Community Manager ordered to pay $1.6 million to HOAs

CONTACT 13

Darcy Spears (KTNV)

6:00 PM, Jul 7, 2017

Dozens of Home Owners Associations are out a ton of money. Over a million bucks all together. Contact 13 finds out who took it and how they got away with stealing homeowners’ money. Las Vegas, NV

Community Association Managers are supposed to look after homeowners and their HOAs.  But the Nevada Real Estate Division says one manager was only looking out herself.

Contact 13 obtained this order from the Commission for Common-Interest Communities.  It says community manager Leslie White defrauded 34 HOAs out of more than $1.6 million. White took much of that money after surrendering her community manager certificate. 

Real Estate Division investigators found fraud and hundreds of violations of state law with the two businesses white ran under the names Associated Community Management and Path Community Management.

The state says White used electronic signatures to transfer money that was not approved by HOA boards. And one of her companies “…was paid in excess of its contract for virtually every association it managed.”  

White has 60 days to cough up nearly $3 million dollars.  That includes fines and fees to the state and restitution to the HOA’s. 

We tried to contact her, but the phone numbers we found were disconnected. 

The case has been turned over to the Attorney General’s office for possible further action. 

Below is the list of Home Owners Associations impacted in this case:

Alterra Homeowners Association:         $19,592.71

Amber Wood Homeowners Association: $36,535.33

Avignon Homeowners Association: $67,070.70

Avila Court Homeowners Association: $22,980.36

Bella Lago Homeowners Association: $83,900.14

Benton Homeowners Association:         $30,485.73

Bonita Vista Homeowners Association: $34,893.77

Brighton Homeowners Association: $35,873.21

Calabria Homeowners Association: $36,353.90

Carmel Ridge Homeowners Association: $42,346.78

Centennial and Lamb Association: $75,958.23

Chatham Hills Homeowners Association: $61,536.65

Cherry Lane Homeowners Association: $81,207.34

Country Glen Homeowners Association: $27,208.24

Crestwood Homeowners Association: $9,000.00

Cumberland Homeowners Association: $26,448.00

Greenwood Homeowners Association: $19,650.00

Hillcrest Homeowners Association: $6,980.00

La Siena Homeowners Association: $56,763.41

Manchester Homeowners Association: $159,495.74

Mesa Verde Homeowners Association: $36,175.54

Moreno Homeowners Association: $91,114.62

Murano Homeowners Association: $62,897.04

Newbury Homeowners Association: $75,795.43

Paloma Homeowners Association: $35,063.94

Pinecrest Homeowners Association: $43,813.86

Sheffield Homeowners Association: $21,971.60

Somerset Landscape Maintenance Association: $15,653.17

Sterling Court Homeowners Association: $53,856.06

Sunrise Valley Estates Homeowners Association: $87,050.91

Terraza Homeowners Association:         $32,350.00

Trailwood Homeowners Association: $13,622.50

Whisper Rock Homeowners Association: $59,822.42

Posted in Viewpoints | Tagged

When an HOA totters financially

Arizona Homeowners Forum

Posted: 05 Jul 2017 07:44 AM PDT, Reposted 7/6/2017

What happens to a Homeowners Association as it totters financially is fascinating.

In the case of the Crossings at Willow Creek, recent hearings in Yavapai County Superior Court confirmed that there is no bankruptcy alternative. That’s because a Homeowners Association is a corporation in name only. The members are on the hook for everything as it’s really a partnership.

We as property owners have scheduled a Member’s meeting on July 17 at 5:00 at the Community Room at 1235 E. Gurley St., Prescott to appoint a Board, without which Judge Mackey is almost certainly likely to appoint a receiver soon. This would be analogous to a mentally ill person with millions in the bank having their bank accounts run down by attorneys and other parasites.

Carpenter Hazelwood, who resigned as attorneys for the HOA last year, triggered this by arguing for a receiver to be appointed when faced with records requests pursuant to a simple AZDRE Order.

It’s already acknowledged properties in the Crossings are worthless because they can’t be sold. What then could homeowners be responsible for above that? Can their property values go negative?

Remember there is no insurance for the HOA now. Under a worst-case scenario, the liabilities to the HOA, and then the members, could easily amount to $20mm or more, especially if an accident takes place in the wash. That’s $250,000 each lot. So yes, property values could go negative.

It takes a lot of dot connecting to figure out what is involved here and we have been doing that for almost 10 yrs. So ahead of the meeting, I will be taking the dots one by one daily to make things clearer. This will be done via the blog at www.thecrossingsatwillowcreek.blogspot.com We’ll also have the documents pertinent to the case available soon via links posted there

A couple of points

  • The Meeting is technically members only but some contractors with construction deposits are welcome
  • Any member wishing to appoint an agent, especially an attorney, must have that approved ahead of time by us.
  • Out of town Press will be welcome but need to be accredited first. Please do that by email to jasellers123@gmail.com
  • There is a current investigation underway by Detective Brazell, Badge #350, at the Prescott Police. If you have relevant information to give to him you would not wish to share with us, his number is (928) 777-1925
  • Conversations with him leave me totally confident the meeting will be safe and not masked by threats as has previously occurred.

Feel free to post questions or comments on the blog as it will not be censored except for totally outlandish comments

SIMPLY ENTER YOUR EMAIL ADDRESS ON THE BLOG TO RECEIVE DAILY POSTINGS

ONLY GOOGLE WILL KNOW YOU ARE WATCHING

A mere selection of issues to be addressed daily will include:

  • Why could the City of Prescott file bankruptcy over this?
  • Why are the US Supreme Court 9thCircuit Rulings in the Kayanne Riley case so relevant?
  • Why there will be no Big Chino without fixing the Crossings – properly?
  • Why was the subdivision ever built in a floodplain anyway at the intersection of all the City’s water mains, including those for the Big Chino, Major Sewers, a main road, and a wash carrying more water than the Colorado River in flood -10,000cft/sec+
  • Is Carpenter Hazlewood looking to collect fees or did something happen with a recent foreclosure they would like to cover up?
  • Why is Chubb Insurance engaged with high powered attorneys? – http://www.manningllp.com
  • What is the role of Metro Phoenix Bank here?
  • Where is Justin Scott?
  • Where is Kathleen Yamauchi?
  • Why did the Board, Attorneys and Management Company all resign on the same day?
  • Who jumped ship first and why?
  • And a lot more dots!

John Sellers

Posted in Viewpoints | Tagged , ,

Defining HOA-LAND

An important article, click to open and view the following link:

https://pvtgov.wordpress.com/2017/05/29/defining-hoa-land-what-it-is/

Posted in Viewpoints | Tagged , | 1 Comment

HOA Attorneys: Lacking Moral and Ethical Perspective

Source: HOA Attorneys: Lacking Moral and Ethical Perspective

Posted in Viewpoints

Arizona HOA Honey Moneypot

Reposted from ArizonaHOA.blogspot.com

   The “Arizona HOA Honey Moneypot“ – why all these problems in Arizona HOA’s?

