Texas HOA forecloses Army Captain's house over unpaid dues

[Phantasee]

Not So Neighborly Associations Foreclosing On Homes

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."

Clauer had a hard time understanding what his wife was saying. His $300,000 house was already completely paid for. Could it be possible that their home was foreclosed on and sold because his wife had missed two payments of their HOA dues?

In many states it is not difficult for an HOA to foreclose on a member's home for past dues even if the amount owed is just a few hundred dollars.

"I was really in a hurry trying to get home before my family was living on the streets," Clauer says.

Sold For A Steal

But by the time he got back to Texas, it was too late. The Clauers' four-bedroom, 3,500-square-foot home had been sold on the courthouse steps for just $3,500 — enough to cover outstanding HOA dues and legal costs.

The new owner quickly sold it for $135,000 and netted a tidy profit.

"Basically it's everything to us," Clauer says. "Having a house like this paid for was huge for us, for our retirement plans. We thought we were so far ahead, and now it's like we're starting from the beginning."

Lawyers for the HOA say that while Clauer's case is regrettable, it was his and his wife's fault for not paying their dues in a timely manner.

"The fact of the matter is, the laws of the state of Texas allow the homeowners association to file assessment liens on properties who haven't paid their assessments, and they also allow foreclosure on those liens," says Patrick Whitaker, who represents the HOA. "And the homeowners association followed the letter of the law."

Beg For Mercy

And in 33 states, an HOA does not need to go before a judge to collect on the liens.

It's called nonjudicial foreclosure, and in practice it means a house can be sold on the courthouse steps with no judge or arbitrator involved. In Texas the process period is a mere 27 days — the shortest of any state.

David Kahne, a Houston lawyer who advises homeowners, says that in Texas, the law is so weighted in favor of HOAs, he advises people that instead of hiring him, they should call their association and beg for mercy.

"I suggest you call the association and cry," he says.

If a homeowner misses a couple of association dues payments, the $250 or $500 they owe often becomes $3,000 after the association's lawyers add their legal fees, Kahne says.

It's not the HOA that has to pay the lawyer's bill but the delinquent homeowner. If the homeowner wishes to contest and loses, the owner is on the hook for legal fees that could run deep into the tens of thousands of dollars.

Kahne says that as the economy has gone under, HOA management companies and lawyers have been making millions off homeowners through this foreclosure process.

"We're having literally thousands of lawsuits filed over very small amounts of money," Kahne says. "And those very small amounts of money rapidly become large amounts of money when the association attorneys add their bills."

Suddenly faced with a demand that they pay $3,000 immediately or lose their home, many disbelieving homeowners don't know where to turn.

With the recession, foreclosure filings for delinquent HOA assessments in Texas have increased from about 1 percent of all home foreclosures to more than 10 percent currently, according to the industry.

'Won't You Be My Neighbor'

Over the past 20 years, HOAs have exploded across Texas. While there are 1,100 municipalities, there are now 30,000 HOAs. And these associations have far more power to take away a citizen's home than any city or county in Texas.

The perception that the balance of power has swung too far toward HOAs has begun to permeate the Texas Legislature. Reform legislation has passed the Texas House of Representatives, but no bill has been able to make it through the state Senate.

"Associations are a collection of neighbors," says Republican state Sen. John Carona, who represents Dallas. "The goal has to be to work well together — have a harmonious community — and to create a lifestyle that people enjoy and want to be a part of."

In addition to representing Dallas, Carona owns the largest HOA management company in the country — Associa, which has more than 100 offices, 6,000 employees and 7,000 HOA clients in 30 states and Mexico.

Carona defends the rights of HOAs to foreclose for delinquent dues, even for small amounts.

"If an association did not have a means, a forceful means, to collect that money from any homeowner who, for whatever reason, couldn't pay, it places an unfair burden on every other owner in that association," Carona says. "And a burden, quite candidly, that those other members didn't bargain for."

There have been complaints that some members of HOA boards have bought HOA-foreclosed properties for a pittance, and then sold them for a hefty profit.

In Texas, there are no laws to prevent this. Carona says the best way to address this apparent conflict of interest is not by passing new state laws but by letting the HOAs handle it internally through modification of the association's constitution.

"I think that an association can avoid that type of thing by adopting conflict-of-interest rules," he says.

Closing Loopholes

Republican state Rep. Burt Solomons from North Texas has been trying in vain to pass HOA reform legislation. He says during state legislative hearings there was no shortage of outraged homeowners, but he acknowledges that the HOAs, their property management companies and their lawyers fought back effectively.

