but it ensured the association attorney that he would be paid whether he won or lost the case. If he lost, he knew that the association would be paying his fees. If he won, he knew that he had the homeowner in a vise. If the homeowner did not pay, the attorney would foreclose on his home without ever having to go to court.

Rosenberry and the CAI lawyers knew that a silent revolution in housing was taking place. In California, when Proposition 13 passed (it placed a cap on property taxes), they knew that cities and counties would be drained of revenue. Requiring new homes to be built in homeowner associations would ease - if not solve - the revenue crunch. Homeowner associations would take care of their own streets and lighting, provide recreational areas and take care of acres of common ground. Today, 8 million Californians live in 36,000 homeowner associations. In some areas like south Orange County, it is almost impossible to find a home that is homeowner association-free.

Gray Davis and Larry Stirling got the bill passed into law. They had done a sterling job for the CAI laywers, who made sure to leave a little loose change in their campaign coffers. (Stirling, who was termed out of the legislature for longevity, did a stint as a judge in San Diego, and is now running for the legislature again this year.)

The stories of homeowners who lost their homes in foreclosure for infinitesimal sums began to slowly seep out in the late 1980's and early 1990's. One single lady lost her home for a mere $300. Another became homeless for a similar amount and was forced to sleep in the back seat of her car for several weeks. Another homeowner ended up with lawyer fees of over $50,000 over a parking space for his RV.

The early victims believed that they were alone in their plight - and thus made more vulnerable. But as the American Homeowners Resource Center began to piece together the seemingly disparate parts of the jigsaw puzzle, and publish the stories of homeowners, the victims began to see the broader picture and realize that they were not alone.

And they began to fight back. One striking example is Melissa Colburn.

Not only did she fight successfully to get her condo back, but she started to spend long hours combing public records for information on homeowner association foreclosures in general, and on Peters and Freedman in particular - the law firm who foreclosed on her home. The results paint a very clear picture as to the devastating effect of the Davis Stirling Act on homeowners, and the rewarding effect on CAI lawyers.

In the years 2000, 2001 and 2002, there were 156 Notices of Trustee Sale by homeowner associations posted in San Diego County - almost one a week. 22 homes were actually sold. Almost half the notices were posted by Peters and Freedman - more than 100% higher than their nearest rival. 6 of the sales were conducted by Peters and Freedman, half of which went to one man, Carlos Sosa.

The average amount of the debt for the homes handled by Peters and Freedman was in the $2,000 range. The lowest was $987.08, the highest $10,938.08.

Typically, the bulk of the debt was for lawyers' fees, dwarfing the amount of the unpaid assessment. Indeed, many homeowners caught in these situations complained that it was not the unpaid assessment that they had difficulty paying, but the lawyer's fees that were tacked on. The financial cart was put before the horse.

Homeowners complained that this was the very purpose. The CAI lawyers had set up the Davis Stirling Act precisely for this reason. It is estimated that Peters and Freedman earned at least $150,000 for filing these 75 Notices of Trustee Sale.

Ms. Colburn noticed another curious feature about Peters and Freedman. They were the only major company that acted as the trustee conducting the sale. All other major law firms used a neutral third party. Mr. Epstein of Epstein and Grinnell, explained that his firm did this because he believed it was a conflict of interest to represent the homeowner association and also act as trustee. The homeowner association only sought to obtain the amount of the debt. The trustee has an obligation to sell to the highest bidder.

Trustees can also play games to sell to favored buyers. They can postpone the sale at the last minute, thereby discouraging bona fide buyers from coming again, leaving the field to the favored buyers. Ms. Colburn said that she is investigating the relationship betwen Carlos Sosa and Peters and Freedman.

Ms. Colburn's research may mean that the 75 homeowners who paid thousands to get Peters and Freedman off their backs are entitled to a refund. Civil Code Section 2924(f) requires that the trustee publish the Notice of Trustee Sale for 3 consecutive weeks in a newspaper of general circulation. Peters and Freedman used the Uptown Examiner - a newspaper with about a 150 circulation. However, they only published 3 times in 2 weeks. If true, they would have violated the statute, rendering the Notice of Sale invalid.

