Arizona Homeowners Receive Little to No Protection from Unregulated HOAs

Homeowner Associations are designed to help keep communities well-maintained and to instill some rules to unify the neighborhood, but in Arizona these associations are often doing more bad than good.

There are many benefits when it comes to buying into a neighborhood with an established HOA, such as living amongst a very attractive community, eliminating much of the responsibility for the maintenance of your home’s exterior, gaining access to shared common spaces like pools, tennis courts, and a variety of other amenities that one most likely couldn’t afford on their own. Initially, the monthly dues seem like a fair price to pay for the vast luxuries and the element of carefree living. Although, if one isn’t careful to read the fine print they may be shocked down the road to learn that if the mandatory dues aren’t paid the HOA and its management company is required to enforce rules, high late fees and potentially even take your home. In addition to that fearful possibility, residents are locked into the covenants, conditions, and restrictions set by the HOA management, in other words; a long list of rules.

If the aforementioned fees are past due, the HOA can take radical steps to recover its money. If a homeowner hasn’t paid their duties in over a year or owes more than $1,200—which in some associations could only be a couple months of missed payments—the association can legally seek foreclosure and sell the home at auction to acquire their money. The HOA can also take residents to court at any point they fall behind on assessments. For an association that advertises themselves to support a community, these steps are proving to be quite the opposite.

In Arizona specifically, HOAs are highly unregulated and run by volunteers who don’t require any license, certificate, or specific training. In addition to the potentially inexperienced “professionals” on the HOA boards, any financial documents illustrating how the association spends the money collected from homeowners aren’t publicly reported. At times, this can be upwards of millions of dollars collected each year. Amongst Arizona’s approximate 9,000 HOAs, foreclosure actions have been initiated on more than 3,000 homeowners in the Phoenix area since 2015, based on a 2017 Arizona Republic investigation. The lack of regulations for HOAs has not only resulted in dozens of families being pushed out of their homes, but also years of unnoticed crime such as embezzlement and money laundering. Karen Whiting, the owner of the community management association Method Real Estate, was arrested in January of 2018 for pocketing over $300,000 from multiple HOAs she managed in Maricopa County, Arizona. Her arrest was directly assisted by the Gilbert Fincher Creek community. Considering there was no regulatory agency for them to report to when they speculated Whiting was committing larceny and fraud, the HOA members had to take matters into their own hands by taking extensive time to research and document the ongoing theft.

A similar case occurred in Phoenix when the owners of Eagle Property Management were accused of stealing nearly $1.3 million from the 40 different Valley homeowners associations they managed. The husband and wife duo, Harlow and Nancy White, were indicted on conspiracy and transactional money laundering charges when evidence proved the family used funds collected from the community to pay for personal items, bills, and mortgages. The White’s children, Rachel Ellerbrock, Kelsey Powell and her husband Michael, were also involved and are facing fines of up to $250,000, five years in prison, and restitution.

The HOA horror stories don’t stop at these various criminal acts. In addition to residents’ expensive monthly fees being misused, resulting in a lack of community standards that the association so proudly advertises when recruiting homeowners, the aggressive attention to detail can be debilitating and nearly impossible to keep up with. Some HOAs seem to be targeting older residents in an effort to boot them out of the neighborhood. Mary Jean Lindgren had lived peacefully in her Ahwatukee neighborhood homeowners association for 10 years until a new president came on board and began issuing strict orders. Mary would receive large fines for something as minuscule as a fallen leaf in her yard, and to make matters worse they would continue to issue fines without a direct explanation of how trimmed her tree needed to be, which made it impossible to meet their undefined standards. Feeling at a loss, Mary reached out to Kevin Harper, a local independent attorney in Gilbert who specializes in representing homeowners against the powerful law firms that represent HOAs. Harper wasn’t surprised by what Mary shared with him, as he had seen this dozens of times before. He voices, “This is something I see over and over again…A very small fine can spiral out of control into tens of thousands of dollars in legal fees and foreclosure.”

The control homeowner associations have over residents can be quite frightening. They have the power of a city government, the ability to foreclose on your home, and can turn off your electricity and water as they wish. One of the most upsetting elements is how unaware new homeowners are to this reality when buying into an HOA in hopes of living in a safe and charming community. Arizona Real Estate Commissioner Judy Lowe expresses, “Most homeowners don’t understand the foreclosure process and don’t know their HOA can foreclose.”

So, how do we educate potential homeowners of these unethical homeowners associations?

First, decide if a homeowners association is the right choice for you. The positive aspects can be very beneficial for the right resident, but the pros may not outweigh the cons for others. If you’ve always dreamed of living in a neighborhood with community spaces such as lavish gardens, a pool, and greenbelts, and admired unified neighborhoods with pristine fences and well manicured yards, then a homeowners association could be the answer for you. These associations allow those who respect these notions to indulge in them when typically they couldn’t afford said amenities on their own.

It’s also important to remember why HOAs exist to begin with; to save the city money. There are dozens of expenses that are often looked over when it comes to a nice neighborhood, including operating street lights, paved streets, parks, etc. Some cities don’t have the funds to upkeep and maintain these features, so they urge residential developers to create associations to take on that cost.

Secondly, be sure to read the fine print. Always review HOA applications thoroughly, and educate yourself on what HOAs can charge you. There are regular assessments, special assessments, late fees, and fines. One way to guarantee you have control over your community and a voice in future changes is to join your HOA board. As Blanche Evans says on HouseLogic, “If you don’t like the rules, the best way to change them is to become part of the process.” This is especially important to consider when it comes to the unregulated HOAs in Arizona. Take the time to read over information on the Arizona Department of Real Estate’s administrative dispute process, so you know what options you have if your living situation goes south.

Taking the step towards homeownership is a major milestone, so the last thing you want is to end up in a situation where you’re feeling taken advantage of and caught up in a vicious cycle of accruing fines and disputes. Becoming a homeowner doesn’t need to be scary, as long as you prepare yourself on all of the different options you have when it comes to your type of home, neighborhood, community, local council, and the overall do’s and don’ts for first time homebuyers. There is the perfect home for everyone out there, now you just have to go out and find it!