An Opposition to AB 770 - Assemblymember George Mullin's bill to create a Homeowner Association Ombudsman

December 09, 2005

By Donie Vanitzian (View author info)
Copyright Donie Vanitzian

Following is letter Donie Vanitzian wrote Assemblymember Gene Mullin opposing his bill AB 770.

FOR THOSE OF YOU INTERESTED IN OPPOSING THE DEVELOPMENT OF AN OMBUDSMAN OFFICE FOR COMMON INTEREST DEVELOPMENT/HOMEOWNER ASSOCIATIONS IN CALIFORNIA - PLEASE ADD YOUR NAME TO THE BOTTOM OF THIS PETITION LETTER, THEN FORWARD IT TO: GENE MULLIN, CHAIR OF THE CALIFORNIA STATE ASSEMBLY COMMITTEE ON HOUSING.
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From: Donie Vanitzian - Arbitrator

November 28, 2005

To: The Honorable Gene Mullin, Chair
California State Assembly Committee on Housing
1528 El Camino Real, Suite 302
San Mateo, California 94402

cc: Post Office Box 94248-0001
Sacramento, California 94248-0001

Attention: Assembly Committee on Housing and Community Development

Re: Opposition to Assembly Bill 770 - Ombudsman for residential deed restricted common interest developments

Dear Assemblyman Mullin,

I oppose the creation of an Ombudsman office and hundreds if not thousands of other deed restricted titleholders oppose it as well.

While you are busy creating yet another government department to add to California's already depleted State payroll statistics, remember that there are 4.5 million Californians still out of work and a State that is nearly bankrupt with a budget that has gone to hell in a hand basket thanks to the prior governor whose name started this whole mess: Gray Davis of the reviled Davis-Stirling Act. Both Davis and Larry Stirling are silent on the mess they created, gee, what a surprise.

The letters of "support" for the Ombudsman project appear to be from industry or self-serving government departments. Once again owners are consigned to their inferior position at the bottom of the bureaucratic food chain while third-party vendors concern themselves with the viability of their contracts. Meaning, how they will get paid.

If You Continue To Build It -- We Won't Fall For It Any More

Industry's interests are those of a vendor and not as a property owner. And as such, they have no business injecting themselves into a process that involves taxpaying home-OWNERS. Contrary to the "If you build it they will come" mentality, the legislature has already tried that and it failed. Remember? They built residential deed restricted common interest developments under the guise of "affordable housing," it was then and continues now, to be an unmitigated failure. If it were not, there would be no talks about this preposterous proposition for an Ombudsman. All those that "came" now "went" or "want out" only to learn too late that there is No Exit.

Do Something Useful: Get Rid of the Fees

What proposed exit strategy will be available to owners who are lumbered with these growing paralytic fees and assessments? These unconscionable fees just keep showing up and now they have worked their way into the owner's escrow. They are also showing up under other names in many other areas of association business, an example is "transfer fees."

Will it be an exit to the Ombudsman's office?

The beating that this type of restricted property purchase is taking will soon amount to: "If you build it they won't fall for it any more and they won't come."

My co-authored column titled Associations (Real Estate section of the Los Angeles Times) receives upwards of 1,000 pieces of mail a month, that doesn't include the boxes of files and documents we receive. These owners are not writing because they are happy. Yet few letters in opposition to the "Ombudsman" have been lodged with your office or the Committee on Housing and Community Development by "homeowners." Owners tell me that they do not trust elected officials that are influenced by the industry. They also believe that because owners do not make massive campaign contributions to their elected officials they are not afforded equal access.

I still receive letters, files and phone calls in response to my five-part series, Senior Condo Purchases: A World of Hidden Liability, Risk, and Abuse that was published in 2004. Seniors learn too late, that this type of housing is a risk, it is not carefree, it is no longer affordable, and it is stressful beyond anything I can put in words. Seniors are turned into sitting ducks for boards to pluck off. They have saved money to get them through their golden years but are finding they can no longer control their expenses because they are mandated to pay what the board tells them to PAY.

Question: What happens to seniors when they run out of money?

Answer: The association takes their home. In most cases, it is the only home the senior has.