The foreclosure business is just one aspect of a homeowner association law firm.

A law firm can stir the litigation pot in a homeowner association and drag it out in order to garner more fees. In one case, Peters and Freedman dragged out a lawsuit until the insurance company caved in and paid the $25,000 in lawyer's fees that Peters and Freedman demanded. The insurance company had already hired an attorney to defend the association. Peters and Freedman, the association lawyer, muscled in and refused to sign a settlement agreement unless they got their $25,000.

Peters and Freedman are currently locked in many association lawsuits. They have already run up over $40,000 in lawyer's fee in the Sonni Bass case over the propriety of a light over a sport court. In the Desert Crest case near Palm Spring, they enabled a developer to change the CCR's so that membership in a golf club became mandatory. Some of the homeowners who are in their 80's and 90's said that they could not physically play golf, and, as they lived off Social Security, could not afford the increased dues. Some may lose their homes over this issue.

Some day, when the definitive history of homeowner associations is written, more of these tragic stories will come to light. The Davis Stirling period in California history represents one of its darkest moments. Homeowners ever since have been struggling to extricate themselves from its industry dominated tentacles.

SB 1682 (Ducheny) has given them a ray of hope. It would forbid non-judicial foreclosure for unpaid assessments less than $2,500. Lawyers' fees are not included in that amount. It passed the California Senate and is waiting action in the Assembly. If the law had been in effect in 2000, there probably would not have been any Notices of Trustee Sale recorded in that year or subsequent years.

The Davis Stirling Act unleashed lawyers on California homes like a hoard of locusts, devouring everything in their path. It created an atmosphere of submissiveness and subservience in homeowner associations. Nobody wanted to get in "trouble" with the board, and everybody knew that the the association's legal dobermans were ready to attack.

The path back has still a long way to go where those in homeowner associations can enjoy their homes in the same way as those outside the guard gates. The path, however, might not be as long as it once was, thanks to the valiant efforts of a host of homeowners across the state - and the country. Hubris has a way of undermining itself - and a lot of homeowner association lawyers have had a lot of hubris. The day of reckoning is getting closer.

New Arizona Bills

Date: Sat, 22 May 2004 09:35:52 -0700
From: "MS"
Subject: Fw: New Arizona Bills

Following is an email I received this morning from a local lawyer (not my
lawyer) who is a real estate specialist and who deals from time to time with HOA issues.

I have had extensive communication with this lawyer in the past regarding HOAs, in which he disagreed with most of my opinions and assessments of the flaws in the HOA concept itself. Basically, he was pro-HOA and considered my views as "radical". Most of our discussions were done on the phone.

Whenever he had a client with an HOA problem, he would call me. I provided him with information regarding HOAs and he clarified for me many legal concepts and issues concerning contracts, CC&Rs, liens, foreclosure procedures etc.. We both realized that we were educating each other and found our communication rewarding and beneficial. I believe that eventually I have succeeded in dragging him to our side of the fence when he realized that HOAs don't exactly do so much "good".

Reading his email below, he sounds like one of "us". For background, I pasted below some of our past email exchange -- read and see how his views have changed over time.


----- Original Message -----
From: N---LawTuc@----.com
To: "MS"
Sent: Saturday, May 22, 2004 7:49 AM
Subject: New Arizona Bills


MS,

I note that the Arizona Legislature did pass a few bills relating to
HOAs. Exept for SB1137 ("your" bill - good job and congratulations!), I
don't think they mean much: HOAs can't foreclose on ONLY fines, penalties,
etc., and buyers have to sign a statement recognizing that the CC&Rs are a
contract and acknowledging that they waive the Homestead exemption. This
does really nothing for the problem of improper assessments and doesn't give
homeowners their homestead protection. There is still no due process. That
bill failed. Although I don't have much faith in Justice Court "due
process", anyway. Let's talk!

