NPR: Not So Neighborly Associations Foreclosing On Homes

Posted by Kendall Harmon

Capt. Mike Clauer was serving in Iraq last year as company commander of an Army National Guard unit assigned to escort convoys. It was exceedingly dangerous work — explosive devices buried in the road were a constant threat to the lives of Clauer and his men.

He was halfway through his deployment when he got a bolt from the blue — a frantic phone call from his wife, May, back in Texas.

"She was bawling on the phone and was telling me that the HOA [homeowners association] had foreclosed on our house, and it was sold," he says. "And I couldn't believe that could even happen."

Caught this on today's morning run--I had no idea this could happen. Read or listen to it all--KSH.

Filed under: * Culture-WatchLaw & Legal Issues* Economics, PoliticsEconomyHousing/Real Estate Market

29 Comments
Posted June 30, 2010 at 4:00 pm [Printer Friendly] [Print w/ comments]



1. Dale Rye wrote:

Texas HOAs often have rules that are incredibly detailed (what color ribbon you are required to use to decorate your mailbox every Christmas, what species of plants are required to be grown in a flowerbed, or the permissible age of houseguests). Failure to comply will result in fines, and failure to pay the fines and collection fees will result in foreclosure—even on a fully-paid-for house.

The “association” membership has little to do with it, since they hire a management firm that gets much of its income from the fines, collection fees, and the profits from reselling foreclosed properties (as the story points out, a house may be bought on the courthouse steps for $3000 and sold the next day for $300,000). The residents are often fearful of complaining about storm-trooper restriction enforcement for the same reason people who fear audits don’t attack the IRS.

It is all remarkably astonishing. The reason HOAs have acquired this power is that many Texas cities (and all Texas unincorporated communities) have no zoning, so people can only rely on restrictions to control land use in their neighborhoods. As Lord Acton observed, “power corrupts,” and the absolute power of some HOAs has corrupted absolutely.

June 30, 5:40 pm | [comment link]
2. Chris wrote:

yep #1, I would also say it’s a racket.  maybe there is a RICO violation with these shenanigans?

June 30, 5:53 pm | [comment link]
3. Terry Tee wrote:

This story shocked me and I felt so sorry for the family concerned.  I used to own a house in Arizona which was part of a HOA.  One of the many factors that led to a decision to sell was the quality of the candidates elected to the board.  Some were outstanding; others had me frightened and at times an air of bitterness seemed to hang over campaigning for election.  Moreover, as is pointed out above, ultimately the HOA usually takes out a contract with a management company and it is they who make most of the decisions.  Democracy is a fine thing but too often it turns into oligarchy.

June 30, 6:11 pm | [comment link]
4. APB wrote:

About the time I retired, I took a good look at the HOA rules in the area in AZ where I had planned to retire, and ultimately decided not to do so.  Since in theory it is a voluntary association, even if there is no place to live that doesn’t have a HOA, you have little in the way of due process.

As for the captain.  As mentioned in the article, the Servicemembers Civil Relief Act does provide a great deal of protection, and some stiff penalties for those who violate it.  If the military lawyers take the case on as a general case, he is going to have a lot of high power help.  If he finds them treating it as just one individual, he may be better off going with a private attorney.

June 30, 6:28 pm | [comment link]
5. libraryjim wrote:

Home owners associations are EVIL! They are run by neighbors who seem ordinary until they get “elected” to officer status, then they turn into little authoritarian dictators who send you notices if your car is one inch too far off the driveway, or you leave your garbage cans out one minute too long after the garbage truck pulls away.

Yet they are defended by some who say “Well, you don’t HAVE to live there, you know, you could have chosen to live in a neighborhood without one”.  Really? Where do you find THOSE now-a-days?

June 30, 6:55 pm | [comment link]
6. Sick & Tired of Nuance wrote:

My city can do similar things.  The previous owners of our house had let a hedge bordering the side street sidewalk (we are on a corner lot) become overgrown.  I had been cutting it back a few inches per year, allowing it to fill in again so as not to shock it.  The side that needed trimming back was on the shade side, so regrowth was slow.  Anyway, I had trimmed half the length of the hedge (about 50 feet) but received orders to go out of state for a month.  When my family and I returned, there was a notice waiting for us that we had 16 days to trim the hedge to within city specifications or we would be fined $100 per day that we were out of spec.