As co-author of the book Villa Appalling! Destroying the Myth of Affordable Community Living, A Textbook for Understanding Planned Developments, Homeowner Associations and Planned Communities, the mail we receive against establishing an Ombudsman's office has been overwhelming. On November 27, 2005, Amazon ranked Villa Appalling! at 44,600.

While various industries may purport to represent the needs of "associations" the typical misconception among these industries is that "neighbors have vested these directors with significant community and financial responsibilities." [FN1] Neighbors had nothing to do with vesting a board of directors with financial responsibilities but the California legislature had everything to do with it. California's legislature has made their stance exceedingly clear: because there are no penalties for recalcitrant boards they can continue to act with impunity and plunder to their heart's content. The result is what we are experiencing today, dissatisfaction and complaints by a majority of residential deed-restricted homeowners. If, as one letter to Assemblyman Mullin states "something has to be done"[FN2] then start with the legislature; (a) remove board indemnification, (b) pass statutory penalties against recalcitrant boards, (c) pass statutory penalties against management companies who break the law, and (d) enforce the laws.

Industry's Concern is for its own Financial Stability

By their own admission, the industry's "growing concern has to do with the widening gap in funding for long-term maintenance and repair of for-sale, common interest housing." [FN3] Why would that be a concern for "industry?"

Industry's "solution to these financial woes and the potential loss of affordable housing is founded in education and supported by a state agency setting voluntary but recognized standards for assessment levels and reserves." [FN4]The unfortunate reality is that California legislators actually believe those preposterous statements and do so to the detriment of thousands of homeowners. With all this talk, talk, talk, about education and raising assessments, as an owner, I want to see more disclosure, disclosure and disclosure. Disclosure by industry and boards of directors.

If the association is a corporate entity, then act like one. Fulfill your responsibilities just like all the other REAL corporations in the State have to. Put your books on the table along with your disclosures and let the consumer make an informed choice. Stop legislating us separate and apart from other supposed "real property" owners.

The problem? There is no legislation that makes an association's operating funds AND reserve account judgment-proof OR board and management company tamper-proof. In every sense of the word, such bank accounts are slush funds for the taking.

Will Deplete Resources and Prejudice Homeowner Opportunities

There is no essential statewide benefit to be derived from an office supporting an Ombudsman. That office will be nothing more than a taxpayer funded parking lot for industry propaganda. In other words it will be a never-ending watering hole for industry to brainstorm "recommendations" based on the complaints -- mind you, complaints that THEY created along with the Department of Real Estate who rubber stamped these developments and supports their subsidies.

When the largest section in the Davis-Stirling Act concerns not homeowners - but construction defects, that should tell consumers something. The word "homeowner" appears only three times in the Davis-Stirling Act. That is because owners are reduced to personal bank accounts that fund the association.

Not one government agency has prosecuted developers who fly under the radar. Developers who obtain permits and big subsidies for building much needed "rental housing," then avoid notice requirements to the neighborhood so that at the eleventh hour when no one is looking, SWITCH to a condominium project. They have avoided paying the proper fees, producing the required Environmental Impact Reports, the traffic studies, the bonds, and so forth. They sell those condos at quadruple what it would have cost to go through the normal channels and do not get penalized by the State nor do they rebate their subsidies. [FN5] Those perpetrators help comprise the same industries that want an Ombudsman's office to handle their problems, not the owner's problems.

The misnomer by such industries that the "services that the Ombudsperson will provide are essential to afford uniform, statewide educational opportunities and information to directors and owners, particularly for a volunteer-led yet legally complex system where so much is at stake" [FN6] is not only a dangerous assumption it lacks credibility. Perhaps such musing are a premonition of what such industries expect to benefit from the creation of an Ombudsman.

Ombudsman aka Deed-Restricted Director of Foot Traffic

The position of an Ombudsman is not one of an "arbiter", "legal fact finder", or "cost-saver of services to community associations that will offset collected fees" as the industry want you to believe. Instead, what is already confused, the Ombudsman will confuse more. Homeowners are overwhelmed by the various levels of compliance that they must know, understand, and follow, before exercising their rights in a court of law. One minute they must file requests for resolution, the next minute they must mediate, and the day after that they must agree to arbitrate, and the next week they are required to accommodate, then settle, then be sued regardless of how much they attempt to comply with whatever it was they were supposed to comply with. Did they fill the form out properly? Was there a form at all? Where were they supposed to get a form? Is that the right form? Were they supposed to meet with the board or did the board and their lawyers prevent that? The machinations continue unabated and an Ombudsman will not help this situation it will worsen it.