Enough said,

J---
----------------------------------------------------------------------------
----------------------------------------------------------------------------

From: "MS"
To: <---LawTuc@----.com>
Subject: HOAs
Date: Thursday, August 29, 2002 1:01 PM

J---,

What makes HOAs so special?

Homestead exemption was created to protect people against the loss of the
homestead, even when they owe money. Whenever a debt is not paid, whether
to an individual or to a larger entity, somebody suffers. When a credit
card debt is not paid by somebody, we all pay for it. When a utility bill
is not paid, we all pay for it. When state or local tax is not paid, we all
pay for it. Yet, the debtor does not lose his homestead, even when in
bancruptcy. When your dentist bill is not paid, we all pay for it. Why
failure to pay HOA assessments is treated differently than any of those?

True, Federal tax debt has a priority over homestead. But we have
constitutional protections against the government. The government has a lot
of power, but it cannot do anything it wants as the people have
constitutional rights. Homeowners do not have such rights and protections
agianst the whims of their boards of directors. They are not entitled to
property rights, due process and equal protection -- after all it's all
private and pursuant to a contract! Can you compare?

So if indeed it's so "private", why does the legislature give it so much
power and extra privileges that nobody else have?

This is only the tip of the iceberg. This is just one of the reasons that
so many people come to you with complaints about HOAs. Something is
fundamentally flawed in the whole concept!

----------------------------------------------------------------------------

From: <---LawTuc@.com>
To: "MS"
Subject: Re: HOAs
Date: Thursday, August 29, 2002 3:31 PM

NO. Frankly, I think you are so negative from your experience on HOA's that
you can't see they do good. That's OK, it takes radicals to cause change --
which is very needed. We can talk sometime later about details this week is
crazy busy.

J---

----------------------------------------------------------------------------


From: "MS"
To: <---LawTuc@----.com>
Subject: Re: HOAs
Date: Thursday, August 29, 2002 4:55 PM

No J---, it's the other way around. My experience has caused me to study
the subject, after which I have reach certain conclusions. And it's not
only "my" experience; it's also the experience of thousands across the
country, with whom I communicate daily on the internet. Potentially, it's
the experience of 50 million Americans who live under these regimes, being
told that they have "agreed" to be subjugated to them, but without ever
getting any advance disclosure (which the law does not require)? The number
of horror stories, of which only a small portion is reaching me, is beyond
imagination. I shared with you only one issue (about the HOA lien) because
it's closely related to your specialty. There are many many other issues.

You say -- "they (HOAs) do good"; What good? Good for whom? Saving money
to local government by not providing certain services to a selective group
of homeowners, while still collecting their taxes (has nothing to do with my
personal experience)? Protecting property values (a theory with no
supporting evidence whatsoever) for the price of loss of liberty and
dignity, where citizens have no civil liberties and no constitutional rights? Giving land
developers the freedom and right to become "legislators" by drafting the
"laws" under which communities and their inhabitants would live, by
designing CCRs that are made to serve the interests of the developer and a
few zealots, but not of the people? I can go on and on, but I will stop
here.

It's not clear to me what your first "No" referred to. My personal
experience has nothing to do with any of this. My litigation is about
violation of EXISTENT law, whereas my "radicalism" wishes to change the
present laws. I wish they would "do good". They don't, although most
people are not aware of it, and some of them may even function smoothly and operate
properly -- but potentially, each and every one of them is one election or
appointment away from disaster. They certainly "do good" for local
government, lawyers, developers, managers and others, at the expense of the
ignorant homeowners. They have almost unlimited and uncontrolled power, and
POWER CORRUPTS. Enough!

________________________________________________________________________
________________________________________________________________________

posted by Las Vegas  # 11:45 PM 0 comments

Missing Money: A News 3 Homeowner's Association Investigation
May 19th, 2004

More than a million people in the Las Vegas valley live in homeowner's associations ... mini-governments who handle millions of dollars. But as News 3 Investigator Darcy Spears found, some associations' money is missing, and one man may be to blame. We've all heard horror stories of associations run amok, foreclosing on homes for petty fines and the like, but how often do you hear about an entire association, including the board, being victims?