  • Honey attracts bees. Money attracts the worst of behavior
  • It’s the cash stupid!
  • We estimate that $3bn of CASH is sloshing around in HOA bank accounts owned by YOU
  • Worst example which went unnoticed in the excesses 2008 financial crisis
    • Community Association Banc (CAB), a division of First National Bank of Arizona (“FNBA[1]”) attracted over $1bn of deposits in the months prior to 2008
    • Only $75mm was funneled back to communities
    • Only the FDIC knows where the rest went
    • They used wholesale deposit harvesting via HOA Management Companies
    • Few Boards even knew or know where their cash is
    • The only credentials of the President of CAB, a $1.5 billion plus bank, were membership of CAI, HOA management, and ownership of Las Vegas nightclub
    • I’m not making this up – See this – click HERE
    • When FNBA went under in the shadow of IndyMac, the Federal Government injected $862mm of FDIC taxpayers money
    • In a highly unusual step, they also bailed out UNINSURED DEPOSITORS
    • Many Arizona HOA’s had millions in excess of the FDIC insurance limit
    • We believe the decision was political
  • What this got to do with you?
    • Be aware there are powerful dark forces at work in the HOA industry
    • Few Management Companies, and none of the so called specialized HOA Law firms, have incentives to promote transparency
    • The Edge at Grayhawk lost $2.4mm in fraud because nobody was keeping an eye on the Management Company
    • CAI , a national organization, has huge lobbying power because of their access to money

 

[1] Not to be confused with National Bank of Arizona

Posted in Viewpoints | Tagged

AZ HOA abuse

In a nutshell:
1. A homeowner with two lots in an Association falls behind about two years back, $1,000 per lot
2. They pursue him for only one lot BUT he pays the amount for both..$2,000
3. They then pursue him for $1,000 for the other lot
4. They successfully foreclose for $1,000 plus legal fees. Back to $2,000
5. They sell the lot for $18,000
6. He neither received the excess nor does the  $16,000 show in the HOA accounts.
7. So where did it go?
8. Gets better.
9. They also filed a lien on his house where he lives. Not in the subdivision because he owns vacant lots
10. The town where he lives wants an easement over his house for a neighborhood water project which he wants to do but there a lien
11. He has no way to lift the lien consensually because there’s no HOA Board, MGMT Co, or attorney..

He’s screwed

Posted in Viewpoints | Tagged , ,

How to reset your password

Reposted from another site:

HOA SENIOR TRYING TO RESET WINDOWS PASSWORD

WINDOWS:

Please enter your new password.

USER:

cabbage

WINDOWS:

Sorry, the password must be more than 8 characters.

USER:

boiled cabbage

WINDOWS:

Sorry, the password must contain 1 numerical character.

USER:

1 boiled cabbage

WINDOWS:

Sorry, the password cannot have blank spaces

USER:

50damnboiledcabbages

WINDOWS:

Sorry, the password must contain at least one upper case character

USER:

50DAMNboiledcabbages

WINDOWS:

Sorry the password cannot use more than one upper case character consecutively.

USER:

50damnBoiledCabbagesShovedUpYourAssIfYouDon’tGiveMeAccessNow !

WINDOWS:

Sorry, the password cannot contain punctuation.

USER:

ReallyPissedOff50DamnBoiledCabbagesShovedUpYourAssIfYouDontGiveMeAccessNow

WINDOWS:

Sorry, that password is already in use

 

Posted in Viewpoints | Tagged

Who’s insuring your HOAs wallet?

Guest Blog: http://arizonahoa.blogspot.com

The last of three OAH cases on books and records took place this week. In all cases, the books and records at issue were copies of:

  • The user names and passwords for HOA bank accounts for members on a read only basis
  • The signature cards held by the bank for those accounts.

Banks involved include US Bank, Alliance and Mutual of Omaha. The FDIC has clearly stated, IN WRITING, that for their deposit insurance to flow through the Management Company to the HOA, as beneficiary, the nature of the FIDUCIARY RELATIONSHIP must be clearly identified in the documentation. Banks in the industry have confirmed that the FDIC also tracks with Tax Identification numbers. In most cases, only the Tax ID of the Management Company shows. Rarely the HOA. If these records do not exist, an additional FDIC requirement is not satisfied.

Trestle Management testified under oath this week that they do NOT have a FIDUCIARY RELATIONSHIP with the HOA. You can access the FULL HEARING AUDIO but for the critical 20 second testimony extract, click HERE

Only the FDIC can resolve this. However for HOA’s looking to move their accounts to two banks knowledgeable in HOA’s, and doing it right, just email jas@arizonahomeowners.net

Posted in Viewpoints | Tagged ,

Digital signatures

Digital signatures, computer-documents storage pose challenge to HOA board

Digital signatures and computer-documents storage pose a challenge to HOA board.

Stockphoto / Getty Images

Digital signatures and computer-documents storage pose a challenge to HOA board.

 Donie Vanitzian, JD

Question: Our association seems to be stumbling over itself when it comes to electronic documents. First, it’s embroiled in litigation and received a subpoena for documents, which prompted our association attorney to have the board gather all electronic correspondence for a specified period of time. The problem is that some directors deleted documents from our computers, sold their units and moved out of state.

Separately, one of those departed directors made a mandatory rule that all homeowners had to sign their communications with a digital signature or the board would not accept an owner’s email — even if it was an emergency. Is an electronic signature legally binding? Is there a difference between electronic and digital signatures? And how do you know who is actually signing something with these signatures?

Answer: Litigation is like poker; you must play the cards that are dealt. Know too that you simply cannot change the past. Your duty in responding to a subpoena is to produce all relevant, non-privileged documents in the custody or control of you, your attorneys and third-party agents. If the documents no longer exist or are unavailable, there may be little you can do. The party seeking discovery may question your association on this matter and may seek discovery from the departed directors to see if they have retained any records.

The bigger question, however, is when and why were the records deleted. The destruction, alteration or failure to preserve evidence is known as “spoliation,” and it is a big deal. 

Depending on the association’s degree of culpability, if any, and the prejudice to the other side, a court may impose monetary sanctions, prevent the association from presenting certain evidence, terminate the association’s case altogether or, even worse, enter judgment against it. In a jury trial, the court may instruct the jury to assume that the missing evidence would be unfavorable to the association. If that were not bad enough, spoliation is also a criminal offense under Penal Code section 135.

Given the potential risks involved in not producing the documents, your association may want to consult with a computer forensics expert to see if the files can be retrieved from the computer.

Unlike the low-tech, but highly efficient, paper shredder, deleted computer files are not always irretrievable and sometimes can be found on the hard drive, backup tapes on Internet-based storage and backup systems such as iCloud, Google Drive or Dropbox. If this proves unsuccessful, then the association may wish to solicit the cooperation of the departing directors to obtain the documents. They would be wise to cooperate because they may have liability to the HOA for failing to preserve the records.

As for electronic signatures, they cannot be unilaterally imposed for all communications by a single director. Associations act through their board of directors. And even if such a requirement was authorized by the full board, directors have a fiduciary duty to act in the best interest of the association and it would be inconsistent with that duty to arbitrarily ignore vital email communications from titleholders. But that is not to say that electronic signatures are not useful tools.