FISCAL IMPACT: Ombudsman Project Needs Reality Check

A child who cannot yet add can figure out this "project" will cost a fortune and have a tremendous fiscal impact on the state. It will undoubtedly have an impact on sales.

Every known Ombudsman office requires the complainant to submit the complaint in writing. After the writing is received, at some point it is acknowledged. Then the Ombudsman will forward that complaint to the association. The association will sit on it for who knows how long, perhaps another 30 days because they will wait for a board meeting before they decide to act. Now it's 60 days gone. The board may or may not forward the communication to the association attorney. Now it's 90 days down the drain. The association attorney will sit on it and then write to the Ombudsman apologizing for the delay in response by stating, "I just got this," better yet, "I never got this letter." Now it's 120 days, and the homeowner's hands are tied. Then the attorney requests everything the Ombudsman has to be forwarded to the association (via the attorney). Six months have gone by. This works great for the association and works particularly well if the statute of limitations clock is ticking against the owner. That owner does not stand a chance.

Meanwhile, the board pays the association attorney, the owners pay the association to pay the attorney, the owner pays for his own attorney, then the board raises assessments because they used operating funds to pay association attorneys and don't have enough money left to "repair, replace and maintain."

The process itself amounts to due process for everyone but the owner. This further compounds if not exacerbates the real issues facing owners. Owners are expected to pay for delays, interest, penalties, fines, permits, architectural plans, their own attorneys, their own insurance policies, the board's attorneys, the association's insurance, regular, special, and emergency assessments at will, funding reserve accounts that have no-holds-barred access and no accountability -- what the hell does the owner get out of this? (a) They donate whatever is left behind in that reserve account to the association without the benefit of a tax write off or rebate, and (b) they pay another fee to fund yet another government office for an Ombudsman. Have you people lost your mind? You are totally out of touch with reality? Who comes up with these schemes?

Please explain how your Ombudsman's office is less expensive, more expeditious, more effective, and less painful, than what is presently occurring?

Why doesn't the California Law Revision Commission (a wholly useless committee at that) close the loopholes in the laws rather than applying glue to keep it together? Why doesn't the legislature put some teeth into these bills? I can answer that: Because they don't want to.

Instead the Ombudsman office will be nothing more than a discovery mechanism for the board's attorney. The Ombudsman office will debilitate the elderly and many homeowners will die before any meaningful resolution is realized. The creation of an Ombudsman will result in yet another rest stop created to disgust owners who are already physically, emotionally, and financially spent by laws created to protect boards while sucking more money away from owners. Titleholders will again be left supporting the machinations of a corporate enterprise. Where are the protections for the homeowners?

For all the rhetoric espoused by Nevada, Florida and other states regarding the successful nature of their Ombudsman programs, the problems remain unresolved.

Education is Nothing More Than a State-Sponsored Infomercial for Industry

Education is the industry's Trojan horse into its own government office. What will the educational classes be called, Davis-Stirling for Dummies, Community Harmony, How-To Create a Cycle of Financial Dependency, Homeowner Anger Management? The educational classes will result in industry-specific topics, cross-selling, and vendor speeches dressed up as an informative "class." The Ombudsman office will be turned into one big industrial infomercial replete with referrals and an end game resulting in "remove your board."

Ombudsman is Not a Consumer Protection Body

The position of Ombudsman is anything but a "consumer protection body" nor could it EVER pretend to function as one. Industry representations in the letters published to Assemblyman Mullin reveal a chilling prediction of infiltration and conflict-of-interest issues once the Ombudsman office is in place. Those who are drooling at the thought of collecting yet another $5.00 FEE from titleholders across this State for the purpose of creating a bureaucratic food chain that places owners at the bottom of that barrel, have likely already spent that money. As the industry admits, their end game is to keep community associations fiscally healthy and whole: at any cost. In case anyone forgot, that cost originates wholly and only from, the titleholders.