Most every month under most every one of these roofs, homeowners cut their checks for dues to homeowner's associations. They're run by elected volunteers who are typically concerned with things like keeping pigeons out of pools, having block parties, and making sure trash cans aren't out for too long.

For the more complicated stuff, like managing money and running the community's business, HOA's often hire professional property managers. Senator Mike Schneider: "Homeowners pay their monthly dues and they expect everything to be handled for them, and they don't want to be involved in it and they just expect everything to be run on the up and up."

But things are not always run that way, as Aimee Pantea found when she joined the board of Mariposa, a community association involved in construction defect litigation. "There's so much money involved in these construction defect cases, that all this money tends to make people a little greedy."

When looking over association records, Aimee's contractor husband, Romy, first noticed this red flag. "He had signed a management contract that offered him a 2% fee for the construction defect reconstruction fund."

Sen. Schneider: "That's blatantly against the law in the State of Nevada." The contractor's board sent Wrath a violation letter, but the Panteas found more serious problems. "We discovered that there was approximately $100,000 in funds that were reported to the board on their financial statement from A & A Management that were not there.

Tom Wrath runs A & A Management. He currently manages Spanish Villas and Duncan Court HOA's. He's also been in charge of Paradise Springs, Casa Vegas, Starfire Condo, Cheyenne Park Villas, Fairway Villas and Mariposa. Mariposa had to hire Attorney Jay Hampton to get at their own records. "Mr. Wrath had refused to provide the records, refused to provide access to the records, he wasn't letting board members go take a look at financial records, and he wouldn't provide information about the association's money, like where it was."

"So they went to the bank to start finding out whether it was there and I think that day was a shock for all of us to find out that five certificates of deposit did not exist." The Panteas say Wrath made up fake financial statements to cover his embezzlement of Mariposa's funds. When they threatened to sue, most of the missing money magically reappeared. Attorney Jay Hampton: "He finally turned over close to $100,000, but interestingly, it came from a personal account. It was money that he had apparently taken out of the Association's bank account."

Under Nevada law, he's not allowed to do that, and he may still be breaking the law by keeping some of the money. His answer to Mariposa's legal complaint states, "many of the funds in question have been returned." What about the rest? The Panteas said they met with brick walls trying to get help. "We went to the Real Estate Division, Attorney General's Office, Police Department and nobody was helping."

Metro says their review of the records shows a crime was committed. Fraud detectives say Wrath did steal the money, but since he returned most ot it, the case would get little or no priority from the district attorney for prosecution. "I think that if you stole something and they catch you and you go, oh, here it is back, you still stole it and you still should pay for it."

Sen. Schneider: "It seems like, in this town, embezzlement is a bigger issue than we all had known in the past. And embezzlement cases seem to be treated very lightly unless it hits a great amount of money, one million dollars or more." So if Metro couldn't help, what about the Real Estate Division? That state agency is charged with overseeing homeowner's associations and property managers. And it's not like this is the first time they've heard allegations of missing money under Tom Wrath's management.

In part two of this story, Darcy takes a look at what the government knows about Wrath, and what they haven't done to protect the public.

Southern Nevada's home prices soar

Median sales price of single-family, detached homes exceeds $250,000
By HUBBLE SMITH
REVIEW-JOURNAL

Las Vegas home prices are getting more expensive, with the median sales price of Southern Nevada single-family, detached homes exceeding $250,000 for the first time in April, according to one Realtor group's statistics.

The median price, in which half the homes sold above and half below the amount, was $252,500, a 44.3 percent increase from $175,000 a year ago, the Greater Las Vegas Association of Realtors reported Tuesday.

The Realtor group's statistics compile prices for both existing and new single-family detached homes that were being resold on the Multiple Listing Service.

The average price was $294,488, up 26.3 percent.

The group's statistics also showed 3,267 home sales in April, an increase of 35 percent from the same month last year.