To be clear, an electronic signature is any electronic symbol used with an intent to sign a document. Under the federal E-Sign Act and the Uniform Electronic Transactions Act (adopted by every state except Illinois, New York and Washington), the parties to an agreement must express an intent and agree to execute the agreement electronically, which often takes the form of separate correspondence or language within the agreement indicating such an intent. 

Like any signature, though, an e-signature can be challenged by a party who claims that it is not his or her signature or that consent was not given. This is where digital signatures come in. They are generated by software applications and provide greater surety to both the person signing a document and the one receiving it. 

Last year, to eliminate any confusion over electronic versus digital signatures, California adopted Assembly Bill 2296 clarifying the standards of what constitutes a digital signature.

Under the bill, digital signatures use software to generate a signature that is unique to the person using it, must be capable of verification (such as by collecting the email and Internet protocol address of the signer) and are linked to the executed document in such a way that if it is changed the digital signature is invalidated.

As one provider explains, digital signatures are akin to “electronic fingerprints” and create a coded digital message that securely links the signer with the document being signed and verifies the chain of custody of the document.

A valid contract can be created using electronic signatures that do not meet the stringent criteria of a digital signature, but the risk of a party challenging the validity of a signature is dramatically reduced by using digital signatures. Digital signatures are, in essence, the Internet equivalent of a notary — but without the cool stamp.

Posted in Viewpoints | Tagged

How to resign from your HOA Board

Reposted from http://arizonahoa.blogspot.com/

The best letter yet when you want to resign from your HOA board. Not that we want you to resign, but if you must, do it with a smile.

I resigned when things got tough. Today, I wish I hadn’t but at the time it seemed right. We adocates have to learn to stay even when its tough.

Dear Mr. President and Members of our Board,

Although it has been an intoxicating experience to serve as your Trustee, I regrettably must submit my resignation before I have a nervous breakdown.

When I ran for office, I didn’t realize I would actually have to come to secret board meetings and second your every motion to go after members who refused to live by your rules. You know, the ones we keep voting on and don’t ask members what they want? The duties listed for Trustees forgot to mention we would be fining neighbors for planting tulips instead of begonias, parking in front of their own homes, and opening their garage doors for more than 15 minutes at a time. Of course I realize we don’t have to fine our friends and can grant waivers for those who kiss our ass, but I am not comfortable with selective enforcement and find it distasteful to remove the toilet paper adorning my house so frequently.

When Martha sat on the curb and cried after we completed the non judicial foreclosure, I had a difficult time explaining to the deputy that it was because she refused to get rid of the cat after her husband died. I did change my email as you suggested with the death threats pouring in but considering your mother-in-law down the block from you, has had two cats for the last 10 years, it was hard to explain to Martha and her neighbors why hers was not grandfathered in too.

When the members came in mass with pitch forks after we assessed them for the new golf course, I wondered why you found it so problematic to actually put the notion to a vote. I realize it will increase property values with a golf course in the area, but how high can property values go since we have mostly double-wides in this subdivision? Having the attorney write and explain how members would be charged with ultra vires if they continued to harass the board regarding the new golf course worked. Now our neighbors are forming a coalition to petition the board for recall.

My resignation is effective immediately. I will always remember my term in office with some affection as it led to having Martha take up residence in my back room. She is quite the chef and I’m afraid my culinary druthers are now spoiled. I am off to locate the guy with the petition and I assure you, none of the alligators released in the pond in the common area are mine and none of the kittens left on your front porch came from Martha’s cat.

With Warmest Regards,

Your Faithfull Volunteer

Posted in Viewpoints | Tagged | 1 Comment

Reprinted from http://arizonahoa.blogspot.com/

The blog referenced in the title is a site that all Arizona residents should follow.

Dear (HOA Insurer – see LIST)                                                                                                                       February 13, 2017

I am part of an Arizona homeowners group exposing serious risks to the financial system because of financial malpractice in the HOA industry. But we are also fighting legal terrorism on homeowners by their HOA’s via their attorneys if they dare ask questions, especially about money. See the list in Attachment 1.

You are financing much of this.  In 2007 legislators instigated an Administrative Law process via the Office of Administrative Hearings (“OAH”) designed to prevent disputes over garbage cans escalating, leading to $hundreds of thousands of legal bills in Superior Court, and occasionally foreclosures.

Arizona Superior Court data has confirmed that Court actions since 2007 involving HOA’s and these attorneys numbered 16,744 compared to 150 at the OAH. It also indicates 90% of these stem from HOA’s. So much for Alternative Dispute Resolution. Lawsuits and debt collection, see Attachment 2, are major sources of revenue for these attorneys. The other is defending OAH and other cases paid for by you.

My wife and I are members of 4 HOA’s and big believers in using the administrative process. We have had 5 prior OAH cases, all of which involved transparency issues. The first case we won was constitutionally challenged in Superior Court in 2008 by HOA attorneys. Thanks to the then Senator O’Halleran, the HOA blinked, and withdrew its appeal. Ekmark & Ekmark then “resigned” leaving the HOA to fight for reimbursement from CNA of almost $40,000 of legal fees fighting a simple records request.

Standard practice for these attorneys is to intervene with you on the HOA’s behalf. See a recent case in Attachment 3. They argue this is the start of a lawsuit because an unfavorable Administrative decision compromises a subsequent Superior Court appeal by the Administrative ruling. BUT AN ADMINISTRATIVE HEARING IS NOT AN “ACTION”. The claim is simply enforcement of regulations with the maximum cost being a $500 filing fee. Note this may become abundantly explicit pursuant to two bills, SB-1289 & SB-1072, the latter part of a national constitutional group’s efforts to reinforce the separation of powers. See Attachment 4. The goal being to uncouple completely the OAH process and Superior Court so that any appeal would be close to a nuevo trial. Consequently, the need to defend an Administrative proceeding disappears, if it ever existed anyway. As insurers, you might ask to be notified of such proceedings but, properly worded, you would not be obliged to defend something where you cannot recover attorney’s costs. Please support these bills.

Furthermore, as a banker and risk manager, and with your significant risk to the HOA industry, I would be remiss if I did not alert you to one of the biggest financials swamps I’ve seen working on Wall Street. This affects the 68 million of American homeowners who pay $75billion annually to a totally unregulated group of players – HOA Management Companies acting as shadow banks. See more below.

We’d welcome a dialogue.

Sincerely

John Sellers

Posted in Viewpoints | Tagged ,

Trusts aren’t a surefire way of making HOA property judgement-proof

Click on the title below to open and view the document.

Trusts aren’t a surefire way of making your HOA property judgment-proof

Posted in Viewpoints

HOA AZ Superior Court Cases Statewide since 2007

From: John Sellers <jasellers123@gmail.com>
Date: January 26, 2017 at 3:59:51 PM MST
To: John Sellers <jasellers123@gmail.com>
Subject: HOA Superior Court Cases Statewide since 2007
Here is the link below to the 11MB pdf comprising the fully compiled list of Superior Court Cases in Arizona since 2007 involving HOA’s.  
 