Does anyone with half a brain honestly believe that when new buyers figure out the financial quagmire they are buying into and the money pit it is, that they will risk their earnings just to live in a deed restricted common interest development?

Securities and Exchange Commission

The answer does not lie with the Department of Real Estate or the Department of Corporations. It lies with the Securities and Exchange Commission--there is just too much money and too many homes (assets) at risk to do otherwise. The financial standards so many industries are fond of referring to (some even brag about the money they handle), should have remained under the watchful eye of the Securities and Exchange Commission. Many associations have been subject to embezzlement by management companies, their employees, Certified Public Accountants or so-called reserve specialists that perform reserve studies, or other third party vendors whether professional or not. [FN7] These stolen goods are rarely if ever recouped and the perpetrator professionals are released with barely a slap on the hand. Management companies and vendors of the same so-called professional ilk, are allowed to break laws by transacting insurance without a license, performing escrow functions without
an escrow license or bond, selling, recommending and placing investments without fear of prosecution. An Ombudsman will not address these issues. These are the real issues plaguing common interest developments.

Owners Continue to Bankroll the Fraud

The types of problems plaguing this type of home-ownership are not conducive to resolution by an Ombudsman. This corporate-facade-gone-amok has morphed into a legislative embarrassment and a financial black hole for owners. Titleholders are reduced to being the 24-hour HOA-ATM. If the office of an ombudsman is to be created to help titleholders, then only titleholders should be able to avail themselves to it. It should not be available to any vendors such as contractors, developers, management companies, managers, association lawyers or law firms.

The Ombudsman office should not be able to make recommendations for any reason to any State department or governing body. To do so would compromise the office, as it did in Nevada.

The REAL Senior Citizen Complaints

The impact of disputes on seniors will not be lessened by the creation of yet another bureaucracy by way of an Ombudsman.

* Not Improve Transportation
The Ombudsman will not ipso facto provide transportation to a population that "continues to age in place." [FN8]


* Will Not Buy Time
The Ombudsman will not buy that senior citizen quality "time" without board interference in his life before he dies. The Ombudsman will not remove an involuntary lien that has been placed illegally upon an owner's property-which is what happened to my dearest friend. He spent his dying breath begging me to help him remove an "involuntary lien" placed on his free-and-clear home by a management company for "nothing." He owed no money.

* Not Improve Quality of Life
The Ombudsman will not improve the seniors' quality of life because that is in the hands of the board of directors, the lawyers they hire, and the interloper vendors.

* Not Provide the Type of Support Seniors Need
The Ombudsman will not be able to provide seniors with the type of support they need.

* Real Senior Disputes That Cannot be Addressed By Ombudsman

Here are some issues written to me by seniors:
A 65-year old: "Our very wise board was advised by the association's attorney to destroy all meeting tapes so there would be no evidence if they got sued. If they are asked why they did that, they were instructed to say, 'we misunderstood.' That does not help me protect my property. Now they are ignoring me."

A 90-year old: "I have just received a summons I think from some lien and collection service, whatever that is, I never heard of them before. It looks like they're billing me $1500 for something and maybe suing me for $2000? I don't have no idea what this is or how to fix it. Do I go to a law library?"

An 83-year old: "The board won't answer me. The management company won't answer me. They keep telling me I owe them money but won't give me an invoice unless I pay them $10.00. I had my son call and the management company told him since he wasn't on title they didn't have to talk to him and hung up. My son is a deputy district attorney. He said he's had enough. How do I get an accounting of what I've paid? I just want to see what I've paid why do I have to pay them to find that out?"

A 94-year old: "There is very much stress on me here. I'm too old for this stress and don't know how I can come up with any more money that this association keeps asking me for. How can I get out of here without paying any more money, please can you help me?"

A 75-year old: "Our association was sued because our stupid board who think they know it all. And their attorney who owns them tells them what to do. Twenty years I lived here and now I hate it because it's not like it used to be. Now we have a judgment against us and the attorney told everybody we have to pay it. I don't have that kind of money. What will happen to me, I have no where to go, can you help me?"

