PART I: IN THE BEGINNING

In the beginning there was a developer. He was thinking to himself: how can I keep control over my project while I am still developing and already selling? The new buyers will destroy my beautiful creation! They will have flowers in their front yards! They will have garbage cans! Their children will play basketball! and ride bikes! They will have dogs and cats! They will have flags on their roofs on the Fourth! 

He really didn't know what to do, so he went to consult with his lawyer. 

The lawyer said: why don't you create a homeowners association and force all your buyers to be members and abide by your rules and restrictions? You can also pass on your development and maintenance expenses to the potential naive buyers, and keep everybody under your thumb!

But how can I? asked the developer, there are no homes or homeowners yet, only vacant lots. It will be a fraud!

Don't worry, said the lawyer, we'll make it legal. You will be the homeowners. It will be a nonprofit corporation, and you and I will share the profit, while the homeowners pay their dues. We'll create CC&Rs that will be recorded on their deeds. We'll create rules and liens, and if they violate any of your rules, you will be able to foreclose. This will teach them a lesson!

So the lawyer drafted a long, detailed document, and called it C. C. and Rs. The developer, who became now the "declarant", elected himself, his wife and son to the board of directors, which, in turn, appointed him, his cousin and brother-in-law to the Architectural Control Committee, and so on. The CC&Rs stated clearly that all the affairs of the Association shall be determined by the board of directors, which will also had the sole authority to set the rules at its discretion. The board voted to double the members' dues (the declarant was exempt, because he was "class A"), and to forbid nudity in the common area. In addition to the regular assessment dues, violators were fined, which considerably helped to enhance the financial position of the Developer's Association and his personal bank account.

We did it! said the developer, but what will happen after I complete the selling of all the lots? There is nothing in these CC&Rs for the homeowners, they were designed strictly for my benefit and interest. In fact, as I read them, I think that a more appropriate name would be -- "Anti-homeowners Association". But being recorded and running with the land, how will they ever be able to get rid of them?

Who cares? said the lawyer.

PART II: HOW THE HOA SCAM WAS SOLD

Amazingly, it worked. The lawyer and the developer created a highly profitable private nonprofit corporation, which was designed to subjugate its subjects to the interests and whims of the developer (hereinafter -- the Declarant). The idea was to force all potential homeowners into a concentration camp and then fine them for violations, non-compliance and disobedience. The Declarant became the absolute ruler, with unlimited powers -- and it was all done legally! In the United States of America, the land of the free! 

But, said the developer to the lawyer, who will come to live in my development under such conditions, and even pay good money and take a mortgage?

Don't you worry, said the lawyer, we'll sell the idea. We just need PR.

But how? Well, they held a press conference and proudly announced that their carefully planned community, with its manicured yards, clean streets and well-behaved kids (who will be out of sight) would preserve market values. Now, who wouldn't want this? They also explained to the City and County officials how beneficial it will be for them: the HOA will take care of itself and will pay for its own needs, thus relieving the city/county from providing services for the community. The beauty of it, said the Declarant, is that my homeowners will still pay you their taxes, but you won't owe them any service!

So, everybody liked the idea, and the buyers came with their money and exchanged their dignity and liberty for cleanliness and preservation of market value. 

There could still have been a happy-ending to this saga (since everybody lived happily ever after), but then – the busybodies took over!

PART III: THE BUSYBODIES ARE COMING! THE BUSYBODIES ARE COMING! 

In all fairness, most homeowners did not realize that they had just traded their liberty and dignity in exchange for anticipated preservation of market value, because nowhere in the CC&Rs, which they had agreed to be recorded with their deeds, did it say so specifically. Beside, they were preoccupied with choosing the color for their carpeting and filling the mortgage forms, and the CC&Rs that were handed to them seemed like one of those formal documents that you never get around to read, let alone analyze and understand. 

But some did read the CC&Rs, and to them it seemed like a reasonable document, setting up democratic procedures for electing a board of directors of volunteers who will take care of the community needs. Even the assessment fees were reasonable. Sure, there were some restrictions, such as no-weed or mess (who could be against it?) and a requirement of architectural approval for any addition/alteration -- so what? don't you need permits for such things anyhow? and, yes, if you fail to pay, the association could place a lien and even foreclose -- but who was planning on not paying?

Above all, it seemed sensible and fair. You could even appeal, if you didn't like something. It was democratic. Annual meetings and elections. Homeowners managing their business for their common good. Utopia.

