Article Courtesy of
The Scottsdale Times
July 7, 2004
Powerful
homeowners association boards across the Valley are frustrating some of their
members, while others enjoy the aesthetics and uniformity of HOA
neighborhoods. But who’s in charge?
The facts are that
Scott Carpenter is a well-respected attorney who presents
himself well. He has no criminal record. He dresses sharply, and
doesn’t speak as slowly as most lawyers.
So why would north Phoenix resident Joe Haggerty call Carpenter
part of “a pen-pushing Mafia practicing legalized
extortion”?
The answer is part of an even bigger question: Do homeowners
associations have too much power? And similarly, who’s in
charge of them, and who's making and enforcing the rules?
Haggerty wanted to leave his trashcan in his front yard. After
his association and Carpenter’s law firm were finished, it
cost him $12,000 to leave the green plastic can behind the
bushes. His story ran on the front page of The New York Times
last summer in an investigative article about the power of HOAs
Power Struggle
Homeowners association fines most often deal with code
violations for yard maintenance or parking, but when the levies
for those rather trivial infractions go ignored, the situation
can escalate quickly, sometimes even leading to foreclosure.
The Valley boasts one of the highest concentrations of
homeowners associations in the country, especially in cities
like Scottsdale and Gilbert.
While HOAs are organized with the best intentions, homeowners
are often shocked when they learn just how much power
association boards can possess, only becoming aware of their
supreme authority after being engaged in a dispute.
Many argue that when the boards become abusive of the power
there are few ways to keep them in check.
“ I have people call me, asking who can stop their board. I
have to tell them that legally there’s no one to turn to,”
said Scottsdale resident George Starpoli, founder of Citizens
Against Private Government HOAs.
Due to the high concentration of the associations in the Valley,
there are a number of disputes on record that have escalated to
dangerous levels, some of them grabbing national headlines.
One such dispute ended in tragedy four years ago when Richard
Glassel walked into his homeowners association meeting at
Ventana Lakes in the West Valley, and opened fire, killing two
board members. He was later handed the death penalty by a jury.
Glassel had gone through a long dispute with the board over the
trimming of his shrubs. After the board obtained a $1,000
judgment against him, they foreclosed on his property,
ultimately forcing him to leave the neighborhood completely.
Many residents are becoming more and more perplexed by the
ultimate power HOAs can wield for seemingly minor neighborhood
infractions.
“ How is it that in Arizona, you can walk down Main Street
with a six shooter at your side, but you can lose your house
over a few fees?” asked one HOA resident who, fearing board
repercussions, asked to remain anonymous.
“ If the right board wants, they’ll have you out in two
months,” said Starpoli. “Not everyone is like that. But
there are too many that are.”
Scott Carpenter and fellow attorney Curtis Ekmark say the way to
avoid that kind of abuse is to get involved with the board.
“The association is only as good as the people who will put in
their time,” Ekmark said.
But critics don't believe the average homebuyer understands what
they are committing to when they sign into an association.
Joe Haggerty along with his wife and three children had lived in
their association for six years with no problems when, Haggerty
says, one board member made the location of his trash can an
issue. He says his board never warned him about a lawsuit, yet
the board was indeed pursuing legal action. Haggerty was forced
to hire an attorney to fight the legal battle with the
association. “Here’s the irony: I’m paying my dues, and
they’re suing me with my own money.
" It’s like these attorneys set the rules that they have
to play by, and then they tell people whether or not what
they’re doing is fair,” Haggerty said.
But attorney Scott Carpenter, whose firm represented the
association in Haggerty's case, says it’s not that simple.
“The thing is that the law of community associations is
incredibly complex, a lot of moving parts. It’s not easy to
paint HOA reform with a broad brush. No one in my law firm wants
to foreclose on anyone,” he said.
Legal Fees Out of Control
Seventy-seven-year-old widow Marie Brown lost her
Peoria home over the bushes in her backyard. Ekmark’s firm
represented the HOA in her foreclosure.
According to an East Valley Tribune article, Brown did owe about
$4,000 in unpaid bills, but was charged more than $20,000 in
legal fees, which were then taken from the proceeds of her
home’s foreclosure.
Power plays like this motivated Representative Eddie Farnsworth
to write House Bill 2402, recently passed by the Arizona State
Legislature. The bill forces associations to secure court orders
prior to placing liens on homes.
But Carpenter says Brown’s story only reinforces the need for
foreclosure power. “What good are rules if the HOA cannot
enforce them?” he said.
However, while it's true that Brown was in clear violation of
her association’s Covenants, Codes and Restrictions (CC&Rs)
when her home was foreclosed upon, court documents confirm that
at least $14,218 of her assessed fees, more than double the
amount of actual fines and dues, were related to attorneys'
fees.
“ I wouldn’t characterize it (the amount) as extravagant,
but unusual,” Ekmark said of the attorney fees in the Brown
case. “The attorney who handled that spent hours on the phone
trying to convince her (Brown) to do the right thing,” he
added. The catch, Ekmark says, is that “if the lawyer
doesn’t spend all that time and effort trying to help,
they’re mean. If they do help and the case loses, they are
owed for all the fees.