 
A staggering total of 16,744 INDIVIDUAL ACTS OF LEGAL TERRORISM
At a mere $10,000 say per case …..that’s $167million of legal fees
 
All duplications have been eliminated. Where in doubt, say a dispute with a landscaper not a homeowner, that was eliminated too. If you don’t see your name do not be surprised because cases were selected by doing an electronic sort in most cases by attorney name. As long as one of the attorneys was involved for the HOA, your case should be there but you will not see your name so don’t even bother looking.  Simply because we never asked for a sort on Buck, Dessaules or Cheifitz 
 
Of all the data collection tasks, many that your resident geek here was able to do easily, this really was a painstaking teeth pulling exercise. Even I felt daunted at times. Partly because the Arizona Judicial computer systems are steam driven and make the ObamaCare web site look 21st century. And they are a law until themselves with Rule 123
 
But that headline number matters. It also highlights the quality of these attorneys. Hardly Rhodes Scholars if they can average 40 cases a year
 
I’ll be challenging all the attorneys to put up or shut up with this…..asap!!!!! 
 
 
Regards
John Sellers
6231 East Mark Way, Unit 12
Cave Creek
Arizona 85331
 
<HOA Attorneys.pdf>
Attachments area

Preview attachment HOA Statewide Superior Court cases Jan 1 2007.pdf

HOA Statewide Superior Court cases Jan 1 2007.pdf
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Posted in Viewpoints

Arizona Homeowners Forum

Arizona Homeowners Forum


Comments to and reprint with credit to the New York Times – the next crisis?

