Libertarians Cry Out For Government Action!

I'm going to have to write about homeowner associations again; it's amazing the vehemence that it brings out in people, especially considering how in the 1990's these private institutions were going to end municipal government as we knew it, that local government was a dinosaur that soon would be extinct as the more fleet-footed, mammalian HOAs took over the governance ecosystem. Yes, we decided to empower private individuals to control their own community's destiny--and who could have predicted that the people getting that power would use it as well as, say, they can drive cars? I think next week's column is how we gave the power to homeowners to control their neighborhoods, and look how that's turned out; now we're going to have the very same people carry guns and we're going to be safer? Can't wait for that.

My suggested title was "HOAs: Threat or Menace?" but the editor didn't get that joke. And for those of you who know my father-in-law, you know that he's a man who really does need no introduction.

WHEN IT COMES TO HOA REGULATIONS, FATHER-IN-LAW KNOWS BEST
East Valley Tribune, May 6, 2007

Extracting the U.S. from Iraq is child’s play compared to a political debate raging in my world. On one side are my editorial overlords at the Tribune, scourge of homeowner associations everywhere. On the other side is a HOA finance committee member who happens to be my father-in-law. It’s not hard to guess where I come out.

Today’s issue involves whether HOA assessments should be limited by the homestead exemption. HOAs get their powers from recorded declarations, the all-powerful Covenants, Conditions and Restrictions incorporated into every deed to property in the subdivision, and which every purchaser is deemed to accept. Nobody has to buy property in an association, but if you do, you’ve agreed to be subject to the HOA. It’s a private arrangement, it's more efficient, government shouldn’t interfere -- all that libertarian right-to-contract stuff.

In 1996, the Arizona Legislature attempted to rein in HOAs by, among other changes, capping annual assessment increases -- but also confirmed that association liens weren’t subject to the homestead exemption, which prohibits the forced sale of a residence valued under $150,000. People can waive the homestead exemption, and many CC&Rs provided for such a waiver; the statute confirmed such waivers’ validity.

Subsequent legislatures restricted HOA lien foreclosures to assessments (plus collection charges and expenses) only; other liens couldn’t be foreclosed and only could get collected when the property got sold. But -- contrary to Tribune senior opinion writer Le Templar’s brief summary in last week’s column -- the series of amendments over the past decade makes clear that the original 1996 amendment wasn’t a broadening of HOA power, but rather just confirming what existed at the time, and the validity of those CC&Rs that people accepted when they purchased.

It’s the latest attempt to curb HOAs where Templar gets crosswise with my father-in-law. Templar believes that HOAs shouldn’t be able to enforce their liens, whether for assessments or otherwise, despite the homestead exemption; HOA liens shouldn’t be treated like taxes or mortgages, but rather like other non-favored creditors, and debtors shouldn’t have to give up their homes to pay delinquent assessments or fines. Templar supports SB1330, which would not just bar foreclosures, but also make any HOA lien unenforceable unless the homeowner’s equity exceeded $150,000 -- even at the sale of the property.

My father-in-law, however, argues that preventing HOAs from collecting on liens unless equity exceeds the homestead exemption shifts the burden for operating the association to those owners who pay their assessments on time. He sees the work the HOA does, paid for by the majority of owners, as creating property value -- value in which the non-payers want to share but not pay, even though they agreed to do it. To prevent what Templar sees as abuse would allow deadbeats to avoid their obligations -- and make those playing by the rules pay for their share and the deadbeats’ too.

Those of you without a relative in HOA leadership may come out differently on this issue, but what’s most interesting is that HOAs were once seen as the wave of the future; Edge City, Joel Garreau’s 1991 book, saw privatized organizations like HOAs inexorably taking over from strapped and increasingly incapable municipalities. But now we see so-called conservatives in Arizona using old-fashioned government to limit HOA powers -- and forcing HOAs to act more like governments, with open meeting and free speech requirements.

The HOA world now awaits the decision of the New Jersey Supreme Court, expected later this year, in the Twin Rivers case. An appellate court held that the state constitution’s free speech protections apply to HOAs, which have "a constitutional obligation not to abridge the individual exercise of such freedoms."

In Twin Rivers, the state ACLU chapter sued to overturn the HOA’s restrictions on political signs. In Arizona, Rep. Eddie Farnsworth (R-Gilbert) is leading this latest charge to restrict HOAs. Fast Eddie and the ACLU, together at last, united by shared distrust of homeowner associations. Is this a great country, or what?