Case spotlights homeowners associations' powers


Courtesy of the Herald Tribune

Posted August 5, 2005

By PAUL QUINLAN and WILL ROTHSCHILD

 

VENICE -- Karin Healy will be in court today, pleading with a judge that she shouldn't lose her house just because she's $1,380 behind on homeowners association fees.

But Healy's case is about more than one homeowner's failure to pay her dues. It also raises the broader question of whether homeowners associations should have the power to take homes over relatively small amounts of money.

One Miami legislator says they shouldn't, but his bill to check their power went down in flames this year, leaving the millions of people who belong to homeowners associations without the added protection such a law might afford in the event of a dispute.

The result is a growing number of lawsuits clogging the state's court dockets, as well as a growing

number of extreme stories like the one involving Healy.

While it is unclear how many lawsuits are on dockets around the state involving homeowners and associations, one Fort Lauderdale attorney who has represented dozens of clients against associations says 100 liens and foreclosure suits by homeowners associations are filed every week in Broward County alone.

 

Gov. Jeb Bush's task force on homeowners associations in 2004 recommended legislation to halt the practice of taking homes to satisfy overdue fines, a law that took effect last year.

The task force heard several stories of homeowners having to pay tens of thousands of dollars in legal fees to keep their houses after refusing to pay questionable fines to their associations.

In Healy's case, the issue was not fines but 

Update

THE STORY SO FAR: Fairway Village Homeowners Association fore- closed on Karin Healy's home in June. It was auctioned for $11,000 on July 20.

WHAT'S NEXT: A circuit court judge will hear Healy's appeal to set aside the sale this morning at 10:30. Healy is expected to ask to sell her home herself so she can pay the delinquent fees.

$1,380 in unpaid dues. And unpaid dues are not covered under the 2004 law.

Healy, 47, is a single mother with three teenage daughters. She filed for bankruptcy last April, which is when she began to fall behind.

To pay the dues debt, her home in the Fairway Village subdivision was auctioned off by the homeowners association two weeks ago for $11,000.

Association advocates and some of Healy's neighbors sympathize with her current predicament but stand by their association's action, arguing that without threat of foreclosure it has little power to collect the dues that help maintain the small, two-street subdivision adjacent to -- but not connected to -- Plantation Golf and Country Club.

None of the association's board members returned calls for comment Thursday. Both the management company, Capri Property Management, and the association's attorney, Sharon Vander Wulp, also refused to comment.

One neighbor, Robert Wynne, 72, said he wasn't aware of the foreclosure and sale. But he defended the association, saying it had little choice but to sell off Healy's house, despite her financial struggles.

"It's sad. My heart goes out to people like that," Wynne said. But he added, "The least you can do is go to the association and tell them you can't pay ... I don't think it's fair that everyone pays their dues, and she doesn't."

Dan Lobeck, a Sarasota real estate attorney and advocate for homeowners associations, said cases like Healy's are rare and should not reflect negatively on an otherwise valuable right of residents to bind together for the good of the neighborhood.

"In fulfillment of those common maintenance functions and enforcement functions, associations are given taxing authority," Lobeck said. "Just as the government has its remedy, homeowners associations are given their remedy to collect their taxes."

Critics, such as state Rep. Julio Robaina, R-Miami, say homeowners associations are even more powerful than the government.

For the county to sell off a home, for example, it must go through a two-year process. There is no time restriction for homeowners associations to sue, nor is there a minimum debt level. Some foreclosures have taken place over less than $100.

Homeowners associations operate with no oversight, and in the event of a dispute over fees, fines or elections, a homeowner's only recourse is to go to court.

The terms of the association's powers of foreclosure are spelled out in contracts that homeowners sign when they purchase the property. But Healy said she never read the small print in her association's nearly 50-page declaration of covenants, conditions and restrictions.

Even if homeowners owe associations thousands of dollars, there should be checks on the power of associations to foreclose, Robaina said.