"I think when we look perspectively at our town against the rest of the country, we can't say our homes are inexpensive now," said Lee Barrett, president of the association and owner of Century 21 Barrett. "But it is affordable when you compare it to other metropolitan areas."

In fact, the local median price of homes is not as high if based on other criteria.

Home Builders Research, which counts home sales through deed closings at the Clark County Recorder's Office, reported 2,216 new home sales in April at a median price of $233,360.

Resales totaled 6,292 at a median price of $220,000. Building permits for new homes rose to 3,424, a 62 percent increase from April 2003. Home Builders Research's median price numbers also include non-detached home figures from townhome and condominium sales.

Dennis Smith, president of Home Builders Research, said the issue of housing affordability is also continuing to be an ongoing problem that home builders face in Las Vegas. A study a couple of years ago by the Southern Nevada Home Builders Association showed that 1,400 home buyers are priced out of the market for every $1,000 increase in home price, he said.

"Luckily we have enough demand here from people who want to live in Las Vegas that we don't have a situation where we can't find buyers for homes," he said.

"We may be pricing people out, but we're finding buyers moving here. Is it a problem? Absolutely. I don't see it getting any better. With the price of land going up, I see no reason to expect home prices to come down."

Barrett, who recently returned from a National Association of Realtors' conference in Washington, Barrett said housing markets are sizzling all over the United States, not just in Las Vegas.

"It's happening all around the country, in south Florida, the Midwest. Maybe not as much as we're seeing here. It's the (low) interest rates," Barrett said.

Hugh Newkirk of Newkirk Realty said he's starting to see some of his clients in Sun City Summerlin cashing in on their homes, which have appreciated 2 percent to 3 percent a month over the past few years, and moving to lower-priced areas such as Phoenix.

"At least through the summer, we see prices continuing to rise," he said. "I do think the election and interest rates will slow the rate of increase."

His wife and business partner, Karen Newkirk, said the inventory of available resales has nearly doubled in the last several weeks.

"Quick sales and multiple offers only happen when inventory is down," she said. "Keep an eye on this. It is climbing daily."

The Realtor association reported that 4,667 homes became available for sale on the MLS in April, bringing the total to 8,806.

"That's what we've been saying all along, to watch the number of homes for sale that have been put back on the market by investors," Smith said.

Some homes jump $50,000 in value by the time they close escrow, allowing investors to quickly "flip" them for a tidy profit, he said.

"How many of those houses that they (the Realtor association) list have never been lived in? Those are the investors that builders want to get rid of," Smith said.

Median list price for homes on the MLS was $299,000 in April, up 66.2 percent from $179,900 a year ago. The average-priced listing was $370,703, up 44.6 percent.

Closings for condominiums and townhomes totaled 697 in April, compared with 441 a year ago, the Realtor group reported. Median price was $130,000, up from $98,880 in April 2003.

One alternative that could keep median home prices down this year: apartments converted into condominiums and selling for under $150,000.

Homes don't spend much time on the market in Las Vegas. Nearly 80 percent sold within 30 days and 11 percent sold within two months, according to GLVAR.

Larry Murphy, president of SalesTraq, a local real estate research firm, said Las Vegas is the fastest-selling housing market in the nation.

Existing homes in Las Vegas were listed for an average of 21 days and sold at 100 percent of list price, he said.

STUNNING DEFEAT FOR CAI IN CALIFORNIA SENATE

Ducheny's Non-Judicial Foreclosure Bill Passes 36-0

May 18, 2004

Sacramento, California -

Community Association Institute(CAI)lawyers suffered a major blow today when the California Senate voted unanimously in favor of Senate Bill 1682. This bill prohibits the use of non-judicial foreclosure for unpaid assessments in homeowner associations for amounts less than $2,500.

Homeowner advocates were both happy and cautious. They praised the skill and dedication of the bill's author, Senator Ducheny, in securing passage through the Senate. However, they cautioned that CAI will be waiting for the bill when it goes to the Assembly.

CAI is already on a high state of alert, having sent a newsletter to all its members asking them to buttonhole their representatives. CAI lobbyist, Beth Grimm, and CLAC lobbyist, Skip Daum, have already called the work of the legislators "a feeding frenzy".