Solomons says HOA board members and advocates testify and say, "'We need the power to access and fine and foreclose, and we need the money. And we look for people in violation of the rules and restrictions that we put in place.'"

"And they drive around in golf carts looking for them," Solomons says.

In theory, HOAs are only supposed to foreclose for nonpayment of dues. But Solomons says that through a loophole in Texas law, in practice, HOAs can foreclose for nonpayment of HOA fines, too. Solomons watched with frustration last year as his reform bill died in the Senate.

Legal Recourse

As for Clauer, he's gone from fighting in Iraq to fighting his HOA in Texas. And if he weren't in the military, Clauer would have no legal recourse at this point.

But in a spasm of gratitude in 2003, Congress passed the Servicemembers Civil Relief Act, which was supposed to prevent nonjudicial foreclosures against military personnel fighting overseas.

"Hopefully we're going to get the house back," Clauer says. "That's what we're fighting for — that the judge will understand that this was illegal. That the HOA can't do what they've done."

If a federal court decides in favor of the Clauers, the foreclosure and subsequent sales of their home would have to be unwound and the deed returned to them. If they lose, the captain's nice, paid-for, suburban home would be lost to his family forever. The case goes to court early next year.

Story is from June, but that is some disgusting shit. What good is a Home Owner's Association if it creates this kind of headache? This is excessive power in the hands of the HOA.

[Marcus Aurelius]

And I thought the laws forbidding anal sex and the like were the strangest stuff that was going on in some US states. I can't really see how such extraordinary powers to collect past due fees can be given to private associations without any court order. Even more mind boggling is that they can legally sell the house significantly under current market value. It goes directly against ownership and property rights, which are supposed to be the cornerstone of capitalism. But I suppose as long as it's not the government or other public officials doing it, it's perfectly okay.

[Soontir C'boath]

Look, the free market will fix this. As these HOAs keep doing this, more and more people will know who those companies are and avoid them and then it'll become a losing proposition. It's as simple as that. The government does not need to be handling every nook and cranny like this just because some people have already suffered after the fact.

[Ryan Thunder]

It's worked so well so far. :v

[Chris OFarrell]

Ah the United States of America. The Land of the Fre...err...Corporation.

[Alyrium Denryle]

Gee, and here I was thinking I lived on earth rather than Ferenginar. I bet the board members of this HOA (and all HOAs) go home at night, have a bottle of wine and then put a glass plate over their lobes and hire prostitutes to take a big steaming shit on the glass

"ooooh Its so warm"


...

Oh, and they have a "Support Our Troops" ribbon on their car.

[Vyraeth]

The case was actually settled back in July, the Clauer's, thankfully, were able to keep their house.

http://realestate.aol.com/blog/2010/11/ ... osed-home/

Furthermore, as a result the Texas legislature is in the process of reviewing current HOA laws. Hopefully that will stir actual change and limit how much power HOA's have.

[Soontir C'boath]

The case was actually settled back in July, the Clauer's, thankfully, were able to keep their house.

http://realestate.aol.com/blog/2010/11/ ... osed-home/

Furthermore, as a result the Texas legislature is in the process of reviewing current HOA laws. Hopefully that will stir actual change and limit how much power HOA's have.

Well then a good ending but they don't need to be regulated by the government. This here is a clear cut case of the free market at work![/End]

Given what I've seen of Governor Rick Perry in his interview on the Daily Show and things like his reversal on giving a tax break to the production company that made the movie "Machete", I wonder if something will actually be done.

[RogueIce]

And I thought the laws forbidding anal sex and the like were the strangest stuff that was going on in some US states. I can't really see how such extraordinary powers to collect past due fees can be given to private associations without any court order. Even more mind boggling is that they can legally sell the house significantly under current market value. It goes directly against ownership and property rights, which are supposed to be the cornerstone of capitalism. But I suppose as long as it's not the government or other public officials doing it, it's perfectly okay.

IIRC, there's some kind of legal mumbo-jumbo about how the homeowner doesn't actually "own" the house, or the land the house is on, or something like that. It's also how those infamous "deed restricted" things happen (no flagpole in the yard, no basketball hoop on the driveway, etc).

Ah, according to Wikipedia, when you buy a home there you agree to be bound by the "Covenants, Conditions, and Restrictions" and you have absolutely no choice to reject it. That's where they probably get the power to do these things.

