Articles of Interest
The Scottsdale Times, July 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
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.
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.
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.
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.
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.
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.
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 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.
Articles of Interest