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Court
Decision Upholding “Discriminatory” Rental Ban also Calms Industry Nerves
True or False: 1) Owner-occupants have more invested in the property and will
be more concerned about maintaining it. 2) A large concentration of tenants in
a common interest ownership community can threaten the value not only of the
units they occupy but of the community as a whole. You won’t find many owners
or professionals in the common interest ownership world who would challenge
either assertion. The assumption that owner-occupants are preferable to tenants
is reflected both in secondary mortgage market policies that make a high
owner-occupancy rate a condition for approving condominium loans and in the
rental restrictions (or outright rental bans) that many communities have
adopted. But this conventional wisdom was challenged last year when an Indiana
Appeals Court ruled that a rental ban in one condominium community violated the
federal Fair Housing Act. Although the decision applied only in Indiana, it
sent nervous ripples throughout the industry, because with a relatively small
number of judicial precedents addressing condominium issues, it is not uncommon
for courts in one jurisdiction to rely on the decisions of courts in others.
Fortunately, at least in the view of most industry practitioners, the Indiana
Supreme Court has reversed this unsettling decision.
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How to Help Fix HOA Problems, Before They Become Problems Everyone knows that HOA’s and HOA Boards are often in a continual dance for
“which one is right.” Sometimes that spills over into lawsuits, open revolts by
homeowners, or worse. How can HOA Board members act proactively to stop some of
that dance of near death? I am a big fan of The Fifth Discipline by Peter Senge.
In the Chapter entitled “Does Your Organization Have a Learning Disability?” he
mentions three problems I see might affect HOA Boards. Now, before you say,
“that isn’t us,” read the next three paragraphs.
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Predicting the Future of Community Associations
Co-operative, private maintenance of commonly owned land and structures in small
villages and towns has been around for hundreds, probably thousands, of years.
But in California, “common area,” and the community associations that maintain
it, have only been regulated by statute for a few decades. The first California
Condominium Act was enacted in 1963. The Davis-Stirling Act, in use today, was
enacted in 1985. We began seeing condominiums massed produced for California
consumers in the early Sixties when the McKuen Corporation started building
their ubiquitous fourplex buildings throughout California.[1]
Consequently, California’s experience with this form of housing dates back less
than 50 years, and with so little history, predicting the future requires a lot
of speculation. We do have some data, however, and from those sources we can
piece together a picture of how community associations, and the projects they
maintain, might evolve over the next half century. Some of this comes from other
writer’s accounts, and some from our own experience. We tried to make practical
predictions, based on recognized trends, so you won’t see anything here about
condos on the moon! The following facts are already evident:
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Poor Documents and Insufficient Reserves = A Big Headache The era of community associations really began to flourish in the late 1970s.
The legal documents for those early homeowner associations and condominiums
reflected the best thinking and analysis of the time regarding the future
financial and operational needs of the individual communities. Actually, it is a
tribute to the attorneys who crafted some of those fledgling documents with
foresight to include flexibility for future boards with regard to assessment
levels. However, in most cases, that flexibility was not included and community
associations were limited to a small percentage annual increase – or none at all
-- without a high percentage of membership approval. Those communities face a
serious economic challenge today. Let me describe an actual situation involving
a townhouse community in a suburb of a large metropolitan area that was built in
the early 1970s. The community has private streets and parking lots, a
clubhouse, and a swimming pool, in addition to wood perimeter fencing, two
retaining walls, and some decorative brick walls. Their documents specify that
the annual assessments can only be increased by a maximum of three percent per
year.
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