“ That is an unusual case that needs to be put into
perspective,” Ekmark continued. “There are 10,000 planned
communities in Maricopa County. Weird things are going to
happen.”
Carpenter added that while foreclosure stories are dramatic,
they are not very common. “It’s a bit of a myth that
associations are foreclosing on people left and right. Every
single foreclosure that we file is an unfortunate thing that
happens. We never file the foreclosure without giving the person
a chance to work out a payment agreement or something,” he
said.
Starpoli and other critics believe it could set a dangerous
precedent to ignore such cases.
Interpreters of the Law
Carpenter and Ekmark are both members of the Community
Associations Institute (CAI), an educational non-profit
organization. Some HOA reform seekers believe CAI is looking out
for attorneys rather than homeowners.
Starpoli says the organization has effectively declared itself
the expert. He said these same attorneys show up every time an
Arizona HOA forecloses on a home, and he wants Valley residents
to know those same attorneys may work closely with their own
neighborhood. |
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By
the numbers:
90 Percentage of Gilbert homes in H.O.A.’s, according to
Town of Gilbert Congress of Neighborhoods
$52,000 Approximate foreclosure sales price of H.O.A. resident
Marie Brown’s home.
$95,000 Approximate value of homes in Brown’s neighborhood
10,000 Attorney Curtis Ekmark’s estimate of planned
neighborhoods in the Valley.
$323 Amount of money John Taylor owed his H.O.A., found in a
random search of court records
$3,716.50 Amount John Taylor had to pay his H.O.A.’s attorney
when he lost his case.
1973 Year CAI was founded.
0 Number of discovered court H.O.A. foreclosures by non-CAI
attorneys.
Terms:
H.O.A. Home Owners Association, traditionally formed to increase
home values and neighborhood aesthetics by promoting uniform
standards of maintenance and behavior.
CAI Community Associations Institute, a national non-profit
organization specializing in H.O.A. litigation.
CC&Rs Covenants, Codes, and Restrictions. The constitutions
which define the rules of an H.O.A. Most include a paragraph
that exempts “homestead protection” from foreclosure. Most
require lawyer interpretation. Many prohibit residents from
viewing board correspondence with attorneys.
Resources for H.O.A. homeowners:
ahrc
pvtgov
cai-az
carpenterhazlewood
ccfj |
|
The
attorneys who advise association boards also make thousands of dollars on home
foreclosures and threatened foreclosures, Starpoli explained. Critics consider
that a monopoly. CAI members say it’s only reasonable to be part of a trade
association.
“ There is no conspiracy,” Carpenter said, adding that CAI is nothing more
than a trade organization. “It’s like saying someone who does patents and
trademarks for a living can’t be a member of a trade association.” he
said.
Recent
Legislation
As for Haggerty’s $12,000 trashcan and 77-year-old Marie Brown’s
foreclosed upon home, Carpenter said, “we can’t legislate by anecdote.”
But Rep. Farnsworth thinks the stories are too frequent and too frightening.
“The current unregulated system restricts the private property rights of
homeowners and leaves many feeling disenfranchised in their own
communities,” he said.
Evelyn Lyles, a cancer patient in Gilbert, was only $270 behind on her dues
when she was threatened with foreclosure. She says she was not allowed to pay
the past due assessments and was told her home was in default and told further
that legal fees were being accrued by the association attorney.
In despair, Lyle wrote a letter to Gilbert Mayor Steve Berman, who took up
Lyle's cause with the HOA, but was ultimately unable to dissuade the
association from charging the legal fees Taking it a step further, Berman then
raised the nearly $2,000 needed to pay the fees and save Lyle's home.
CAI’s
History with Foreclosure Legislation
When Farnsworth’s bill hit the House floor, Mayor Berman rallied for it,
with CAI actively lobbying against it. That was no surprise.
Before 1996, Arizona HOAs could not foreclose on homes, but in 1996 CAI
attorney Curtis Ekmark was instrumental in passing a bill that effectively
removed “Homestead Protection” from association homeowners, paving the way
for HOAs to pursue ultimate foreclosure of homes for noncompliance.
CAI solicits Valley associations for funds to fight bills that are “bad for
associations and the people who live in them.” CAI says it uses those funds
to lobby for bills that allow foreclosure and against bills that would
disallow it.
Critics of CAI say the motives of the organization are financial in nature Joe
Haggerty says it seems a little ironic that “these guys are making millions
of dollars on foreclosures and threatened foreclosures, but of course
they’ll say HOAs need that power.”
The
Bottom Line
The question on whether HOA power should be held in check by a governing body
is yet to be answered.
In other industries where similar types of conflict exist, regulatory agencies
have effectively acted as an unbiased mediator and can often bring a voice of
reason to the table.
For now, legislation is afoot that will place limitations on the
organizations, at least with regard to foreclosure. |