But unnoticeable there were other provisions that escaped the reader between selecting the kitchen vinyl floor and checking the school district for the kids. It said that "the board shall have the exclusive right to determining and managing the affairs of the association" -- so what? the board will be elected democratically by the members, right? and if a board member misbehaves - out! You could have petitions and recalls and special meetings and what not, all provided in formal Bylaws. Besides, there were associations like this all over the place, so it must be OK, right? [the fact that the board is the developer, and that he had 3 votes per lot, somehow did not seem significant at that stage. Yet.] It was clear that the CC&Rs or any of its provisions could be amended by 2/3 of the members, so, obviously, the sensible homeowners will move to amend whatever was unacceptable, and there was nothing to worry about. Also hidden was the provision that the board had the exclusive power to create, add, modify amend etc. the Rules of the association, and these Rules "shall have the same force and effect as if they were set forth in and were part of the Declaration", (which is another name for the CC&Rs). But since nobody paid attention to such insignificant details, everything moved along smoothly, until the big day came.

The Big Day was the day in which the developer lost the majority of the votes (after selling the lots to real homeowners), and the governance of the association was to be transferred to the homeowners. >From now on they will make their own decisions and independently determine their destination. It was really exciting, and everybody was in anticipation for the General Membership Meeting and elections.

"Everybody" included the busybodies, who prepared themselves for the big takeover, since they had nothing better to do with their lives. It is a well known established fact that busybodies do not like music, sex or dogs, but they like to pick into their neighbors backyard and tell them how to live their lives. Now, when the Big Day comes, they will be able to do it legally, and this was really inspiring.

PART IV: THE BIG DAY

Some fifty or sixty people gathered in the library meeting room and waited for somebody to take care of things. Who is in charge? Then the man from the management introduced himself and announced the official opening of the meeting. We have business to take care of, he said. We need to elect a board of directors that will take care of the "common area",and establish an SS unit that will enforce the CC&Rs, and we need to increase the assessments, because there is not enough money to pay for all our needs.

What are our needs? Somebody asked. Well, landscape and water and management fees, said Mr. Asher (this was the name of the manager). What does the management do? Collects the assessment monies, keeps the books and makes payments to the landscaper and to itself. 

Fortunately, the developer was an environmentalist and did not provide too much of a landscape, because he wanted to preserve the desert environment after he had bulldozed it. He also observed the "dark sky" policy in order to ensure that the galaxy would not get polluted with light particles, so there were no street lights in the neighborhood. In summary, the "common area" included one retention basin which also served as a park (preservation!), and a few mesquite, palo verde and ocotillo at the entrance, but all this needed maintenance, right? And maintenance cost money, right? And somebody needs to manage the money, right?

A financial statement was distributed to all the attending homeowners, and Mr. Asher briefly explained everything, particularly one line: five hundred dollar contribution from the developer, as a departure gift. This, explained Mr. Asher, was done out of the kindness of the developer, because he didn’t have to pay it, he was "class A", remember? So everybody felt very grateful for having had such a generous developer, who also cared about the integrity of the desert environment and the universe.

Then a free-for-all began, and people started to complain: dog barking, weeds in neighbors’ yard, parking, garbage collection – until Mr. Asher said that this was enough, and now we need to elect three directors to the board.

Eleven people offered their candidacy and introduced themselves. Barbie, a fat woman in dark cloths, was first. She was no Barbie doll, for sure. She meant business. She knew her way around city hall. She was experienced. Her main concerns were to make sure that the CC&Rs were fully enforced "without exception", and to preserve market values. She will not be elected, it was clear – too aggressive and fat.

Then came Jenny, a young blond woman in tight jeans, who said that even if she was not to get elected, she would do anything to help the association, because she loved the association and also cared about market values. Proudly she told everybody that she patrolled the neighborhood every day, sometimes even twice a day, to check and make sure that everything was in order. Who appointed her to do it? Oh, she just wanted to help. Too pushy, people won’t like her.

Then came others, all with the same desire to preserve market values: A very young man with good will (too young), an older man, Bob, who sounded mellow and said nothing memorable, (but he was pleasant and provided a good father figure), a tall guy, Raymond, who was a resort manager (nice and gentle), and a school teacher, Kate, who said that she knew how to deal with people. There were others too, but they were not tall and did not leave any impression, so nobody could even remember their names. Common to all was the deep concern about preservation of market values.

People filled their ballots and Mr. Asher stepped out of the room for the purpose of counting them without interruption. Then he came back and announced the winners: Raymond, Bob and Kate. So after all, the Busybodies were not elected. Of course, nobody knew at that time that Raymond was gay, so he became the President. 

So, the first meeting ended with optimism and good will. The scam worked, since everybody believed that it was their association and their CC&Rs, and market values will now go sky-high, and the new board was nice and everybody on the board was really nice, and the Busybodies were not on board, and this association will not be like others.