Well, so much for gradually correcting the problem!  I cut the hedges so they were in spec, took photographs, and called the city hedge nazi to come and make sure that I was in compliance.  He called me up after his driveby inspection and said that I didn’t have to cut the hedge back so severely!  Now, 3 years later, my hedge is still teetering on the edge of survival.  The sunny side seems fine, but the side all the neighbors get to see is mostly barren sticks.  I am reasonably certain that it was one of my neighbors that “dropped a dime” on me in the first place, so I am not too worried.  I had several ask me about it and I told them what happened.  It brought down property values and curb appeal for several houses around.

Of course, I also live in CT where the city can just seize your house by eminent domain and sell the property to another private entity in the hope of getting a better tax return.  We don’t really own our property here…we just rent it from the city/town.

June 30, 9:24 pm | [comment link]
7. Bart Hall (Kansas, USA) wrote:

“just rent it” in Connecticut is for certain. My sister and mother (well into her 90s) live in the house my parents bought right after WWII. It was built in 1842 and sits on a modest lot in a town of 14,000. It has been owned outright for almost 50 years.

Nevertheless they must cough up just under $600 per month in property taxes. Six hundred bucks a month to support bureaucrats in the style to which they have become accustomed. Our mortgage payments were never even remotely close to $600 per month.

Again, this is a town of 14,000. How much does it cost to keep the streets in good shape and provide police and fire protection?

June 30, 10:38 pm | [comment link]
8. Denise wrote:

So, there are still a few blessings with life in California.  At least in my part of California.  I live in a condominium community, with a HOA.  The board members are good stewards of the money we pay into the association fund every month, and life here is pretty good.

June 30, 11:45 pm | [comment link]
9. Br. Michael wrote:

NPR leaves out the following:

The Heritage Lakes Homeowners Association was initially owed $977.55 and sent multiple notices by certified mail demanding payment. All went unanswered, said David Margulies, spokesman for the association and its management company, Select Management.

The problem, according to a lawyer for the Clauers, was that Michael Clauer – U.S. Army National Guard Capt. Michael Clauer – was deployed to Iraq.

His wife, suffering from depression over her husband’s absence, had let mail pile up and didn’t open any of the certified letters. May Clauer and her parents owned the house mortgage-free.


http://www.dallasnews.com/sharedcontent/dws/news/city/collin/frisco/stories/062610dnmetsoldierforeclose.1c0dd01.html

Another problem is that these HOA’s are creatures of contract between private persons.  Now I agree that often they take on all the aspects of contracts of adhesion and who ever reads the numerous pages of fine print “covenants and restrictions” that come with the deed, but the question is how far do we want the state to go in regulating the freedom of people to enter into contracts with each other and in protecting people from themselves?

You know that their are just some things that people have to do for themselves.  Letting up-opened certified letters pile up is not a wise thing and if you know that your wife is subject to depression and is likely to ignore critical things then you need to arrange for some help.

On the other hand HOAs can behave like the worst of dictatorships.  I have had experiences with my own and it can be awful.  In the case of foreclosing and selling homes, I think that the state would be justified in limiting or regulating the scope of covenants and HOA contracts prospectively.

July 1, 6:29 am | [comment link]
10. Archer_of_the_Forest wrote:

That’s just sick beyond words, seeing as the guy was in Iraq, serving his country.

But, by the same token, this is exactly why I would never, ever own a home in a suburb or gated community that has a neighborhood association like that. If the neighborhood has to rely on Gestapo tactics to make everything uniform, then that isn’t a neighborhood in my opinion. It’s a cell block.

On a lighter note, stories like this remind me of that X Files episode some years ago about a neighborhood association. Turns out there was a monster underneath the neighborhood that made all the lawn ornaments disappear.