There is no mutual agreement between buyer and seller regarding the CC&Rs, they are legally defined to "run with the land". If an owner sells the encumbered land/ home, he ceases to be a member of the association and the new owner is forced to become a member. All members must pay assessments to and abide by the restrictions of the association.

The best part is that the homeowner has to pay out of pocket to sue a HOA, while that homeowner's fees are going to help pay for the HOA's legal fees at the same time.

[Johonebesus]

Now cue the response that the homeowners signed a contract when moving into their developments and should have known damn straight and well what could happen if they didn't pay their dues, so it's really their fault.

The problem is nature does not give us a level playing field. A lot of people are just sort of stupid, and many, many more take careless risks. That's just the way it is. Ideally everyone should think things through very carefully and read all the fine print and consider all the possible scenarios before making any big financial decision, but the reality is most people don't. It's very tempting to say, "well they were stupid and made bad choices, so I have no sympathy," but that is just going to result in a lot of suffering, except for the clever bastards who take advantage of popular stupidity. Ideally everyone would have enough sense to make rational economic decisions, but the reality is a hell of a lot of people don't and make easy prey for unscrupulous businesses, so we need laws and regulations to protect them. Yes, I'll go ahead and say it, the ignorant masses sometimes need government to protect them.

[Phantasee]

The case was actually settled back in July, the Clauer's, thankfully, were able to keep their house.

http://realestate.aol.com/blog/2010/11/ ... osed-home/

Furthermore, as a result the Texas legislature is in the process of reviewing current HOA laws. Hopefully that will stir actual change and limit how much power HOA's have.

Part of the reason they got to keep it was because Capt. Clauer was on active duty at the time. Not everyone gets that kind of protection.

[Flagg]

Now cue the response that the homeowners signed a contract when moving into their developments and should have known damn straight and well what could happen if they didn't pay their dues, so it's really their fault.

This.

Though I do feel sympathy for them, absolutely loath HOA, and think they should be regulated to as not allow this kind of nonsense to happen.

[Alyrium Denryle]

Now cue the response that the homeowners signed a contract when moving into their developments and should have known damn straight and well what could happen if they didn't pay their dues, so it's really their fault.

This.

Though I do feel sympathy for them, absolutely loath HOA, and think they should be regulated to as not allow this kind of nonsense to happen.

Except that the contract is coerced. They do not have a choice but to sign. In some areas, you cannot GET a house without an HOA attached to it.

[Gandalf]

Except that the contract is coerced. They do not have a choice but to sign. In some areas, you cannot GET a house without an HOA attached to it.

I don't think that counts as coercion.

They always have the option of not buying said house.

[Flagg]

Except that the contract is coerced. They do not have a choice but to sign. In some areas, you cannot GET a house without an HOA attached to it.

I don't think that counts as coercion.

They always have the option of not buying said house.

Exactly. Otherwise cell phone contracts would be illegal.

[Simon_Jester]

Now cue the response that the homeowners signed a contract when moving into their developments and should have known damn straight and well what could happen if they didn't pay their dues, so it's really their fault.

The problem is nature does not give us a level playing field. A lot of people are just sort of stupid, and many, many more take careless risks. That's just the way it is. Ideally everyone should think things through very carefully and read all the fine print and consider all the possible scenarios before making any big financial decision, but the reality is most people don't.

There's another more significant problem: monopoly.

Any neighborhood can have a homeowners' association. From the point of view of the average resident there's no real downside, because the probability that they will land on you personally is so small no one factors it into their calculations.

There's nothing stopping every neighborhood in large areas from adopting such a system, at which point those same large areas become uninhabitable to anyone who doesn't want to deal with a bunch of petty tyrants.

And it's not just the ignorant who need this. There are good reasons to want to live in certain neighborhoods, and those neighborhoods should not be barred to people unwilling to put up with a tyrannical homeowner's association. It's not because they're too dumb to read fine print, it's because they shouldn't be locked out of the neighborhood.

[Soontir C'boath]

Am I the only one frightened that parts of this thread seems to acknowledge that it's ok for there to be 'tyrannical' homeowner's associations or any company with lopsided contract terms as long as you read the fine print?

[The Spartan]

To make matters more aggravating, Texas is a homestead state, where no one, neither creditors or government, can force sale of your home to pay off debt unless you agree to allow them to do so by signing a HOA agreement. Which you must do to live in certain areas.

Which isn't coercion somehow.

"Associations are a collection of neighbors," says Republican state Sen. John Carona, who represents Dallas. "The goal has to be to work well together — have a harmonious community — and to create a lifestyle that people enjoy and want to be a part of."

