Who Do Home Owners Associations Represent?

A recent story about a Home Owners Association in the Dallas area had me questioning the credentials of the reporter. Surely an HOA could not be powerful enough to foreclose on a $300K home for $800 in unpaid fees! But it did happen and the management company did this to a member of the armed services while he was serving on active duty on his way to Iraq.

As is usually the case, the story is slightly more complicated than that. As it turns out, the HOA checked with the military before beginning the proceedings and the military apparently said he was not on active duty. Ok, I feel much better now. I mean, if he was not on active duty then it was OK to foreclose on his house.

How is this possible? If a remodeling contractor does not get paid for thousands of dollars in construction work, the best he can do is attach a mechanics lien. I had believed that the only people who had the authority to foreclose on a property were the mortgage holder and the taxing authority. But it turns out that, at least in some places, your neighbors can make you homeless. After all, the HOA is made up of the homeowners in the neighborhood. They have elections and you or your neighbors create the rules that the rest of the neighbors live by. In this case, the neighbors, through the HOA, took a $300,000 house away because of HOA fees that had not been paid. Whether or not you believe the soldier and his wife’s reasons (depression and ignoring much of the mail), the most that should have been done is a lien.

The HOA only answered questions from the media when board members and the management started getting death threats. The HOA then hired a PR firm to answer questions rather than facing the media directly. What do you want to bet that the PR firm costs a hell of a lot more than $800! And now several of the neighbors are quite embarrassed and want to distance themselves from the whole thing. They now want the HOA to take additional steps before foreclosing. Excuse me? How about removing that option altogether.

I know that a lot of people have no idea what is really in those covenants you sign when you buy a house in a decent neighborhood. The vast majority of us would be appalled if that had been our neighborhood (as it happens it was not far from mine). But remember, we elect and hire these people. We are responsible for what’s in those agreements. They represent us — when they do something like this, it is the community that is doing it.

Foreclosures by HOAs should not be legal unless it can be proved that the house has been completely abandoned. Even then the taxing authority would have first claim. I can imagine a few cases where a remedy of this sort could be useful: illegal or clearly dangerous activities, extreme neglect. But foreclosure is not even an option in those cases unless money is owed. An HOA should not have the power to make a family homeless over unpaid fees.