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By Pat Carlson
President
Texas Eagle Forum
March 18, 2011
The government having the most control over our lives is local government and
the local government closest to the private individual and property owner is a
homeowners association (HOA). This government body consisting only of a board has
unchecked godlike powers that in many instances is being used to devastate the lives
of individuals.
Just ask 81 year old Winonah Blevins of Houston, Tony Goodman of San
Antonio, and Captain Mike Clauer of Frisco. In 2000, Wenonah Blevins had fallen
behind $814.50 on HOA dues (2 years in arrears). Ms. Blevins dropped off a check for
$800 to the association in August of 2000, but because they had already begun legal
proceedings against her, they would not cash the check. So April 10, 2001 her
$150,000 home was sold in the lobby of a courthouse for $5,000. Of this total, $4,200
went towards late fees, interest and legal expenses.
Tony Goodman owed $769 in back dues and his HOA foreclosed on his homeselling it on the steps of the Bexar County Courthouse for $2,019, about the amount of
dues plus attorney fees. Mr. Goodman was left holding the balance of the mortgage he
owed.
Capt. Mike Clauer was serving in Iraq last year when he got a frantic phone callfrom his wife telling him their paid off home was being foreclosed on by their HOA. His
wife had missed two dues payments out of depression over his deployment. By the
time Capt. Clauer returned to Texas, his 3,500-square-foot, $300,000 home had been
sold on the courthouse steps for $3,500, enough to cover outstanding HOA dues and
legal costs. The new owner quickly sold the home for $135,000 netting a tidy profit.
Capt. Clauer has appealed his case based on the Servicemembers Civil Relief Act
passed by Congress in 2003 meant to protect military personnel fighting overseas from
nonjudicial foreclosures.
That's right, in the state of Texas and 33 other states, HOAs have the power ofnonjudicial foreclosure based on any minimal unpaid fee, fine or dues. This means a
house can be sold on the courthouse steps with no judge or arbitrator involved in a
mere 27 days -- the shortest of any state. Once legal proceedings have begun, the
homeowner is responsible for all previously owed amounts plus late fees and legal fees.
A very small debt can become a very large debt in a short time. After the HOA and its
attorneys collect their fees, any mortgage owed is still the responsibility of the
homeowner. An already desperate situation becomes even more desperate, when the
homeowner has to declare bankruptcy. Texas does provide a 180 day redemption
period after foreclosure to pay all debt and reclaim the home.
It is claimed that only 1 percent of all nonjudicial foreclosure filings result inhomeowners losing their homes. But by threatening such a devastating loss,
foreclosure actions can coerce homeowners to pay inflated delinquencies even if such
delinquencies are unjustified or onerous. In any other situation this would be called
extortion.
Devid Kahne, a Houston lawyer who advises homeowners, says that in Texas,the law is so weighted in favor of HOAs, he advises people to call their association and
beg for mercy instead of hiring him.
Texas like most states has provisions established in our constitution to protecthomesteads. Article 16 Sec. 50 of the Texas constitution provides for homestead
protection from forced sale, mortgages, trust deeds and liens.
“The homestead of afamily, or of a single adult person, shall be, and is hereby protected fromforced sale, for the payment of all debts except for: the purchase money thereof, or a part of
such purchase money; the taxes due thereon; an owelty of partition imposed against the
property by court order or by a written agreement of the parties to the partition....work
and material used to repair or renovate existing improvements thereon if contracted for
in writing....in the case of a family homestead....”
The authority of associations to foreclose on homes stems from the 1987 rulingby the Texas Supreme Court in
Inwood North Homeowners' Association v. Harris(736S.W.2d 632). The Supreme Court overturned the rulings of two lower courts finding that
homestead law did not protect homeowners against foreclosure for failure to pay
assessments. This was a three to two decision with Justice Mauzy and Justice
Gonzalez dissenting. They stated “The court herein has created a remedy in the name
of public policy in direct contravention of the Constitution of this State."