In addition to representing Dallas, Carona owns the largest HOA management company in the country — Associa, which has more than 100 offices, 6,000 employees and 7,000 HOA clients in 30 states and Mexico.

Carona defends the rights of HOAs to foreclose for delinquent dues, even for small amounts.

"If an association did not have a means, a forceful means, to collect that money from any homeowner who, for whatever reason, couldn't pay, it places an unfair burden on every other owner in that association," Carona says. "And a burden, quite candidly, that those other members didn't bargain for."

"I think that an association can avoid that type of thing by adopting conflict-of-interest rules," he says.

And this asshole isn't in a conflict of interest somehow.

And that associations will fix it better than legislation even though they've failed to do so.

Somehow...

[Zaune]

Am I the only one frightened that parts of this thread seems to acknowledge that it's ok for there to be 'tyrannical' homeowner's associations or any company with lopsided contract terms as long as you read the fine print?

If you feel a contract is lopsided, don't sign it. If you feel the HOA is imposing unreasonable conditions on living in a particular neighbourhood, move somewhere else.

I'm not going to dispute that this particular case was a massive overreaction on the HOA's part, but really, it's not like the victims had a choice between signing this particular contract and pitching a tent somewhere. There are other HOAs, or neighbourhoods without them. There's the option of renting. There's even the choice to buy an acre or so and get zoning permission to build a house from scratch in that part of the world.

[Soontir C'boath]

The point I was making was companies should not even be allowed to write such one-sided terms IN THE FIRST PLACE before the contract is even read by the signer!

Being able to foreclosed on a $300k home for a pittance couple hundred dollars in late dues would be one of them. Yes, someone should say no and try to have it removed or move on, but should terms like this really be there in the first place?

[Broomstick]

Look, the free market will fix this. As these HOAs keep doing this, more and more people will know who those companies are and avoid them and then it'll become a losing proposition. It's as simple as that. The government does not need to be handling every nook and cranny like this just because some people have already suffered after the fact.

Great idea EXCEPT that in some places HOA's are so ubiquitous going somewhere without one is nearly impossible.

And that is why I refuse to live somewhere where HOA membership is required. In case anyone hadn't realized - yes, in some communities you HAVE TO belong to the HOA.

[Broomstick]

Except that the contract is coerced. They do not have a choice but to sign. In some areas, you cannot GET a house without an HOA attached to it.

I don't think that counts as coercion.

They always have the option of not buying said house.

Then you live in a condo which has a Condo Association just as draconian, or you live in an apartment building where the owner makes the rules or you live in a trailer park with a Trailerpark Assocation just as draconian....

I don't think you understand - there are vast swathes of the US where you have no real choice and no real alternative to dealing with this sort of bullshit.

[Broomstick]

Except that the contract is coerced. They do not have a choice but to sign. In some areas, you cannot GET a house without an HOA attached to it.

I don't think that counts as coercion.

They always have the option of not buying said house.

Exactly. Otherwise cell phone contracts would be illegal.

You can get a cellphone without a contract attached. I know this, because I've done it that way for about a decade now.

Your argument falls apart because there are parts of the US where you can not buy a house without being in a HOA.

[Soontir C'boath]

Broomstick, I think you should read every post before multi-posting because Johonebesus, Simon, and Spartan have replied quite well already.

[aieeegrunt]

To make matters more aggravating, Texas is a homestead state, where no one, neither creditors or government, can force sale of your home to pay off debt unless you agree to allow them to do so by signing a HOA agreement. Which you must do to live in certain areas.

Which isn't coercion somehow.

"Associations are a collection of neighbors," says Republican state Sen. John Carona, who represents Dallas. "The goal has to be to work well together — have a harmonious community — and to create a lifestyle that people enjoy and want to be a part of."

In addition to representing Dallas, Carona owns the largest HOA management company in the country — Associa, which has more than 100 offices, 6,000 employees and 7,000 HOA clients in 30 states and Mexico.

Carona defends the rights of HOAs to foreclose for delinquent dues, even for small amounts.

"If an association did not have a means, a forceful means, to collect that money from any homeowner who, for whatever reason, couldn't pay, it places an unfair burden on every other owner in that association," Carona says. "And a burden, quite candidly, that those other members didn't bargain for."

"I think that an association can avoid that type of thing by adopting conflict-of-interest rules," he says.

And this asshole isn't in a conflict of interest somehow.

And that associations will fix it better than legislation even though they've failed to do so.

Somehow...

.......and if you dig a bit he's probably connected to the people who buy and then flip the house for profit.