At the least, he said, the state should establish a consumer advocate, or ombudsman, to settle disputes between homeowners and their associations, similar to the one for condo associations.

Robaina filed a bill this year to tackle the issue. House Bill 1229 would have put homeowners associations under the purview of the state Department of Business and Professional Regulation.

"One of my goals is to try to bring regulations to homeowners associations the same way that condos have it, so that people will finally have a place when there is abuse," Robaina said. "These people get away with murder, and it ends up in a civil courtroom, which costs people a lot of money."

Robaina's bill never made it out of committee.

It would have given homeowners a place to turn in the event of a dispute with their association, and it would have given the state authority to reprimand or even fine associations that have acted illegally.

It also would have set a $2,500 threshold for unpaid dues before an association could use the power of foreclosure.

Robaina admits adjustments are needed to give the bill a chance of passing, and he is organizing a meeting in Miami later this year at which he hopes to bring the associations' lobbyists and consumer advocates to the table to help craft a bill.

Several elements, Robaina and others say, should be considered:

The foreclosure threshold needs to be reconsidered, and a new formula devised. Because associations range from the very large, with hundreds of members, down to ones with only a handful, a one-size-fits-all monetary figure isn't workable, Community Association Leadership Lobby attorney Donna Berger says.

It is a point Robaina concedes. While a 300-member association might be able to carry a couple of thousand dollars in unpaid dues, Robaina says, spreading that debt among only 10 members in a small association is too burdensome.

Robaina advocates requiring associations to make a good-faith effort to work out a payment plan with a delinquent homeowner before they refer the case to their attorney.

While most associations will send lateness notices, they are not required to do so and can refer accounts even one month delinquent to their attorney. When that happens, what started as a relatively small amount of money quickly grows into a mountain of debt for the homeowner.

"They trap you by adding on attorney's fees, late fees and interest," says Fort Lauderdale-based attorney Blane Carneal, who says he has represented dozens of clients against homeowners associations. "Your only way out is to hire an attorney and fight it in court."

In Healy's case, the $1,380 her association says she owes has been augmented by more than $4,000 in attorney's fees and court costs.

More education is needed. Berger believes a simple, one-page overview of association rules and the association's power to foreclose in
event of nonpayment of dues given to home buyers at their closing would "go a long way in preventing problems." As it stands, home buyers must muddle through the association's covenant, often dozens of pages long.

"They need to know that these payments are right next to the mortgage in terms of their importance," Berger said.

Healy certainly knows that now.

Two weeks ago, the association sold Healy's home at a courthouse auction for $11,000, about six weeks after a judge approved foreclosure on the house. Property records show nearly identical homes in the Pulte Home development selling for between $250,000 and $320,000.

Wynne said the majority of Fairway Village's residents are working families with children who pay their dues on time and maintain their properties. They credit their rising home values to the services and rules enforced by the the association, Wynne said.

Bob Twine, 71, who moved to the neighborhood three years ago, said he knew of Healy's situation only from what he read in the paper.

At an association meeting three months ago, he said the board spoke of possible foreclosures but mentioned no names.

Twine said he didn't blame the association for taking action but didn't understand why Healy didn't take out a home equity loan or sell the house herself as her association debts piled up.

"That's the only recourse they have against people who don't pay," Twine said. "Do the rest of us have to increase our dues to cover her inadequacy?"

Unless a judge today nullifies the auction of her home to American Recovery Group, Healy said she would look for an inexpensive rental for her family, where she'll attempt to rebuild without the benefit of six years' worth of home equity.

"They essentially made $200,000 for 15 minutes on the courthouse steps," she said.


 Judge rules woman can keep house

VENICE HOA FORECLOSURE CASE -- OPINIONS

Home lost over $1,380 dues -- FAIRWAY VILLAGE OF SARASOTA HOA, Venice

NEWS PAGE HOME HOA Foreclosures