April 10, 2005 | C-IHC's Common Sense Newsletter
Margaret Bar-Akiva, President of C-IHC, Urges Support for Homeowner's Protection Bill
Senate bill S-2016 and its Assembly version A-3988 are currently pending before the NJ legislature. These bills are a clear and comprehensive response to the serious governance problems plaguing homeowner associations (HOAs) today.
Over 1 million New Jersey residents currently live in HOAs. But unlike other New Jersey homeowners, they often discover that living in such communities means unknowingly relinquishing some of their basic constitutional and property rights. On a daily basis, HOA residents are subjected to boards that hold closed-door meetings, conduct improper elections, deny access to financial records, impose unreasonable fines, and initiate frivolous and self-serving lawsuits -- all at the homeowners' expense. Some HOAs have been forced into bankruptcy as a result of mismanagement or corrupt business practices, and homeowners have been forced to pay thousands of dollars in special assessments in order to salvage their homes. When homeowners exercise their fundamental right to ask probing questions they are often stonewalled, harassed or vilified by their boards. All of these undemocratic practices have been documented by the NJ Department of Community Affairs and confirmed in the report submitted by the New Jersey Assembly Task Force to Study Homeowner Associations a few years ago. Many people are at a loss to explain how homeowner boards, which have been granted government-like powers to impose fines, levy assessments and place liens on peoples? homes, have been granted those powers without any governmental oversight requirements that such powers demand. And people are equally bewildered that a country bold enough to export democracy abroad can tolerate this form of tyranny at home.
There is no doubt that today is widespread dissatisfaction with HOAs stems from laws of the 1960s which established them as business corporations instead of quasi-governmental entities. While the dismal outcome of this form of housing might not have been anticipated 40 years ago, we have now acquired sufficient experience by which to make at least the following three observations:
(1) Applying the corporate business model and the business judgment rule to HOAs has proven to be deeply flawed because it has unwisely exempted them from scrutiny;
(2) The lack of governmental oversight has allowed homeowner associations to turn into breeding grounds for special interest groups and has permitted incompetent and unscrupulous board members to act with impunity;
(3) The wide latitude in powers given to HOA boards require that they be held to the same standards of due process, open governance, and fundamental fairness to which other
government regulated bodies are held.
Bills S-2016 and A-3988 seek to remedy these major deficiencies by recognizing the quasi-governmental nature of HOAs and requiring their boards to operate in an open and democratic manner. The bills also create an Office of Ombudsman which will assist homeowners in understanding their rights and responsibilities, help in resolving disputes, and provide proper training for board members.
The lack of democratic governance in HOAs is not unique to New Jersey. Grassroots organizations have sprung up in several states to bring about legislative reform. And just like in New Jersey, they have been met with opposition from those who profit from the current setup and are eager to maintain the status quo.
The history of HOAs across this nation paints a disturbing picture of government officials who have abdicated their responsibility in protecting their constituents from a housing experiment gone awry. With S-2016/A-3988, New Jersey legislators now have an opportunity to implement laws that will provide much-needed protection for their citizens. It will be an admirable act whose time has come and a refreshing break from the "politics as usual" routine.