Posted: 22 Jan 2017 04:17 PM PST

See the article below with comments sent to the author
 
To: Julie (Creswell – New York Times).
I believe I’ve identified the next real estate crisis and your article is at the Nexus of that.
62 million homeowners live in HOAs. Those homeowners pay $75billion annually in dues. With $50billion of cash.
All those monies are handled and managed by a shadow banking system called totally unlicensed Management Companies. The biggest of which being FirstService which I believe having spotted the first Enron long before, is the next one. Plus, we have an industry ignoring the Patriot Act, abusing the ACH money transfer system raising the spectre of ISIS intrusion. There’s more. FDIC insurance we believe is faulty. But the worst is where because of PUD riders in mortgages for HOAs, if FirstService disappeared, millions of homeowner’s current on mortgages could be in default.
Hers the Nexus with your article and it’s common with subprime.
Whenever you get new mortgage provider entrants, they don’t have the capacity to be gracious with “minor” defaults as their predecessors. Especially if interest rates rise incentivising them to force higher rates on borrowers.
**********************************************************
Quicken Loans, the New Mortgage Machine
By JULIE CRESWELL JAN. 21, 2017
A Mortgage Lender Digs In Its Heels The New York Times
DETROIT — A low buzz fills the air as an army of mortgage bankers, perched below floating canopies in a kaleidoscope of vivid pinks, blues, purples and greens, works the phones, promising borrowers easy financing and low rates for home loans.
By the elevators, nobody blinks when an employee wearing a pink tutu bustles past. On any given day, a company mascot, Simon, a bespectacled mouse, goes on the hunt for “gouda,” or good ideas, from the work force.
A visit to the headquarters of Quicken Loans in downtown Detroit may seem like a trip to a place where “Glengarry Glen Ross” meets Seussville. But the whimsical, irreverent atmosphere sits atop a fast-growing business in a field — the selling of the American dream — that has changed drastically since an earlier generation of mortgage lenders propelled the economy to near collapse in 2008 by issuing risky and even fraudulent loans.
In the years since the crisis, many of the nation’s largest banks pulled back their mortgage-lending activities. Quicken Loans pushed in. Today, it is the second-largest retail mortgage lender, originating $96 billion in mortgages last year — an eightfold increase from 2008.
Privately held Quicken, like some of America’s largest banks before it, has also landed in regulators’ cross hairs. In a federal false-claims lawsuit filed in 2015, the Department of Justice charged that, among other things, the company misrepresented borrowers’ income or credit scores, or inflated appraisals, in order to qualify for Federal Housing Administration insurance. As a result, when those loans soured, the government says that taxpayers — not Quicken loans — suffered millions of dollars in losses.
Quicken Loans today is the F.H.A. insurance program’s largest participant.
Executives at Quicken Loans deny the charges, maintaining, among other things, that the government “cherry-picked” a small number of examples to build its case. In an aggressive move, the company pre-emptively sued the Department of Justice, demanding a blanket ruling that all of the loans it had originated met requirements and “pose no undue risks to the F.H.A. insurance fund.”
Quicken’s suit was dismissed. But it reflects the in-your-face style of Quicken Loans’ founder and chairman, Dan Gilbert, the billionaire who once publicly excoriated the N.B.A. superstar LeBron James for leaving the Cleveland Cavaliers, in which Mr. Gilbert has a majority stake. He also owns significant chunks of central Detroit, where Quicken Loans is based.
Mr. Gilbert, who founded the company in 1985, sold it to the business software company Intuit in 1999, before buying it back with other investors in 2002.
He is working to rectify the city’s downtrodden image with streetcars, upscale cafes and boutiques, and fiber-optic data, making him a hometown hero. Late last year, Quicken Loans won a motion to move the Department of Justice case to a federal courthouse roughly three blocks from its Detroit headquarters.
Sitting on the edge of a chair in his office, the Motor City’s skyline a steel gray in the late-afternoon November sun, Mr. Gilbert said that his company has been unfairly targeted. “You want to know what this case is about?” he said. “Somebody probably put up a whiteboard and said, ‘Here are the 10 largest F.H.A. lenders, now go and collect settlements from them, regardless of whether they did anything wrong.’”
In court documents, Quicken argues it has the lowest default rates in the F.H.A. program. It projects the government will reap $5.7 billion in net profits from the insurance premiums for loans made from 2007 to 2013, after paying out any claims.
A spokesman for the Department of Housing and Urban Development, which is home to the F.H.A. program at the center of the case against Quicken, declined to speak about the lawsuit.
Late last year, Donald J. Trump named a former Quicken Loans lobbyist, Shawn Krause, to his H.U.D. transition team. A Trump spokeswoman did not respond to an email asking about potential conflicts of interest. In an emailed statement, Quicken Loans said the fact that Ms. Krause had come from the largest F.H.A. lender in the country “bodes well for the positive impact she has, and will, make on H.U.D.”
In the years since the financial crisis, Quicken has emerged as a leader in the nation’s shadow-banking system, a network of nonbank financial institutions that has gained significant ground against its more heavily regulated bank counterparts in providing home loans to Americans. Increased regulation and decreased profits sent the nation’s banks packing.
Nonbanks, like Quicken, have filled that gap. Today, Quicken is the nation’s second-largest retail residential mortgage lender, behind Wells Fargo, but ahead of banking giants like J. P. Morgan, Bank of America and Citigroup, according to Mortgage Daily.
Considered by many to be a visionary leader, Mr. Gilbert often strikes a pugnacious stance. When Mr. James, the N.B.A. star, announced he was leaving the Cleveland Cavaliers in 2010 to join the Miami Heat, Mr. Gilbert — who not only has a majority stake in the Cavaliers, but also operates Quicken Loans Arena, where they play — penned a public tirade against the “cowardly betrayal,” in a letter written in the typeface Comic Sans.
Mr. James is again playing for the Cavaliers. A call to his agent seeking comment was not returned.
The year before, Mr. Gilbert got into an altercation at a bar mitzvah, punching a former colleague, David Hall, in the head before he was escorted out by security, according to interviews conducted by the Birmingham Police Department in Michigan. In police documents, Mr. Gilbert’s lawyer said Mr. Hall filed the complaint in order to pressure Mr. Gilbert into paying $2 million to buy out Mr. Hall’s investments in Mr. Gilbert’s companies. The Birmingham city attorney ultimately denied a warrant in the case on the grounds that the charges were not “supported by probable cause.”
Mr. Hall did not return an email seeking comment. In an email statement, a Quicken Loans spokesman said Mr. Gilbert “defended himself in a minor confrontation that was instigated by a former employee who was the aggressor.”
On a more trifling scale, after sending text messages about this article to a reporter at The New York Times but not receiving a response — Mr. Gilbert was texting her landline number by accident — he followed up with an email accusing the reporter of disconnecting her mobile phone to avoid him. The phone “likely is one of your temporary numbers that you deploy for the surreptitious work that you do,” he wrote.
When alerted to the misunderstanding, Mr. Gilbert apologized “for any of it that was caused on my end.”
When Mr. Gilbert was asked in an email if he “often strikes a ‘combative stance’ or ‘frequently attacks his critics,’” a Quicken Loans spokesman responded in an email, “It’s interesting that when someone with as long and successful career as Mr. Gilbert is forced to defend his integrity and honor from old and/or insignificant already rehashed incidents and accusations from a media source as credible as The NY Times, you would imply that doing such is ‘frequently attacking’ his critics.”
These days, Mr. Gilbert appears to be itching for a fight with the Justice Department. In court filings, Quicken argued that the three-year government investigation was based on 55 “cherry-picked” loans out of nearly 250,000.
Quicken also argued that a longstanding F.H.A. process to resolve loans that did not meet its requirements, through either the repurchase of the loan or by indemnifying F.H.A. from any losses, was retroactively discontinued for Quicken.
Since 2011, Mr. Gilbert has spent more than $2.2 billion on downtown Detroit, buying up 95 decrepit properties and rehabilitating them in an effort to lure new tenants. Nike opened a store there last year. The New York burger chain Shake Shack is coming in 2017, as is the sports retailer Under Armour. Mr. Gilbert also notes that he has leased space downtown to several local minority-owned start-up businesses.
That sort of presence makes downtown Detroit today seem a bit like a company town, a sort of Quickenville. That’s because Quicken Loans is just one of more than 100 closely knit companies that is owned or controlled by Mr. Gilbert with a footprint in the area. Through his commercial real estate properties, Mr. Gilbert can decide which tenants fit into his vision for downtown Detroit, and which don’t.
Rocket Fiber, an idea developed by three former Quicken Loans technology employees and financially backed by Mr. Gilbert, has brought high-speed internet to downtown Detroit. For a $15 million donation, Quicken received the naming rights for the QLine, a streetcar that is expected to start running through downtown Detroit this spring. Mr. Gilbert sits on the board of the streetcar project.
Lines of bicycles in downtown Detroit are available free for all employees of Mr. Gilbert’s companies. And visitors can bet at the tables at Jack Detroit Casino-Hotel Greektown, a gambling venture controlled by Mr. Gilbert.
The Quicken Loans family also includes one of the largest title companies in the United States, an appraisal firm, a call center and In-House Realty, which says on its website that it is the “preferred real estate partner” of Quicken Loans.
Mr. Gilbert, who was busted in college for running a football betting ring (the charges were dismissed and his record was expunged), plays on a big stage. Back in 2010, he guaranteed that the Cavaliers would win the N.B.A. championship before LeBron James would. They didn’t, but the team, led by Mr. James, did win the title last year, and this season’s team has the highest payroll in the league.
With Quicken Loans, Mr. Gilbert has built a game-changing company in the once-staid mortgage-lending industry.
Former executives describe Quicken Loans as a technology company that sells mortgages. But the heart that keeps Quicken’s blood moving is the 3,500 mortgage bankers who work its phones. Many new employees come in with little to no background in financial services. One employee joined after delivering pizzas to the Quicken Loans office and becoming interested in working there.
Entry-level employees typically make hundreds of calls a day, trying to get potential customers on the phone. Not unlike the assembly lines that put together cars in Detroit, the call is immediately handed off to a licensed mortgage banker, who completes the loan application, then quickly passes it to processing so that he or she can focus on the next loan application.
Mr. Gilbert said clients are able to close more quickly on loans when specialists focus on each stage of the loan process. He and other Quicken executives note that the company has repeatedly made Fortune magazine’s list of Best Places to Work For and has earned top marks in J. D. Power client satisfaction surveys.
Quicken defines its culture and philosophy through a number of so-called “isms,” created and curated over the years by Mr. Gilbert: “Yes before no.” “A penny saved is a penny.” “We eat our own dog food.”
At the same time, several former employees and executives in interviews described a demanding work environment, with staff members expected to work long hours and weekends to hit targets. In recent years, Quicken and its affiliated companies have faced at least four lawsuits filed by former mortgage bankers seeking overtime.
Quicken won one of the overtime cases, but court documents indicate others were directed into settlement negotiations. An email to the various plaintiffs’ lawyers was not returned.
And in early 2016, a National Labor Relations Board judge ruled that Quicken and five of its related companies issued an employee handbook with rules that violated workers’ right to engage in various activities, including union-related ones. Quicken has appealed the ruling, calling the policies “common, rational and sensible.”
When asked about criticisms of the work environment, Mr. Gilbert and other executives defended the company, noting that mortgage bankers work an average of 44 hours per week and are compensated well. It is possible for team members, Mr. Gilbert said, to earn over $85,000 in their second year, more than double the median household income for Wayne County, Mich.
Quicken Loans’ growing role in parts of the mortgage market may make it a lightning rod for critics.
Proponents say that nonbanks like Quicken or PennyMac in California — which was started by former executives of Countrywide, the mortgage machine in Southern California that was a hotbed of toxic mortgages in the 2008 crisis — are filling an important void. They argue that they serve people with low to moderate incomes or lower credit scores whom the big banks shun. The big banks, they say, focus instead on so-called jumbo mortgages, or mortgages of more than $424,100, the maximum amount that can be backed by government-sponsored enterprises like Fannie Mae and Freddie Mac.
“The large banks want to go after the higher-end business,” said Guy D. Cecala, the chief executive and publisher of Inside Mortgage Finance.
Thanks to low interest rates, home sales are booming and the mortgage market was expected to top $2 trillion in originations in 2016. That’s a far cry from the frothy height of $3.8 trillion that was hit in 2003.
Moreover, many other parts of the mortgage machine that were in place leading up to the financial crisis have been dismantled.
Still, critics say today’s shadow banks, by focusing on the riskier end of the mortgage market, may be revving up the same parts of the engine that resulted in defaults and foreclosures in the past. Nonbanks, which are typically less capitalized and may have more difficulty reimbursing the government for bad loans, now dominate F.H.A.-insured mortgage loans, according to data from the American Enterprise Institute’s International Center on Housing Risk.
In September 2012, banks originated 65 percent of the purchase-mortgage loans insured by the F.H.A., according to the data. Today, that number has more than flipped: Nonbanks originate 73 percent of the loans, with banks’ share dropping to 18 percent.
The figures are more spectacular for refinanced mortgages, where nonbanks now make up 93 percent of loans.
“The market has moved to the nonbanks because the nonbanks’ appetite for risk is much higher,” said Edward J. Pinto, a director of the Center on Housing Risk. He has argued that the F.H.A. is not only failing to help low-income communities with its programs, but is actually weakening them with imprudent loans.
Mr. Gilbert disputed any “false narrative” that claims Quicken faces less regulatory scrutiny, is lightly capitalized or makes risky loans. He said that the average credit score of a Quicken borrower is one of the highest in the nation; that the parent company’s assets “are larger than that of 93 percent of all F.D.I.C.-insured depositories”; and that the company is regulated by 50 states, multiple municipalities and numerous federal agencies. Quicken Loans is privately held, and it is unclear what its assets are worth.
In an email response to follow-up questions, Mr. Gilbert added, “Quicken Loans underwriting and production is one of the highest, if not the highest, quality production in the entire country.”
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HOA Issues, Problems, Forum Website