The appeal was filed by the attorneys for Inwood North HOA, not the HOA. Theyachieved their goal to override the Texas Constitution, thus giving HOAs and their
attorneys the undue power they wanted to collect fines and fees as well as
assessments.
In order to preserve homeowners'associations controversial authority, TexasState Senator John Carona authored legislation in 2001, cited as the Texas Residential
Owners Protection Act (Property Code 209). Senator Carona owns Associa, the
nation's largest community association management company, A Brief History of HOAs.
The forerunners of the contemporary HOAs were the subdivisions of luxury
homes for the wealthy which sprang up in the 1920's. Property deeds included whatbecame known as restrictive covenants that prohibited owners from selling their
property to anyone other than white people.
The modern HOA developed under the guidance of the Federal HousingAuthority (FHA). In the 1960s, the FHA promoted the HOA as a way of providing
affordable homes to large numbers of people. The FHA required planned
developments to have a non-profit HOA with mandatory membership in order to obtain
FHA insurance.
Together with the building industry, the FHA also promoted the use of covenantsthat attached to the property. These covenants included a lien for HOA assessments on
property owners which led to the possibility of foreclosure for non-payment of assessed
fees. In 1964, the Urban Land Institute published its Homes Association Handbook
which provided model covenants for an HOA. One of its authors was the chief of the
land planning FHA insurance.
Another key organization was the Community Association Institute (CAI) whichwas established in 1973 to bring together all groups that had an interest in promoting
HOAs and provide guidance for them. Over time, the CAI became dominated by the
property management industry. In the 1990's it was reorganized as a 501(c)(6) taxexempt
non-profit business trade organization whose primary mission was to lobbystate legislators. Its major members were property management firms and attorneys.
In 1962, there were fewer than 500 HOAs in the entire country. Today, there areroughly 300,000 HOAs which heavily regulate the lives of 60 million Americans. The
state of Texas has 1,100 municipalities with 30,000 HOAs.
Texas has been referred to as the epicenter of HOA foreclosures and theHouston area as ground zero. There were 496 Houston area HOA foreclosure-related
filings in 1985 and since the 1987 Inwood v. Harris case, the number has grown to a
whopping 2176 in 2007.
Texas must correct this terrible injustice and remove this power from HOAs.HOAs should have to collect debt like any other creditor with the ability to place a lien
on property but nothing more. There are several bills that have been filed during the
82nd Texas legislative session that will begin to take away power from the HOAs:
HB 1196 - by Dutton -To stop auction sale abuse by monitoring and regulating sales
(currently homesteads are being flipped many times for under $3,000. (this bill is pending
in the House Business and Industry Committee). TEF supports this bill.
HB - 912 - by Dutton - To stop HOA foreclosure liens on new properties. (this bill is
pending in the House Business and Industry Committee) TEF supports this bill.
SJR-19-by Jackson - proposing a constitutional amendment permitting an encumbrance tobe fixed on homestead property for an obligation to property owners’ association fee and
fines without permitting the forced sale of the homestead. (This bill has been referred to
the Senate Intergovernmental Relations Committee) TEF supports this bill.
HB 1639- by Dutton -Togive homeowners notice regarding delinquency or violation
deadeline date before attorney fees and costs are charged. (This bill has been referred
to House Business and Industry Committee). TEF Supports this bill.
HB 2328 - by McClendon - to register, monitor and investigate complaints regardinghandling of funds by HOAs. (This bill has been referred to House Business and Industry
Committee). TEF supports this bill. SB 472 - West - To regulate HOAs voting practices and elections. (This bill has been
referred to the Senate Local and Uncontested Calendars Committee). TEF supports this
bill.
SB 446- Jackson -would change the Texas Constitution weakening homestead
protections. (This bill has been referred to Senate Intergovernmental Relations)
TEF opposes this bill
SB 142 - West - prioritizes payment of debt to HOAs. (This bill has been referred to HouseBusiness and Industry) TEF opposes this bill.
