Searching for Old Hawaii

 Most people who read this blog have visited Hawaii at least once or twice in their lives. If you are like most travelers who go to the islands, you seek out a resort on Oahu, Maui or the Big Island, or rent a nice condominium there for a week or so. Then you enjoy the beach at Kanaapali, Waikiki, or Wailea; drink more rum in two weeks than you've had in your entire life; and blow the diet that lost the weight that gave you the nerve to walk around half naked in the sun drinking all that rum! After that you buy t-shirts and chocolate macadamia nuts at the ABC Store, play golf, snorkel, and then read something that you haven't had time to read since your last vacation, and before you know it, it's back on the airplane to San Francisco. Is that about it? Probably, but what have you missed? If you didn't look carefully, you may have missed old Hawaii.

Exposed?!

What protects an individual homeowner from a catastrophic judgment against her community association?

    There’s a lot of media and blog space being devoted to the question of whether the homeowners in the community where Trayvon Martin was killed could end up personally responsible for a judgment obtained against their association and perhaps lose their homes as a result. This tragedy could certainly result in a lawsuit brought against the association by Martin’s family. If it were, it could be based in part on the fact that the homeowner’s association authorized the “neighborhood watch” program which included the work of George Zimmerman, Martin’s alleged assailant. A verdict of negligent supervision resulting in wrongful death could produce a judgment against the association. Notwithstanding all of the publicity and national attention, the damages in the case, assuming a finding of liability against the association, would likely be an award of general damages—a punitive damage award against the association is unlikely on these facts. But any damages award of a substantial amount against the association could create concern among owners about their own potential responsibility. Are the individual owners exposed to personal liability in that or similar scenarios?

Hate Rules Enforcement by your Community Association?

 Get your Neighbors to Vote it out!

Read any pundit’s blog about homeowner associations and you will see a recurring theme: boards of directors over-zealously enforce the rules. True or not, I’m calling the pundits’ bluff: If you don’t like rules enforcement by your homeowner’s association then round up your neighbors and vote it out. I don’t mean dissolve the association entirely, just limit its authority to enforce certain rules and leave that enforcement to the individual owners who care the most. This has two benefits: it leaves certain disputes between individual owners to be resolved just by those owners; and it relieves the board of directors and the association from having to act as a cop.

Reform Community Associations?

After all of the rhetoric, what's really at the end of the rainbow? 

          There is a documentary film entitled "HOAX" which, according to the filmmaker,  Rodney Gray, "follows an investigative reporter, homeowners, and HOA reform activists as they reveal shocking evidence of financial and psychological hardships experienced by people throughout Texas and Nevada. A few of these people, including the filmmaker, have been the subject of adverse actions from the very HOAs created to help them."

The blogosphere has picked up this film and especially those sites which champion the rights of individual owners, have trumpeted it as revealing and a blow against injustice. I've looked at  the link to the teaser for the film and it appears that the producer has chosen several large gated communities as his subjects. While not agreeing with the premise of the film (i.e. that there is widespread abuse of owners by management companies and boards of directors) it is clear that there are problems out there. Some of the problems stem from very conservative (or liberal, depending on your point of view) reading of governing documents and the ensuing enforcement. We have all read the accounts of fines and foreclosures over  minor infractions. As the complaints mount and the blogs come alive with indignation over these stories, like everything else, the real question boils down to: "What, if anything, can you do about it?"

Ponzi Scheme?

Cities are going bankrupt because they didn’t bother to project their funding needs into the future—will community associations be next?

            Vallejo, California declared bankruptcy in 2008. The city of Hercules defaulted on its bond debt repayments. Other U.S. cities and counties have either declared Chapter 9  bankruptcy or are on the brink. Central Falls, R.I.; Harrisburg, Pa; Boise County, Idaho, and Jefferson County, Alabama all share that distinction.[2] Now, the City of Stockton California may be the biggest city in the nation to declare bankruptcy.

            Each of these public entities has a unique reason for its financial problems. Base closings. Industry shutdowns. A gradual financial decline. But Stockton’s case is somewhat different and perhaps presages more accurately the fate of many other municipalities—they spent money they didn’t have and failed to determine if they ever would. 

          “The city's fiscal history "has eerie similarities to a Ponzi scheme," says Bob Deis, the city manager Stockton hired in 2010. Over the years, the city promised employees huge—and unfunded—salaries and benefits...”[3]

            Essentially, the Stockton City Council approved ever-higher salaries and pension benefits for public employees without the slightest idea of how these benefits would be funded.

            “Perched precariously atop this mountain of obligations are retiree health benefits. Stockton officials awarded these to city employees in a series of votes in the 1990s but made no effort to fund them, intending simply to pay costs out of their budget as workers retired…Stockton Mayor Ann Johnston voted for these expensive measures when she served on the city council. ‘We didn't have projections into the future what the costs might be…I learned that you don't make decisions without looking into the future’… ‘Nobody gave thought to how it was eventually going to be paid for,’ says Mr. Deis, the city manager. “[4]

               Why would public officials be so shortsighted? Part of the reason was political pressure from public employee unions--pressure that is being applied even today to prevent further job and salary cuts. But part of it is that is just too simple to satisfy present day political demands by borrowing funds from future generations--essentially kicking the funding debt down the road.

Negligent Condo Conversion?

Is the converter liable for failing to properly assemble the parts of a new community?

The Conversion Cycle. The latest round of conversions of old apartment buildings to condominiums has come and gone. While the cycle was quick, no professional in the community association industry could have missed it. Numerous "new" communities were created from old apartment buildings during the five years of the late, great, housing boom. Why then? Because when not only is every piece of residential real estate selling as fast as it's listed, but when there is also a waiting list to buy new homes, you had to know that developers would start looking for something else to sell — perhaps something that didn't take several years to develop and build. Immediate inventory, if you will. Old apartment buildings are made to order. Add to that the fact that in such a super-heated market the value of an apartment is much greater if it can be sold as an individual parcel than if it is just one unit in a large rental complex, and you have the makings of another conversion boom.

I say "another conversion boom" because we have seen one twice before — in the early eighties and early nineties — and each time, at the tail end of an upswing in housing prices, numerous apartment complexes were converted to condominiums. The latest version just ended, and we probably will not see any further conversions for a long time. In less superheated real estate markets, buyers prefer new construction and will pay to get it until prices reach record levels and/or there is no new inventory to buy. When that happens, the housing market will temporarily support conversion activity again.

Basic Training Manual for Community Association Board Members

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Get the New Basic Training Manual for Board Members

Essential Information about Community Associations for New Volunteers 

Newly elected board members (and some that have been around for awhile) may not have enough information about the basic legal facts of their community association. This manual walks them through topics like these: "What are the types of common interest developments?" "What is an 'association' and what does it do?" "What are the responsibilities of board members?" "What legal authority governs common interest developments?"

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