Interesting information:

https://www.biggerpockets.com/forums/91-home-owner-association-hoa-issues-problems-forum

 

 

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Have you ever been “SLAPPED” by your HOA?

Arizona Homeowners Forum


Have you ever been “SLAPPED” by your HOA?

Posted: 07 Jan 2017

Whilst HOA transparency issues are vital, the Bill of Rights, including the “right to petition government”, contains FUNDAMENTAL RIGHTS emanating from the Magna Carta in 1215 when King John chopped off the heads of complainers. If these fundamental rights are suspended for the 60 million citizens living in HOA’s, the game is over.
One of the most common complaints from homeowners is of lawyers writing threatening letters, and filing injunctions, when HOA members have the temerity to write, email, or even contact their Board Members and/or fellow members asking questions.  To see examples, click HERE
Our proposed legislative fix – extend Arizona’s anti-SLAPP statute to homeowners petitioning their Board members.
But what on earth is anti-SLAPP?
SLAPP is an acronym standing for Strategic Litigation Against Public Participation. So, when you stand up at your Town Council to complain about a developer, or file a complaint with government, you are exercising your rights of Public Participation. If they sue you for doing that, they are trying to “chill your constitutional rights”.
Many states, starting with California, enacted anti-SLAPP statutes. In the interests of full disclosure, we won the first anti-SLAPP suit in California based on the “right to petition”. We’d complained to the Contractors Licensing Board about a crooked contractor. He sued us, was “SLAPPED” down, and eventually was three jurors short of punitive damages, in addition to a $1.3mm fraud judgment. Click HEREfor details of that case.
If you believe you have been hit with a SLAPP suit, you must quickly file a Motion to Striketheir suit. Many of the bad guys don’t realize they’re doing this. BUT, with anti-SLAPP, the court must clear its calendar to hear your Motion to Strike, all discovery stops, and a hearing occurs quickly. Usually within 45 days. If you are successful, the award of attorney’s fees is mandatory and a suit for malicious law suits can follow with painful results for the bad guys. None of this being dragged out for years by lawyers operating with other people’s money.
To learn more about Arizona’s anti-SLAPP statute click HERE You can also get an independent view by clicking HERE. Also, check out the following video by clicking HERE  – a radio interview of me by Andy Ostrowski.
Although we have other legislative proposals, I believe nothing will tip the scales of justice more than this one bill. So, what are the reasons you should support it?
  • Arizona politicians intuitively support this, seeing HOA’s as a level of government below municipal. Just listen to one debate on HB2609 – The Harper Amendment
  • Even CAI via their long-standing lobbyist, Kevin DeMenna, agrees HOAs are a form of subsidiary government. Click HERE to watch his prior testimony acknowledging this. What’s good for the goose is good for the gander.
  • Don’t get distracted that HOAs are corporations so can’t be dealt with as governments. Much of US federal, state and local government is conducted through municipal and other corporations, especially for borrowings. 
  • Legal practitioners, insurers and others will behave differently. The improved ability to recover attorney’s fees under the statute, by GOOD attorneys, and quickly, eventually by malicious law suit damages, will encourage them to the HOA industry.  Whereas now, they can only work for those who can afford to lose. And when you hire attorneys, you get what you pay for. If you’re forced to pay peanuts. You get monkeys. And the monkeys rule the roost now feeding off HOA moneys.
  • Good attorneys might work on a contingency basis for low income groups and it should attract the ACLU.

The exact details are below:

Folder 118 Title: Petition Right; condominiums; planned communities (Sponsor: Senator David Farnsworth)
This change seeks to establish ANTI- SLAPP protections (Strategic Litigation against Public Participation) to members of HOAs. Association members should be able to petition and question their local association boards without fear of intimidation and law suits simply for speaking their opinions or questioning their board.
Click HERE for the  text of our proposed amendment
See also our overall package of LEGISLATIVE PROPOSALS 2017
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A letter from Arizona Homeowners Forum

 

Arizona Homeowners Forum

Open letter to US Bank, Western Alliance & Mutual of Omaha Bank – a few words matter to the FDIC

Posted: 02 Jan 2017 01:14 PM PST

To:

The Chairmen & Board of Directors of

US Bank

Mutual of Omaha Insurance

Western Alliance Bank

Ladies & Gentlemen

I’m an Arizona HOA member but I’ve been a banker much longer than that. Click HERE. I can even remember when banks offered toasters to acquire deposits because, without them, as even Goldman Sachs found out, you can’t survive. In my experience, there’s only two ways to build your account deposit base:

  • Buy them by acquisition – not so easy and expensive
  • Offer toasters, bricks and mortar, advertising, higher rates – hard work and expensive

You can also do it on the cheap, short term, as Wells Fargo did but, at least in their case, they were opening accounts for people they knew already.

From basic banking documentation obtained from numerous HOA’s, your three banks, and others, have invented a new way of doing it on the cheap through wholesale harvesting of HOA deposits using HOA Management Companies. This already cost the FDIC $1bn in two banks in Arizona you know well in 2008. Not only are these Management Companies not licensed, their basic skill sets are managing landscaping contracts. Most of their staff would not know a debit or credit from a pretzel.