Amazingly, the Busybodies did not seem to be sad or disappointed, because they knew that this was only the beginning, and that there were back doors and side doors, and that eventually they would prevail, and this was really what mattered. So everybody went home happy, while the Busybodies were planning their takeover.

PART V: THE BOARD IN ACTION 

Nobody on the board had a clue of what the board was supposed to do, so Mr. Asher advised them that the president should call a board meeting, in which they would discuss the business of the association and make decisions. Just make sure, said Mr. Asher, that you pass a motion to increase assessments.

The board meeting was held at the management office, with Mr. Asher, the board members and Barbie attending. Mr. Asher was very low key. He said that it was their board and they should run it independently, and he would not interfere. This was a disaster, because the board did not know the business of the association and had no idea of where to start, but there was a relief, because Barbie was there!

Barbie knew everything about how to conduct a meeting, and she instructed the nice directors on how to operate. She knew all about calling the meeting to order and making motions and seconding them and tabling them and saying "pass" and all the stuff that one needs in order to have an official meeting. She also knew about statutes and corporate act and many other things, so fortunately there was somebody there to guide them, and they could relax and go on about their business of being nice.

Barbie said that they needed to appoint an architectural control committee, because this was the most important thing for controlling the homeowners and preservation of market values. So she made a motion to that effect, and instructed the board to second it and then vote to pass it. Then Raymond asked: who will be on this committee? Fortunately, Barbie volunteered immediately. She also promised to recruit other people who had an aptitude for forming an effective gestapo. 

Everything went well. Kate took notes, because Barbie said that they would need to issue "minutes" and everything must be documented. She even volunteered to help in editing the minutes, because she had a computer. They also passed a motion to install one light at the entrance to the neighborhood, so that people would be able to find their way in dark nights. How much would it cost? Bob was appointed (by Barbie) to find out and report back to the board.

Then Mr. Asher, who had been quiet and pre-occupied with balancing the books all this time, raised his eyes from his papers and said: Now you need to increase assessments! 

Five percent? asked Raymond. 

Five percent is not be enough! said Mr. Asher, you need twenty! 

Kate said that she remembered a "cap" on increase in the CC&Rs, but Mr. Asher said that there was now a new statute that allowed twenty percent, and the money was needed because he was going to charge them extra for participating in future board meetings, which was not included in the management contract. So the board voted as instructed, and the meeting was adjourned successfully.

On the following day Barbie recruited Jenny and Walter, to form the official Architectural Control Committee force. In the afternoon they were already patrolling the neighborhood and taking notes. By the end of the week some sixty percent of the homeowners received via U.S. Mail violation notices for a variety of items, with the threat of fines, liens and eventual foreclosures, if not promptly corrected. The notices were on the Association’s letter head, signed by "Architectural Control Committee".

Barbie submitted to the Board a formal request for purchasing a magnifying glass for the purpose of better detection of violations, which the Board approved after the motion thereof was seconded. She also requested a telescope, which request was rejected due to the high cost. The Board complied though with Barbie’s demand to table that request.

PART VI: INTERMEZZO

Due to the urgent situation of the AZ Senate Study Committee receiving only one-sided letters from disgruntled homeowners, we find it necessary to bring to your attention that there are others too. Therefore, the urgency of the matter forces me to interrupt the chronological flow of the HOA Saga and bring you an authentic letter that has just now arrived. I trust that you'll find it worth reading. The HOA Saga will continue soon.

Senator Tom Freestone
Homeowners Association Study Committee
Senate Building
Phoenix, AZ 85007

Re: Homeowners Association

Dear Senator and Committee members:

I find it necessary to bring to the attention of the Senate Study Committee that not all homeowners are disgruntled, and that there are others too. I, for one, am a happy homeowner who likes homeowners associations, and particularly I love my own Association. My desire to serve my wonderful community has driven me to offer my candidacy to the Board of Directors when a vacant seat on the Board came about, and indeed the Board appointed me, and I have become a director myself. This is the greatest thing that has ever happened to me in my entire life.

Briefly, I want to tell you what I love about my Association.

I love the fact that membership in the Association is mandatory in our community, because otherwise most people, who are selfish by nature, would prefer to remain non-members.

I am grateful to the developer for leaving us his great CC&Rs, especially the portions about restrictions. I love to be restricted from so many things, but I love even more to have these restrictions imposed upon my neighbors. I also love the provision that gives the Board the authority to modify, amend and create new rules and restrictions without any limitation. This shows that the CC&Rs are a living document which the Board can utilize for controlling disobedient homeowners. We in our Association do not welcome homeowners’ initiatives of proposed amendments to the CC&Rs, therefore we do not submit such proposals for the homeowners vote. We prefer to have full control over any amendment process, because most homeowners just want less restrictions, and this will give us less items to enforce.