Homeowner advocates point out that the bill was triggered by the non-judicial foreclosure sale of Tom Radcliff's home over $120 in unpaid assessments. His house is worth $280,000.

Homeowner advocates are urging all homeowners to contact their assembly person to urge passage of this important piece of legislation. CAI is attempting to amend the bill to death.

The bill represents years of work by many homeowners to bring the issue of non-judicial foreclosure to the attention of legislators. It also represents years of work informing reporters of the significance of this issue. It also took the work of legislative staffers like Mark Stivers who wrote a clear and unbiased legislative analysis of the bill.

But the news out of Sacramento was not all good for homeowners today.

Gov. Schwarzenegger appointed Lucetta Dunn,an industry official to fill the important post of director of the Department of Housing and Community Development. Ms. Dunn has a long history of working to build homeowner associations for such groups as Koll Real Estate. She is a vice president of the California Building Industry Association. She also is a member of the Orange County Privatization Task Force. Privatization often means deprivation for the citizens, and enrichment for the big corporations.

As her appointment requires confirmation by the Senate, homeowner have the opportunity to send their views to their Senate representative.

Readers weigh in on HOAs
Our article on homeowners associations elicited a strong reaction from both sides of picket fence.

May 18, 2004: 12:11 PM EDT
By Sarah Max, CNN/Money senior writer

BEND, Ore. (CNN/Money) - Do you hate your homeowners association? We raised this question in an article first published in March, and our inbox has since been flooded with emails.

Just to recap, homeowners associations are increasingly common in new housing developments. An estimated four out of five houses built since the late 1990s belongs to a such an association, according to the Community Association Institute (CAI).

Residents who live in these neighborhoods pay annual or monthly dues to help maintain common areas such as roads, parks and pools. They also agree to abide by a set of rules typically encompassing everything from what color they paint their houses to where they park their cars.

The majority of homeowners are happy with their associations, said CAI spokesman Frank Rathbun, because they give owners access to amenities they may not be able to afford on their own – such as swimming pools and private security – and they help protect property values.

"It's like any other aspect of life; if it's done poorly the results will reflect that," said John, a reader who said he has lived in a community association for 30 years. "If it's done well, however, the results can pay valuable dividends to the members."

But critics – and there are plenty – argue that these bodies have too much power and not enough oversight. Particularly worrisome is that in most states homeowners associations have the right to foreclose on a home if dues are not paid.

"Associations have gone from having covenants with just a few simple rules to Big Brother-type of organizations where [residents] cannot have the freedom to do what they want to a home that they, not the association, are paying for," wrote Leslie, a reader who said she has lived in an association for 10 years and is deliberately moving to a neighborhood without one.

"I just finished reading your article and all I can say is, 'Wow! I am so lucky,'" said Lisa, a reader in Pennsylvania who lives on 250 acres where she can do anything she wants. "Why would anyone want to live this way?"
Strong opinions for and against

"I, too, truly hate my homeowners association," said Don, a reader in Colorado. "They now go way beyond [a] 'common good' purpose and try to form neighborhoods into the administrators' personal visions of Utopia."

His biggest complaint is that he is required to have a lush lawn even though water is extremely scarce. He'd prefer to plant vegetation that does well in the arid climate, he said, but that's prohibited.

"So, you might ask, why did I move here to begin with?" Because his housing association controls most of the new development in his area, he said. "Unless you want a two-hour commute, you're stuck."

But rules need to be enforced to protect property values, said other readers.

"We have belonged to two HOAs, and my husband served many years on the board of one," said Nancy, a reader in California. "There have been many disagreements, and I cannot recall one in 26 years, which was not the fault of the homeowner.

"We have watched our quality of life and the appearance of the places in which we live be grievously affected by these people, who behave like spoiled children," she said.

The solution? "Don't live here!" she said.

Is there enough disclosure?

One criticism of homeowners associations is that buyers often do not understand the full implications of living in a particular neighborhood until it's too late to back out.