Bottom line:

  • You are ignoring the fundamental “know your client provisions” of the Patriot Act. With few exceptions, you have no idea who the ultimate depositor is. They could be drug dealers or worse. I think I’ve figured out how you justify it, but it reminds me of Enron & Arthur Anderson.
  • Direct Debit Authorities are flying around like confetti putting the ACH at risk.
  • HOA’s and the Management Companies are impossibly intermingled. If of them goes bankrupt, it would be an unholy mess. I’m involved in a live case where we may find out. Click HERE
  • The FDIC it appears has been very clear. Click HERE. Unless the bank account documentation reflects the words that Management Companies are acting as fiduciaries for an HOA, the FDIC insurance does not flow through to the deposit. Shades of Keating et al. And of course, if they did put those magic words in, Management Companies would find it impossible to escape regulation as the quasi shadow banks that companies like FirstService are really functioning as. Click HERE if you can find those magic words or even the name of an HOA on the bank account details there.

I could be wrong of course, not for the first time. But when I see people running for the hills – see ATTACHED from Mutual of Omaha and FirstService ATTACHED – to me that’s a sure sign they’ve been caught with their hands in the cookie jar.

My challenge to you:

  • Come onto our blog at www.arizonahoa.blogspot.com and explain why we are wrong. I’ll be the first to apologize.
  • Alternatively, we have at least two administrative hearing coming up noticed by the Arizona Dept of Real Estate as explained below. Please ensure we get the best of your best to testify.

AZDRE Petitions scheduled at the OAH per subpoena applications below:

AZDRE Pending Petition

Sincerely

John Sellers

Copy:

Dennis Charlton, Arizona Department of Financial Institutions

Martin J. Gruenberg, FDIC Chairman,

Thomas J. Curry, U.S Comptroller of the Currency

Richard Cordray, Director, Consumer Financial Protection Bureau

John C. Williams, President and CEO, Federal Reserve Bank of San Francisco

Senator Elizabeth Warren

Industry Participants

8 Attachments

 

Preview attachment Sellers Motion Dec 30 2016 Package.pdf

Sellers Motion Dec 30 2016 Package.pdf

Shared in Drive

Preview attachment FDIC Response to Pat.docx

FDIC Response to Pat.docx

Shared in Drive

Preview attachment Mutual Omaha Alliance & US Bank Signature Cards

Mutual Omaha Alliance & US Bank Signature Cards

Shared in Drive

Preview attachment MOB Resignation Letter.pdf

MOB Resignation Letter.pdf

Shared in Drive

Preview attachment Vintage at Grayhawk Termination Notice.pdf

Vintage at Grayhawk Termination Notice.pdf

Shared in Drive

Preview attachment Subpoena Request Package Dec 26 2016 Resubmit Dec 27.pdf

Subpoena Request Package Dec 26 2016 Resubmit Dec 27.pdf

Shared in Drive

Preview attachment Subpoena Request Package Dec 27 2016.pdf

Subpoena Request Package Dec 27 2016.pdf

Shared in Drive

Preview attachment Notice of Petition.pdf

Notice of Petition.pdf

Shared in Drive

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HOAs from Hell, Kansas City Star

HOAs from hell: more horror stories, more fraud — and prospect of legislative action

Read story at: http://www.kansascity.com/news/special-reports/hoa/article122547749.html

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Letter from an AZ advocate to an AZ Senator

John Sellers
6231 East Mark Way, Unit 12, Cave Creek, Arizona 85331
Email: jasellers123@gmail.com Tel: 928 310 8220

To: Arizona State Senator Yarbrough December 10, 2016

Dear Senator Yarbrough

I’m part of a talented diverse citizens group working with Senator Farnsworth on legislation to transform the Arizona HOA industry, the fourth and lowest level of government after Federal, State and Municipal. This country has the world’s best military and private sectors but one of the world’s worst public sectors. Based on the weeks since November 8, I’m convinced government at all levels has no idea of the true “shock and awe” to come. Our group represents a new model of public-private partnership which Tony Blair once described as the third way, and which can help manage some of this.

My 30 yrs. on Wall Street, 10 yrs. of working with local governments across the Mountain States, and wrestling with HOA issues, is that, unless action is taken, we face a potential perfect storm with aspects of Enron, subprime and the near meltdown of the money payment system in 2008. This emanates from the $75 Billion of payments annually and the $50 Billion of cash reserves in the HOA system, part of a fundamentally flawed national housing system. I’m convinced this will be transformed with the new Washington Team. Fannie and Freddie are already being primed for what should have happened 30 yrs. ago. Arizona, much like the Veterans scandal, can be the engine of national HOA industry change as part of that.

Your staff can review the documented facts on my blog at http://www.arizonahoa.blogspot.com In my business, he/she who connects the most dots wins and there’s no place for anecdotal evidence. Just the facts. Just the facts.

One fact we know is that in Arizona alone in 2008, $1 Billion of taxpayer’s money was lost with two banks enabled by HOA Management Companies. But even this pales in comparison to the potential I see for terrorist incursion due to failed enforcement of Patriot Act anti-Money Laundering procedures, risks to the ACH payment system, and a financial meltdown of FirstService, the largest HOA Management Company nationally. This could result, in a worst case, in millions of homeowners being current on their mortgages, yet faced with foreclosure.

I believe the current federal and state banking regulations, with or without Frank Dodd, are sufficient to bring certain bad actors to heel, including banks such as US Bank, Mutual of Omaha and Western Alliance. And this will not be the first time I have played a part in that. But all we are doing is exposing the problem, without providing the solution, which only smart legislation and regulation can bring. I implore you therefore to make this a high priority. I should add one other thing: 

I worked in suicide prevention in the UK. With 50,000 hits now on my blog, the feedback I can never disclose, makes me feel I’m back there. These are not isolated examples but acts of legal terrorism as I’ve previously testified. Hence my favored legislative fix, if I had to pick one, and having defeated a SLAPP suit myself, is to extend Arizona’s anti-SLAPP protections to the “right to petition” HOA Board Members.

But there are other essential fixes. HOA Management Companies for instance are running a shadow banking system with people hardly equipped to deal with landscaping issues. And Realtors are effectively underwriting faulty HOA disclosure by those same Management Companies, none of whom are licensed by anybody.

Achieving public awareness on financial issues is not easy, until 2008 happens. So, we are conducting an experiment. We’d ask every legislator to participate by asking their HOA and Management Company, to provide user names and passwords on a read only basis to access your HOA bank account online. You may be shocked by their refusal. I’d be happy to meet.

Thank you for your service.  Respectfully John Sellers

Copies:
Governor Ducey
All Arizona Senators
All Arizona State Representatives
Trump Transition Team
Dennis Charlton, Arizona Department of Financial Institutions
Martin J. Gruenberg, FDIC Chairman,
Thomas J. Curry, U.S Comptroller of the Currency
Richard Cordray, Director, Consumer Financial Protection Bureau
John C. Williams, President and CEO, Federal Reserve Bank of San Francisco
http://www.arizonahoa.blogspot.com
Senator Farnsworth Working Group
Various industry participants

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Private Community Governments

An Admin Perspective…

Although much has been spoken and written about the issues confronting community
associations, little progress has been made in achieving a balance between people, property and private community governments. Although planned  communities are corporate in legal structure, they should not be autocratic and corporate in mindset.

