January 1, 2004 in Mortgages

One of every five Americans lives under rules and regulations that could confiscate their homes from them, remove their right to privacy and take away their freedom of expression.

Neither Congress, the police nor local governments can do anything about it. Some people hate the situation. Others love the rules. Many homeowners, however, don’t realize what rights they’ve signed away until it’s too late.

They are people living their American Dreams inside a community regulated by a homeowners association (HOA), and corresponding covenants, conditions and restrictions (CC&Rs) that constitute a form of government that pleases some but is just a headache-inducing hassle for others.

“Fifty-five million Americans live in developments overseen by community associations,” says consumer watchdog Ken Hyland. “Four out of five of those associations are doing well, but the other 20 per cent have problems.”

The reason: The rules that govern private home developments are very difficult to change and are set up by developers who never live on the site and who disappear after a few years.

Here’s an overview of HOAs and CC&Rs, what they are and what they can do to you.

Signing away your rights

“It is an enormously serious and growing problem,” says Evan McKenzie, a professor of political science at the University of Illinois.


“If you move into a covenanted neighborhood, you have no choice but to abide by the covenants. It might be your house, but you can’t do just what you want with it,” explains McKenzie, a condo law expert and author of “Privatopia: Homeowner Associations and the Rise of Residential Private Government.”

“While certain rules — like the hours of swimming pool operation — can be changed quickly by the governing board, deed restrictions are almost impossible to change, requiring a huge majority of owners.

“Some people like that. They want to know that their community won’t be marred by car-repair enthusiasts or illegal residents in trailers. But others resent being told what color their house may be painted, or that they can’t fly Old Glory on a flagpole.

“Not knowing what you are getting into can be costly. Your association can fine you. If you don’t pay, it has the legal right to collect by selling your house!”

How it all started

McKenzie outlines how the problem arose: “For years, there was an emergence of incentives that produced common-interest housing.

“First, people were demanding affordable housing. To meet that demand, developers wanted to build more units on less land to keep costs down. Meanwhile, municipalities wanted to increase the tax base but also wanted to avoid the huge cost of providing expensive roads and utilities.”


The solution: Common Interest Developments. Instead of providing every house with its own pool, driveway and lawn, CIDs provided homes with shared amenities.

They sometimes avoided local density codes, adds McKenzie, because the communities were private developments that the local authority did not have to oversee or maintain.

“The oversight responsibilities instead fell to volunteer committees of private homeowners with help from professional property managers and lawyers, creating in each CID a private government with residents signing a binding contract to obey its laws.”

The changing American landscape

Local governments liked getting property taxes from developments that cost them nothing, so states such as Texas, California, Nevada, Florida and Virginia saw to it that little else was built.

In 1965, fewer than 500 CIDs existed nationwide. By 1970, there were 10,000. Today, although there is no official monitoring, experts estimate there are 250,000 common-interest developments.

“Almost all new development in densely-populated areas is CIDs. It is a total transformation of the landscape of American home ownership,” says McKenzie. “The traditional family home is becoming extinct in larger cities.”


Is this a bad thing? “It is for homeowners who are sacrificing privacy, control and freedom of choice,” says watchdog Hyland, director of the National Institute of Community Management, in Phoenix.

When you move into a CID, Hyland explained, you automatically become a member of the association and are bound to certain deed restrictions, covenants and conditions.

They include the association’s regulations, and require that every owner be a member of the association and abide by its rules.

“The point of the rules is to protect the community, and to maintain or improve property values,” says Hyland.

“When you join a homeowners association, you are signing a contract,” says McKenzie, who teaches a course on condo law at John Marshall Law School, Chicago. “These are legally-binding covenants and if you don’t want to live by them you should not buy the house.

“You’re handing over control of the way you want your home to look, and what you want to do in and around it to the association’s board of directors. They can be untrained people with no knowledge of the law or business, and sometimes have very bizarre ideas of what they want in their community.


“Most associations do well, and protect residents’ interests, but there are some horror stories out there. Even when you have a board filled with great people, it’s still only one election away from disaster!”

Some love it, some don’t

Ironically, the very aspects of safety and tidy appearance, which attract people to CID living, are made possible by tight enforcement of rules that many residents find irksome.

Typical CID rules prohibit or limit the use of such things as flags, clotheslines, wind chimes, signs on your lawn or in your window, garage sales and the presence of pets.

How many cars you can have and where you may park is a popular bone of contention, but the rules can get far more intrusive.

One HOA told a woman to remove the small Cleveland Indians sticker she’d put on her mailbox, another objected to a ‘Peace’ sign in a window. Some dictate when you can put out the garbage, and what flowers you may plant, others restrict remodeling projects.

Repainting? Invariably, you must take your proposed new paint scheme before the committee — and pay a fee for their consideration.

Unruly behavior or noise is banned. One man was fined because his too-large flag flapped at night. An elderly lady was fined by her HOA for sitting outside her Missouri home in her car and kissing her retiree beau.

“Nobody should have the authority these boards have over what people own,” says Elizabeth McMahon, co-founder of the American Homeowners’ Resource Center, a consumer group in San Juan Capistrano, Calif.

Another area of great concern, says McKenzie, is property maintenance.

“Many CIDs are 20 or more years old. Typically, the developer’s responsibility has ended, so, when roofs start to leak or streets to break down, the homeowners have to finance repairs.

“The associations should have reserves to pay for that, but the developers almost always set maintenance fees very low to help them sell units, and the associations invariably find themselves under funded.”

To raise the needed funds, the HOAs levy hefty special assessments and often hike the monthly fees to create future reserves.

Despite the horror stories and the legions of critics, it’s obvious many Americans appreciate the way HOAs operate. Why else would 20 per cent of the population voluntarily place themselves under their control? One man’s trash is another’s treasure — or in this case, one man’s devil is another’s angel.

The choice is yours. But make it only after you’ve thoroughly investigated what you’re getting yourself into.