"I'm a real estate attorney and have served on the boards of numerous homeowners associations for over 25 years," said Eric, a reader in California. "This article was a rant against HOAs, and filled with misinformation."

"Especially egregious," he said, "was the statement that CC&R aren't disclosed until the close of escrow and/or until they can't get out of the deal, which is flat out wrong, at least in California."

Still, we heard from quite a few readers calling for better disclosure of association rules.

"At no time do real estate agents mention them," said a reader from Jacksonville, Fla.

"We were never informed of the existence of such an association until days before closing on our home," said Jeff of Massachusetts. "If we had known of its existence in advance, it may well have swayed our buying decision."

Is foreclosure too harsh a punishment?

One example that drew quite a bit of reaction was of Tom and Anita Radcliff, a retired couple in Calif. whose home was foreclosed on by their association because they did not pay the $120 in annual dues they owned.

"After hearing about the old couple who lost their house for a $120 check they forgot to send to their association, I know even more why I would never move in such a neighborhood," said one reader. "Homeowner associations should be banned."

But proponents of associations point out that the Radcliffs could have avoided foreclosure by simply paying their fair share. "I do quite a number of foreclosures, of the kind you mention being 'out of proportion' to what is owed," said Barbara, a condominium association lawyer in Connecticut.

"Foreclosure may seem harsh," she added. "But from my vantage point it is the only way folks know you are serious, and that the common charges must be paid regularly just like your mortgage, electric and water bills.

"The non-paying unit owners often say to me, 'Why foreclose when I only owe a few hundred or a few thousand dollars?' I answer, 'Show me the money.'"

HOA Fraudit Standards

Homeowners associations use CPAs to conduct audits of the HOA's
financial statements. Audit procedures have changed dramatically as a
result of many highly publicized accounting scandals in the past few
years. Although the types of fraud seen in those well-known cases
typically do not occur in HOAs, the changes in audit procedures apply to
all businesses, large and small.

The biggest changes result from the American Institute of Certified
Public Accountants' (AICPA) Statement on Auditing Standards No. 99. SAS
99 became effective on December 15, 2002. Its purpose is to improve
audit quality and the ability of auditors to respond
effectively to the potential for fraud. SAS 99 covers such new topics as:


Characteristics of fraud
Exercising professional skepticis
Assessing and responding to fraud
Examining journal entries for fraud
Evaluating significant unusual transactions
Communicating fraud to the client


The effect of SAS 99 is that the auditor will perform procedures to
determine unusual relationships between accounts and increase inquiries
of management. The auditor will also assess the risks associated with
management override of internal controls and journal entries. The
auditor will inquire of the board of directors, bookkeepers, property
managers, and others to determine if any has knowledge of fraud or
suspected fraud. The auditor will also examine programs and controls in
place at the HOA or the management company to prevent, detect, and deter
fraud. At the conclusion of the audit, the Board, manager and bookkeeper
will be asked to sign a letter of representations which vouches for the
correctness of the financial statements.

HOAs are corporate entities which should maintain professional and
honest books. SAS 99 will help auditors ferret out those that have ill
motives.

----------------------------------------------------------------------

Written by Richard Thompson

Handicapped kids can't catch the bus

The Virginia Gazette
Brandy Centolanza

WILLIAMSBURG -- A well-intentioned attempt to preserve the private road
in a neighborhood has left two handicapped children struggling to catch
the bus.

For two years, homeowners of Shellis Square condominiums on Merrimac
Trail have refused to permit WJC school buses to travel the loop,
claiming the heavy buses damage roads and sidewalks. Yet trucks are okay.

As a result, Kelley Campbell and Tomeka Cox have to trek through the
neighborhood with their disabled children so the kids can board the
school bus as it drives along Merrimac Trail. Both girls attend the NEED
Center at Norge Elementary.

Campbell's 5-year-old daughter, Brittany, has spina bifida, a condition
that results from the failure of the spine to close properly during the
first month of pregnancy. She is only able to walk with the aid of a
walker or crutches and sometimes is confined to a wheelchair.