In the beginning…

In the early 1900’s Kansas City developer J.C. Nichols was among the first to develop of a series of planned  communities called the Country Club District. For his Mission Hills project, he created a ‘mandatory member ship homeowner’s association’ to ensure he would maintain complet e control over the development as well as those who dwelled within it[1]. Nichols incorporated Mission Hills, and by so doing, he created his own private government with power to enforce his restrictions, maintain property, build infrastructure, contract for utilities and collect assessments from homeowners for upkeep of the common areas. Since then a new body of governance knowledge and experience has evolved, but some of the restrictive covenants from that time period are still in effect for two reasons; (1) many covenants require a super majority vote of the community members to change and (2) they are perpetual and do not have a finite life.

Perception is not reality…

Professor and lawyer Evan McKenzie author of Privatopia:
Homeowner Associations and the Rise of Residential Private Government
stated:

Residents in Common Interest Developments commonly fail to understand the difference between a regime based formally on rights, such as American civil governments, and the HOA regime, which is based on restrictions.

One can’t help but wonder about the origin of the governing documents in planned communities. Some were written 100 years ago and never changed; they were and are today written in hard-to-decipher legalese for the developers. When they were written, there probably were no permanent residents living in the development and they were a  product of someone’s imagination of how a development should look and behave; a  developer’s dreamland where perception is not reality. When the development build-out was complete, the community members were left with governing documents they had not developed and a method of government they had little or no experience with. It is interesting to observe that probably no one from the developer or the declarant board ever lived in the community they developed! They simply move on and begin the process all over again.

When you buy property in a private, corporate, unregulated planned community you probably have been told or have seen written you should always read the governing documents. I will not disagree with that statement. However, there are two caveats you need to be mindful of:

  • Nearly every phrase and paragraph is open to someone’s interpretation. Those who govern and the governed often interpret meanings differently; and even the
    courts cannot agree on the meaning conveyed in a covenant. This is often a source of disagreement within a community but, as we all know, the legal community loves discontented homeowners.
  • While the covenants generally cannot be revised without a majority approval of community members, the rules, regulations and design guidelines often can be modified by the board without the consent of the homeowners. Those documents alone can significantly alter the character of the community from an earlier point in time.

Is there an alternative methodology that can be used to further enhance a persons’  evaluation of the covenants? I believe that a simple page count of the governing documents can help determine the degree of control by the planned community over individual and property rights. I use the following:

  • Up to 100 total pages A reasonable degree of control
  • 101 to 200 total pages A high degree of control
  • 201 pages and above A very high degree of control

This methodology provides interested individuals a quick evaluation of a planned community’s capacity for governance. If you want a community with a high  degree of control over your life and that of others, go with the higher page count!

Democracy is no obstacle to tyranny…

The HOA private, corporate government provides no system of checks and balances an  there is no ‘constitution’ to limit their powers. They are the almost invisible government that intrudes into our very personal lives in a way unimagined by any of the other  regulatory agencies of our society. The HOA board members simultaneously occupy the legislative, judicial and executive branches with absolutely no local, state or federal oversight. In disputes with homeowners, the board acts as accuser, prosecutor, judge and jury. There is no appeal process except through the courts[2].

Once on the board, these people often forget who elected them and tend to develop an  adversarial posture towards the other homeowners, imposing on the association their own personal standards of neighborhood appearance and homeowner deportment. They will often micro-manage your property through means of creative interpretation and the drafting of new rules and regulations. Clearly, the adversarial posturing of an HOA board will set the tone for conflicts that are sure to follow. There is a limit to the acceptable extent of control and to its productive results. Evolution must produce a synergy between governance needs and governance capacity.

There are legitimate concerns as to the relationship of the governed to those who govern. Highly regimented, non-community focused developments do not sell as well as those that are less restrictive. Restrictions must have a perceived rationale and benefit. Excessive focus on restrictions takes time and resources away from the more productive activities. In communities where conformity and control are the watchwords, there is little reason for homeowner participation unless a member is “into” control.

Here come the experts…

Without the necessary experience to manage a planned community, the next step for the board is to hire a general manager or a management company to perform those tasks. Good luck, there are no academic requirements, licensing criteria or any governmental regulatory agency that oversees their performance. Then the board needs to retain legal counsel to represent the corporate interests. Interestingly, the residents own the corporation and they pay the dues and assessments to retain legal counsel but they have no access to that individual.

But wait, there is an outside non-profit corporation that has all the management and  legal answers. Their primary mission is legislative advocacy through their lobbyists, and their advocacy does not benefit the homeowners; they advocate to benefit their corporate interests and to restrain the individual and property rights of homeowners. The money flowing into the legislative advocacy corporation comes from three sources and is in the millions of dollars nationally:

  • dues paying general managers and property management companies. While board members have a fiduciary duty to the members (as defined by Arizona case law), general managers and property management company personnel have no fiduciary duties to anyone but themselves. These individuals operate without any governmental or regulatory oversight and there are no minimum academic requirements. Property management is a large and lucrative business but not without controversy[3]. Their scale of operations is often large; one management company in the southwest has 320 HOA clients in Arizona and New Mexico; others have over 1,000 clients.
  • attorneys who represent the corporate interests in planned communities and who are among the largest financial contributors. The large number of planned communities nationwide has spawned a ‘cottage industry’ of attorneys who limit their practice to this financially lucrative sector.
  • vendors who provide services to planned communities. Vendors are actively recruited with advertisements headlined Strike it Richa California invitation to other vendors and politicians to come to their trade meetings to learn about financial opportunities available to them in planned communities; and in Illinois in 2007 with an enticing invitation to Hit the Jackpot With Community Living.

The outflowof money goes primarily to the lobbyists who protect the outside corporate  interests, most often against the interests of the homeowners. Remember, in Arizona, they are the people who actively lobbied to eliminate the statutory right of the homeowner’s exemption from anyone living in a planned community and the right that required the sale of property to satisfy a judgment of an association to be sold for at least fair market value.

1. A restriction for Nichols Leawood Estates Home Association read: “Land not to be sold, conveyed, transferred, devised, leased or rented to any person of the Negro blood or by any person who is more than one-fourth of the Semitic race, blood, origin or extraction, including without limitation of said designation, Armenian, Jews, Hebrew, Turks, Persians, Syrians and Arabians, excluding, however, from the application of this paragraph partial occupancy by bone fide domestic servants employed thereon”.

2. In 2008, the Arizona Legislature enacted a law that created a less expensive alternative for the resolution of homeowner/ planned community disputes by giving the Office of Administrative Hearings jurisdiction over those issues. The law, however, was later overturned on appeal by the outside corporate operatives.

3. In 2010, the Broomfield (CO) Enterprise newspaper reported that a management company employee is accused in court documents of stealing money from Broomfield homeowners associations. The amount stolen is too great to be covered by Vista Management’s insurance policy, according to a December letter written by Vista Management President Cindy Combs.

In 2008, the California Law Offices of Gottschalk & Associates announced that it was launching a RICO investigation of lawyers and management companies for homeowners’ associations in California. RICO stands for Racketeer Influenced and Corrupt Organizations Act.

In 2008, The Las Vegas Review-Journal reported that FBI agents were combing through homeowner associations’ records as part of a sweeping investigation into possible corruption on several boards across southern Nevada.

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