A 91-year old: "I have a tracheotomy and use a wheelchair. Every day I make my way over to the management office to ask a question and every day they tell me to come back tomorrow. I've been doing this for three months. I still don't have an answer about who is going to fix the damage to my unit. Yesterday I got a letter from the board's lawyer telling me they are going to Restrain me by Order. I have not touched anybody I just asked them a question. Can you please explain to me why they have to restrain me? If its not too much trouble can you also find out when they're going to fix the leak in my roof because my carpet and walls are still wet from when their plumber fixed the upstairs lady's unit. Maybe you'll have better luck than me. Thank you very much."

An 85-year old: "My small condo I used to love is nightmare. I learn to keep my mouth shut. I stay away but this place [association] is torture project with papers every day. Violations papers everyday. Fines papers. Rules rules I break rules they tell me. What rules they talking about I don't know for what. I come to this country from oppressive regime and my whole life I don't see papers like this, papers everywhere for everything. They want money then they want more money. I don't have job, where I'm going get job my age? Please, you tell me what I do? What I violate, why they charge me all this money. I'm not rich lady, I'm old, where they think I'm going to get this kind of money?"

A 72-year old: "When did the board of directors become dictators with an 'I'm in charge attitude?' Speaking for all the seniors here, we have been shamed and scammed. We retired seniors are on a set income and we need some truth and accountability. We can't see this, we can't see that, everything's a big secret. Secret meetings, secret decisions. How do we find anything out?"

An 89-year old: "The board fined me for something so I said I wanted to talk to them. They told me I can only do that at a meeting. Next meeting was in 25 days, I don't drive. I have one kidney and it's hard to walk so I asked the board where the meeting place is. They told me I had to call the manager. The manager told me I have to call the board. The board told me it was tomorrow so I set out early and got there and waited for 2 1/2 hours. No one showed up so I walked back home. Next day the board said they cancelled it so I have to wait until next month. But they said they're gonna charge me interest on the fine. I'm worn out already."

A 79-year old: "I've been trying to attend board meetings for 18 years. No one will tell me where or when they are. Can you find out for me?" Can you get me copies of the minutes too, they won't let me see them. Thank you."

An 88-year old: "Sirs, recently with some of the goings on around here I've been thinking. I've got all my money in this condo. Do you think that's a good idea?"

The above clips do not begin to cover:

* issues surrounding property damages to individual units, separate interests or homes caused by association incompetence, negligence, and in some cases intentional acts, but they all have one thing in common: boards ignore all of them.
* blatant lies owners are told by boards, their representatives, and advisors with such conviction, owners rarely if ever question them.
* the savagery of the trickery employed by boards amounting to nothing less than legal terrorism against those most vulnerable.
* the prohibitive and often unsubstantiated charges levied against owners and their property, and the inordinate rises in assessments.
* the owner's exposure to financial exploitation, liability, risk, and asset devaluation at the hands of an association.

What do these people do? Call 1-800-Ombudsman? No Dorothy, this bud's not for you.

Answer:
No, an Ombudsman will not work.

Sincerely,
D. Vanitzian

[FN1]See letter to Assemblyman Mullin, ECHO April 9, 2005.
[FN2]See California Alliance For Consumer Protection, April 7, 2005 letter to Assemblyman Mullin.
[FN3]See Excerpts from letter to California Law Revision Commission On Its Tentative Recommendation Creation Of Common Interest Development Bureau, ECHO April 9, 2005 letter to Assemblyman Mullin.
[FN4]See Excerpts from letter to California Law Revision Commission On Its Tentative Recommendation Creation Of Common Interest Development Bureau, ECHO April 9, 2005 letter to Assemblyman Mullin.
[FN5]Begging the question, where are the California Attorney General, District Attorney, and City Attorney while all this is going on?
[FN6]See April 9, 2005 letter to Assemblyman Mullin from ECHO.
[FN7]Author note: In the arena of common interest developments and related laws, and other than a "licensed attorney," the term "professional" has lost it's meaning. The term "professional" has degenerated into including all parasitic industries feeding off of homeowners associations. Under the auspices of redefined educational levels, these otherwise "employees" or "service providers" can now purchase a "title" with the word "professional" in it. Therefore, the term "professional" should not be given equal weight to those who are "real" professionals licensed by the State of California.
[FN8]See California Commission on Aging, letter to Assemblyman Mullins, May 6, 2005.


RELATED LINK: California Legislative Bills - Check AB 770 (Gene Mullin-D)