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If you are wondering how it happens that the purchase of a home in Shavano Ridge (or any other common interest development) has cost you many of the civil and constitutional rights enjoyed by other Americans living outside of a planned community, here is a brief overview of the problem. Those wishing to learn more are advised to see the Reading List page. Most of those books can be checked out from your local library. 

Why HOAs Exist

Land prices began rising in the early 70s, and developers were finding it increasingly difficult to provide middle to upper middle class housing at an affordable price. In answer to this problem, they developed the Common Interest Development (CID). This allowed developers to pack more houses on less land and offer shared amenities such as swimming pools, tennis courts, and other recreational facilities that would have otherwise been out of reach to many homebuyers. Because these CIDs required a great many homes to be built in order to spread out the maintenance costs of those amenities to an affordable level, construction in the development might go on for years. During this extended construction period, developers wanted to maintain complete control throughout the subdivision. To give them complete control over the appearance of the subdivision, the developers created deed restrictions, commonly referred to as CC&Rs, or Covenants, Conditions, and Restrictions of Sale. In effect, what they did was create their own private governments. These private governments are set up as not-for-profit corporations, which allows the developers to sidestep many constitutional and civil laws. It is a government by contract, not consent. 

Cities and municipalities did not resist the spread of these private governments because they relieved them of the responsibility of providing expensive infrastructure (roads, sewer, lighting, trash disposal, etc.) to CIDs, yet the residents of those CIDs continued to pay the same taxes to the city. This situation made it relatively easy for developers to get city approval for CIDs. In time, this common acceptance of the CID plan among municipalities nationwide led to a general approval of the CID concept even when the development in question was not gated and did not offer any recreational amenities. 

The CC&Rs

The Covenants, Conditions, and Restrictions (CC&Rs) are a system of deed restrictions that are written into the deeds of all homes in a CID. They permit a seller of land to control how the land is used after it is sold. They are contractual limitations on a homeowner’s property rights.  The CC&Rs are "adhesion contracts." These contracts do not allow for negotiation — you either take it or leave it. By purchasing a home in a planned development, you are assumed to have agreed to the contract whether or not the seller made full disclosure of its contents. The CC&Rs limit the constitutional and civil rights of the homeowner while giving the Board of Directors’ powers beyond those enjoyed by local, state, and federal governments. The CC&Rs also  protects board members from any personal liability, which eliminates the incentive to behave in a fair and rational manner.  There is also a provision in the CC&Rs that allows board members to make up new rules and regulations, which means that the homeowners never really know what they have agreed to when they sign the CC&Rs. In the neighborhood where you live, there are no due process laws, no separation of powers, no checks and balances, and no bill of rights. 

How could such a thing be legal? Of course, under U.S. law, it is not. But the courts view a homeowner’s association as a business entity¾a corporation. The U.S. Constitution declares that the state cannot interfere with contract obligations.  

Disclosure

All the current literature regarding the CC&Rs recommends that the potential homebuyer be allowed to read and fully understand that document at the beginning of the home buying or building process; yet, a recent national survey of homebuyers found that 86% of the time the seller withheld disclosure of the CC&Rs until the moment the final documents were signed. In our own March 2004 homeowner survey, 59% of those surveyed said their selling agent did not give them enough information to make a well informed decision to buy. Again, there is no current regulation regarding the sales practices used to sell homes in planned communities. By waiting until the last possible minute to disclose the existence of deed restrictions, it is clear that sellers are making every effort to interfere with the buyers ability to fully understand the document they are being ask to sign and the severe restrictions on the homeowner’s constitutional and civil rights. It would appear that most sellers think that this deceptive sales practice is the only way they can sell what many people believe to be a very defective product. 

The Board of Directors

Once the developer has sold nearly all the units in a subdivision, the homeowners association is turned over to the homeowners who elect a Board of Directors. Although this process may appear to be democratic, the ties to democracy are extremely tenuous. In many cases, the vast majority of homeowners become disinterested, and a small clique begins to dominate. In some instances, this situation can work out to the satisfaction of all concerned; in less fortunate circumstances, it can lead to incidents of misconduct.  Problems arise mainly because homeowner’s associations must rely on untrained, unregulated volunteers who are essentially free from public and private (law suit) regulation. All to often, the lure of a volunteer position that offers power over ones neighbors, makes no demands for responsible behavior, and no minimum requirements for competency is just too tempting. 

Of course, it is this lack of accountability that is the source of most problems between homeowners and board members. Proponents of homeowner’s associations claim that without this provision, no one would want to be on a Board of Directors and the planned community experiment would fail. Detractors say the product is hopelessly flawed and should fail. In the meantime, without any incentives to act responsibly, homeowners will have to continue to rely solely on the personal integrity of the individuals they elect to their board. 

The Management Companies

The purpose of the management company is to bring some level of expertise to a Board of Directors composed of inexperienced volunteers. In the best of situations, this arraignment can bring some stability to a community; however, as with all things regarding planned communities and homeowner’s associations, management companies in Texas are not subject to any kind of governmental oversight or regulation¾no minimal level of education or competence is required. Both management companies and association attorneys have a very clear economic incentive for adopting an adversarial posture, and therefore, adversarial management companies are not uncommon. They, along with attorneys, are the only paid actors associated with the homeowner’s association, and, in their desire to increase profits, they will can often lead a board into conflict with homeowners. 

The Attorneys

The attorney for a homeowner’s association has only to gain from conflicts between homeowners and the Board of Directors; once again, due to lack of state regulation of homeowner’s associations, attorneys can act without fear to oversight from the state attorney general. Boards of Directors who have access to association’s funds, and who are personally protected from any liabilities, are often very free with those funds. Attorneys can charge anywhere from $50.00 to $500.00 per violation notice and will usually handle any litigation that might result. This is a conflict of interest that would be illegal outside the realm of the corporate law homeowner’s associations are subject to. Again, this climate of no regulation, oversight, or accountability is just too much for some to resist. Often they will counsel a Board of Directors in very aggressive and adversarial practices for very self-serving reasons.  

How Can It Be?

At this point, you must be wondering how it could be that, right in the middle of the United States of America, not to mention the heart of Texas, a homeowner could find they were living in a community that has more in common with a People’s Republic than an American democracy? The answer to that question would have to be the influence of the Community Associations Institute (CAI). The CAI is a nation-wide trade organization of management companies and attorneys. They lobby very hard and very effectively against any proposed legislation that would impose any regulation or governmental oversight upon this industry or create any common rights for homeowners. They did it just this year in Austin [see The Community Associations page].

So the reason You Are Here is because Texas lawmakers hear a great deal from this group, and absolutely nothing from you.

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