July 1, 8:15 am | [comment link]
11. Capt. Father Warren wrote:

We live in Diamondhead, MS a community of ~10,000 folks run by a POA (Property Owners Assoc).  Bi-annual elections are open as are all meetings.  There is a board of directors and everything gets audited and published.  We can’t outsource it to a management firm.  But we are toying with incorporation as a city as we are almost getting too big for the POA model.  But, the POA has worked so incredibly well here that a good 20% of folks would like to keep it as it is.  We have 2 golf courses, a marina, 3 public swimming pools, and tennis complex, baseball fields, community parks, a country club with dining and banquet facilities, and even our own airfield.  All this for $80/mo dues.  We wouldn’t go anywhere else….......and if I don’t like something they are doing, I just go down and see the elected POA President and chat with him over a cup of coffee.

July 1, 9:41 am | [comment link]
12. Jeremy Bonner wrote:

The real issue seems to be the way the HOA sought redress.

Why could they not simply have gone to a small claims court (or whatever the American equivalent is) to recover dues and costs?

Alternatively, if they considered foreclosure a necessity, then they should have undertaken to sell the house at its real value and, after deducting the dues and any costs, to return the balance (which would have been in excess of $100,000) to the family.

July 1, 10:25 am | [comment link]
13. mannainthewilderness wrote:

Because, Jeremy, the purchaser was likely a family member or close friend, and the owners of the management company benefitted directly or indirectly.  The sales are unannounced, so how many people do you think showed up to bid?  And, given the quick flip, can’t you imagine that another bidder might well have paid $25k, $50k, or $75k.  Heck, I would not be too shocked if the buyer of the house was family/friend of the mortgage company as well:  “Hey John/Jane, I know this 300k house for sale that can be had for a steal . . . “
Here’s hoping the jag lawyers get the house back for the couple . . .

July 1, 12:02 pm | [comment link]
14. Cennydd wrote:

My wife and I were members of a homeowners’ association…...ONCE…...and never again!  These associations are ripoffs, pure and simple.  Some thought was given to organizing an association in the neighborhood where we now live, but once we got together with our neighbors and our attorneys, we very quickly thought better of the idea, and we dumped it. 

Captain Clauer and his wife should sue to get their home back from an unscrupulous buyer, along with all of the profits he made from the sale of their home.  As for the homeowners’ association, I would sue them for their assets.  The Soldiers and Sailors Civil Relief Act is a powerful tool, and he should not hesitate to use it.  I know, because my wife and I used it once.

July 1, 12:26 pm | [comment link]
15. Jeremy Bonner wrote:

While my question was somewhat rhetorical, Mannainthewildernesss, I fear that you’re probably right. Another reader sent me a different version of the story, which suggests that the sequence of events may have been soemwhat different, but it doesn’t change the fact that there were other ways for the HOA to get what it was owed. It sounds almost like an application of eminent domain without compensation, only by a private body rather than by government.

July 1, 12:31 pm | [comment link]
16. Cennydd wrote:

I forgot…...It’s the Servicemembers’ Civil Relief Act now, isn’t it?  And a case like this one is the kind that JAG officers just love to wrap their hands around, because it affects them and their families, too, since they’re serving officers like Captain Clauer.

July 1, 12:36 pm | [comment link]
17. Terry Tee wrote:

# 10 Archer, I remember that episode and like you thought of it.  You have forgotten one detail:  if you did not keep a light on above your porch (or was it garage door?) then the creature that lived in the drains came and swallowed you up.  Sure enough, I found a similar by-law in my own HOA.

July 1, 12:43 pm | [comment link]
18. Cennydd wrote:

My advice to prospective home buyers?  If you can avoid joining such an association, by all means, do so!  If you can’t, read the contracts, covenants, and restrictions very carefully, and have your lawyer explain them to you, if need be, before you sign anything!

July 1, 12:46 pm | [comment link]
19. Cennydd wrote:

And make sure you thoroughly understand them.

July 1, 2:34 pm | [comment link]
20. Jim K wrote:

In our gated community here in San Antonio, the HOA has rigged the elections and meetings by always holding them at 4:30 PM on a weekday.  Who, other than the retirees who dominate the board, can attend a meeting at that time?  There is also, quite deliberately, no open time on the meeting agenda for statements, matters from the floor, etc. that might allow issues to be raised that the ruling clique do not want to see the light of day.  Yet another example, I suppose, of the trappings of democracy being used to clothe oligarchy.  Hmmm, does that sound like PECUSA?

