Is It Time to Do Away With Homeowners’ Associations (HOAs)?

Homeowners’ associations (HOAs) are made up of a few busybodies trying to have control over everyone else. So says Representative Juan Carlos Porras of Miami, who calls the HOA model a failed experiment.

It’s a view that resonates with many people who have deeds to condo units and deal with daily life under a condo board.

What’s Going On at the Typical HOA?

Their official name is common interest communities. But most everyone calls them HOAs—short for homeowner associations.

Many are multi-unit condo properties. Some are planned developments of houses, run by a private group, funded by dues from all deed holders in the neighborhood. This covers the costs of upkeep, amenities such as pools and meeting rooms, landscaping, waste services, snow removal, outdoor lighting, and so forth.

About a third of all homes across the country exist within these community associations.

Guidelines for daily life can be quite picky. You’ll find these in the association’s Covenants, Conditions & Restrictions (CC&Rs). They are filed with deeds at the county recorder of deeds’ office. Typically, they set rules for unit owners and homeowners. Owners have to agree to rules on nuisances, smoking, parking, outdoor décor, gardening and painting, guest visits, holiday decorations, pets, and caps on the number of investor-owners. Meanwhile, are the rules that board members have to follow quite so firm?

What’s Going On in Florida—The HOA State?

Florida has a larger ratio of homeowner association properties than any other state. Around half of Florida homes are HOA units. One lawmaker has argued that their time is over.

That’s Representative Juan Carlos Porras of Miami. Porras questions whether HOAs should exist anymore.

Millions of Floridians have a stake in the outcome of such an argument. And the big question is what these properties would become if HOAs no longer existed under a state’s law.

So, is putting an outright end to HOAs more trouble than it’s worth? Could Florida law just need a tuneup, to help boards and managers run these properties better?

In Florida, there’s a state condo law, and it changes from time to time to address certain problems that arise in the operation of these private associations.

What’s the Problem With HOA Governance?

Do homeowner and condo associations in Florida actually attend to their duties under the state condo law? Or do they resist what lawmakers try to do?

Much depends on whether an association bylaws have what lawyers call “Kaufman language.” That’s a provision that states that the association’s bylaws will be amended to comport with changes in state law.

No Kaufman language? Then there’s likely a good deal of operating space for misbehaving board members who don’t wish to be held accountable. Make no mistake, accountability is an ongoing issue. In recent years, several cases of major corruption have arisen at Florida HOAs:

• The Hammocks was rocked by a fraud scandal in a community of 60K residents. HOA leadership was charged with racketeering, money laundering and bribery.

• The board president of Turnberry faced charges of racketeering, fraud, and grand theft.

• The board president of Ro Mont South Condominium was alleged to have diverted thousands of association dollars for personal expenses.

• A scheme in Tarpon Springs allegedly involves the loss of hundreds of thousands from the community’s funds.

A related problem? Current procedures can make it difficult for owners to remove board members who refuse to step aside.

Juan Porras introduced legislation to revamp dispute resolutions. The bill, HB 657, has firm support in the House. This means that, even though the bill has just died in the Senate this year, it’s likely not the last we’ve seen of the pressure to supply a pathway for unit owners to dissolve their boards. After all, this is not the first time such a bill was seriously considered in Florida. Will it come up again? The pressure for stronger accountability is unlikely to disappear.

Many buyers acquire deeds to HOA units, rather than whole properties, because condos are affordable in relation to our expensive overall housing market.

Nuts and Bolts

Today, if mediation between unit owners and association leadership fails, the unit owners have no way to hold the board accountable short of suing in circuit court. But a court case can drag on for years. Paying lawyers is expensive. And the election of new board members while a case is ongoing could make the whole case moot. So litigation is often both stressful and wasteful.

The proposed law would have made big changes to Florida’s HOA law do deal with the above problem. For the sake of transparency, the idea was to have state-funded court procedures to oversee and resolve disputes. This would replace the nonbinding mediation process currently in place. Furthermore:

• The law pressed to allow communities to dissolve their association boards. What is the counterpoint against this? Board members may feel that it’s overkill, because they can, technically, be booted out through annual elections or a recall process if the majority wants them out. The problem, though, is board members who refuse to leave their posts regardless of the vote. Another counterpoint that’s been brought up: Dissolving a board could leave properties without management and upkeep, leading to devaluation and inviting opportunistic real estate investors to take over properties.

• The law was a push to require notification of the county or city government wherever the members of the HOA open the process to dissolve their board. (Steps would include petition gathering, voting, and ultimately a judge’s approval of dissolution.)

• For the sake of board member accountability, HOAs would have to state in their governing documents that their bylaws will automatically change to reflect changes in state law. That’s the Kaufman language.

Some people who are active on their HOA boards fear that these provisions would undermine their home rule, so to speak, by giving authority to Florida to modify association rules. And they successful pressed against it, leading to its demise a few weeks ago.

So, will this bill come up again? We’ll be watching. For now, we know…

The Debate Around HOA Boards Has Reached a New Level

We’ll be hearing a lot more about this in the years ahead, especially as so many new developments are association-based.

If you are thinking of buying into an association, the lesson here is strong: Find out whether the board is dysfunctional before signing a purchase contract. Review the governing documents in advance, too. Ask your agent to rustle up the master deed, and a notebook containing bylaws and the Covenants, Conditions, and Restrictions. And find out what you can about the HOA’s history in relation to state condo law.

Are you thinking of buying into an HOA? Check more deed and property research tips here.