I love the powers that the CC&Rs give the Board. Especially, I love the fact that the Board, the Directors and the Management are not accountable for their actions. This frees us from fear, so we can perform in any way we choose for the greater good of the community. Some disgruntled homeowners demand that we, the Board and management, should too abide by the CC&Rs and the bylaws, but we just ignore them. They don’t understand that the law does not give them any means to enforce these documents on the Board, but we, on the other hand, can selectively enforce upon them whatever we want. I know that this is true, because our lawyer said so. After all, we are the Board of Directors, are we not? 

I love to pay assessments to the Association in addition to the property tax that I pay to the County, because while the Association gives me benefits and services, the County provides hardly any service at all. I don’t know anybody in the County office, but I know everybody on our Board and Committees. Even prior to my appointment to the Board, when I kissed their butt they always responded positively to me. In order to receive even more benefits, I joined Board myself, and now people can kiss my butt too.

I love getting violation notices from the management, because it is done out of sincere care and concern for the market value of my property. I love to pay fines for violations, even if they are what some people call petty violations. Especially I like the threats of liens or foreclosures. But I love even more to be the one who sends such notices to my neighbors, and this is part of my personal motivation of being a Board member. Truthfully, since I became a Board member, I have not received any violation notices at all, so I really can’t complain.

I love the fact that the Board is in charge of everything. People who demand checks and balances don’t know what they are talking about. What’s better than having all the authority vested in one body, our beloved Board? I love the fact that the Board is empowered to fill so many functions, and everybody should appreciate the great job that we are doing. Where else can you find one body of fine people who have no special qualifications, that acts as a legislature, police force, judge, jury, court of appeals and executioner? I just call it efficiency.

Unfortunately, even in our Association there are some disgruntled homeowners. Some people you can never satisfy. Instead of appreciating the cleansing that we have achieved in our neighborhood, they always talk about their deprivation of civil rights, due process, liberty, dignity, privacy and other such things. It’s hard for me to understand them. Didn’t they agree to give up all these rights when they moved into our neighborhood and become part of our community? I really don’t know why these people need rights, instead of just being grateful for their fortune to live in our manicured neighborhood. I think that these people just got their values mixed up. 

I love the fact that the State is reluctant to interfere with the actions of our beloved Board, because really what we are doing in our Association is none of the State’s business.

I love to be able, as a Board member, to pick into my neighbors backyard to check on them and see what they do, and then tell them what’s wrong with the way they conduct their lives. They should be grateful for this, and I can’t think of a more fun way to spend my time.

I love the fact that the Board and its directors and officers are protected by an insurer that will provide legal defense for us even if we act illegally or not in good faith. This makes it even more desirable to be on the Board, because I know that nothing bad can ever happen to me.

I love to participate in closed executive meetings of the Board, because only there we can act without the disgruntled homeowners watching us and complaining. I really feel important to be in an executive meeting, and people respect me even more.

I also like it when they complain in open meetings, and we, the Board members, remain indifferent and just laugh in their face, because the homeowners are powerless and their complaints do not mount to anything. Some people just can’t help it but always complain. They refuse to recognize that they signed a contract with the Association and freely agreed to abide by all the covenants, conditions and restrictions. So really, they should now shut up instead of complaining.

But above all, I just love having control, especially over my neighbors. We nominate to the Board only people who have the proper aptitude for governing the community. Frankly, the others are just not interested in serving the community. When election time comes, we urge the members to send us blank proxies, so we can fill them with the right names. Sometimes, if we don’t get enough proxies, we add some of our own, in order to get the proper outcome of the elections. This way we ensure continuity in our effort to keep the homeowners under control.

I find that serving my Association is highly rewarding, and I urge your Committee not to listen to the few complainers, but rather see the big picture and the positive contribution that we make to society. Please don’t forget that we relieve the City and County from providing services to our community and thus allowing them to use our tax money more efficiently for getting re-elected. We also nurture a profitable industry that include management companies, lawyers, insurers and others, and if you pass legislation that will take some of the power away from us, this industry will get hurt. 

I am glad that the interests of the Board, together with the interests of the industry, are well represented in your Committee by the Community Association Institute, which does a great job of lobbying for us, and I trust that you will do the right thing and leave us alone to continue with the subjugation of the homeowners for the greater good of humanity. We’ll take care of the rest.

Very Truly Yours,
_____________________
Patricia Lilliput, Director
Rolling Hills HOA, Arizona