"It's a struggle," Kelley Campbell said of the trek to the bus. "Because
it takes longer for Brittany to get on the bus, sympathetic neighbors
and drivers on Merrimac Trail have taken it upon themselves to break the
law and go around the bus, even though the safety signals are flashing
and the stop sign is sticking out."

Cox faces a similar problem. Her 4-year-old daughter, Tamia, has been
diagnosed with Type 1 Lissencephaly, a brain disorder that affects motor
and cognitive skills. Tamia can neither walk nor talk, so her mother
must carry her to the bus stop all the way from the back of the complex.

The distances are several hundred yards, which is significant for
handicapped kids.

"We are expected to go to the front entrance in rain, snow, sleet, hail
-- everything," Cox said. "My daughter is prone to pneumonia, so I often
have to keep her home from school when the is bad weather."

Both women rent their homes in Shellis Square. Campbell has lived there
for at least a decade, while Cox moved in last November.

Earlier this month, Cox pleaded with the homeowners association board to
at least allow the smaller buses in that are exclusively for handicapped
students. She didn't succeed.

"I asked them point-blank what the reason was that the school buses
couldn't come into the complex," Cox said. "They told me that they mess
up the speed bumps, and mess up the pavement. I asked them what was more
important, the pavement or the children. I was told that it cost a lot
of money to repair the roadways."

Cox pointed out a hole in the argument, noting that garbage trucks,
package delivery trucks and moving company tractor-trailers are common
in the neighborhood.

"They told me that was because the whole community benefits from those
services," Cox said.

At one point, WJC transportation director Randy Pingley tried to intervene.

"I used the same argument, but it didn't work," Pingley said. "I don't
know why they are against school buses but not other, heavier vehicles."

Pingley approached city officials for help, but was told that nothing
could be done since the roads are on private property.

"This is definitely not something that we chose to do," Pingley said,
referring to WJC Schools.

Other neighbors are perplexed by the rule, since they think it's unsafe
for any child to stand out front on the heavily traveled main road.

"Merrimac Trail is a main thoroughfare," noted Nancy Shelton. "It's
dangerous for children to be waiting out there for a bus. It's unfair."

Brenda Wigginton, a former Shellis Square board member whose husband now
serves as the association's president, tells a different story. She said
the association once considered allowing just the handicapped buses in.
She claims school officials "didn't want any buses coming in, because
there was nowhere for the buses to go because the parking lot was too
crowded with cars."

"They made the final decision, not Shellis Square," Wigginton stated.

"That is not true," Pingley shot back when told of Wigginton's claim.
"This is very upsetting to me."

Pingley said he pleaded with Wigginton to at least let the drivers
finish out the school year, but Wigginton refused. Buses ceased entering
the neighborhood in March 2002.

"There is no way that I would not provide a service to a special-needs
child," Pingley insisted. "If I could go door-to-door to pick up the
kids, that's what I would do."

As for the other vehicles, they can enter the complex because "we have
to let people move in and out, and we have to let the UPS trucks in
because it's the mail," Wigginton said. "We let the recycling truck come
in, but that is just once a week."

She said school buses used to "come in and out of here all day long.
They would come in here at least six times a day. You could tell they
were destroying the pavement. It was definitely deteriorating."

Contradicting her earlier statement, Wigginton then said the decision
was made not to let the buses in because the association didn't want to
increase annual dues to cover the cost of repairing the roads.

"This is purely financial," Wigginton said. "We are looking out for the
homeowner. Everything in here is maintained by the residents. We don't
have the city or VDOT coming in and helping us. This is private
property. We don't have to allow the school buses in."

Campbell is not giving up.

"I have been fighting this for two years, and I will continue to fight
this," she said.

"When you have a handicapped child, usually people are willing to go out
of their way to help you the best way they can," Cox added. "It's
heartbreaking and disappointing for our children to have to suffer
because of the homeowners association's unwillingness to compromise."

Copyright © 2004, Virginia Gazette