July 1, 2:55 pm | [comment link]
21. C. Wingate wrote:

For once I’m with the other troglodytes here. My gut reaction is that they should be all forced to convert to towns so that they are subject to the same legal restrictions as other governments; in the mean time I will have nothing to do with them.

July 1, 3:12 pm | [comment link]
22. Dan Crawford wrote:

It’s no surprise this happens in TX or in any other state where politicians are sold out body and soul to every corporate interest which lines their pockets. Freedom is a rather meaningless word in fascist states. It’s no wonder TX has the highest execution rate in the nation - there’s all sorts of executions one can be subjected to. Yes, people should read carefully the contracts they sign but when they deal with people who lie in word and print - just ask those screwed by Countrywide, Washington Mutual and Goldman Sachs, to name but a few.

July 1, 3:51 pm | [comment link]
23. Chris wrote:

Dan, why then are people fleeing in droves from states like CA, MI, OH and heading to evil old TX?

July 1, 4:47 pm | [comment link]
24. CanaAnglican wrote:

This is a trajedy that hopefully will have a better ending than beginning.  That said, how hard is it to arrange with your bank to automatically make all your monthly payments (mortgage, HOA, utilities, even credit cards)?  Captains make good money and it goes into the bank automatically on the first of every month.

Sure the HOA officers should have knocked on the door and gotten a better take on the situation.  Then a payment plan could have been arranged.  None of us should expect our neighbors to have to double up on their dues just because we fail to pay ours.  I can remember when my dad was overseas as a captain in the military.  If he had failed to pay his debts promptly, his CO would have had words with him.  It was 1949, his career would have possibly been over.

(Intresting side note:  This would have been called a “rug dance.”  Only the CO had a rug in his office.  The officer being grilled got to stand in front of the desk on the rug and squirm around until dismissed.  I suppose the corporate analogy is being “called on the carpet”.)

July 1, 5:45 pm | [comment link]
25. Old Pilgrim wrote:

This is for Terry Tee:

Democracy is a fine thing but too often it turns into oligarchy.

I think you mean that too often it turns into tyranny as we understand the word today. For Aristotle, oligarchy was the rule of the few, and tyranny was the rule of a single person. Today we refer to the tyranny of the majority, which is what these HOAs appear to represent.

July 2, 9:02 am | [comment link]
26. Terry Tee wrote:

New pilgrim:  No, I have to disagree with you, I meant oligarchy, following in the definition of the French political theorist Robert Michels, who famously theorised that whatever government we elect it will still be the public servants of a certain self-perpetuating class who run the country and who decide what to do, aided and abetted by a core of politicos who know the ropes.  Whether large (a nation) or small (a group of condos in an HOA) it often seems to be that way.

July 2, 9:44 am | [comment link]
27. chips wrote:

I am an HOA attorney and I serve on my HOA board. In Texas most of the amenities especially in unincorporated areas are managed and maintained by HOA’s. In the 1970’s most people had equity in their homes (and savings) and therefore paid their HOA dues in a timely fashion. Due to very stupid lending practices a significant setment of the renter class became “homeowners”. This has lead to increasing delinquency rated and larger numbers of people not caring for their homes.

Under Texas law the Capt has six months in which to redeem his home. Also the Serviceman Relief Act may assist him.  Typically army officers are responsible people and he should have informed the HOA of his deployment. Personal responsibility has also taken a hit since the 1970s.

No system is perfect but without HOA’s, most peoples largest investment would take a big hit. Just think how you would feel if your neighbor stopped cutting his grass or painted his home pink poke a dot. Its the HOA who would rescue you.

July 9, 10:03 am | [comment link]
28. chips wrote:

IN order to foreclose the HOA would either have had to have filed suit or sent several notices - was the wife not home reading the mail. You would be amazed how many people do not read their mail.

July 9, 10:06 am | [comment link]
29. Ross wrote:

#27 chips says:

No system is perfect but without HOA’s, most peoples largest investment would take a big hit. Just think how you would feel if your neighbor stopped cutting his grass or painted his home pink poke a dot. Its the HOA who would rescue you.

If my neighbor painted his house with pink polkadots, I would think, “Wow, that’s ugly, but it is after all his house and his right to paint it however he wants.  I will respect his right, just as I would expect him to respect my right to do as I please with my house.”

July 9, 12:13 pm | [comment link]
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