I am the Executive Director of American Homeowners Resource Center, AHRC for short, a non-profit organization dedicated to the preservation of the rights of the American homeowner.(Exhibit 1 - Purpose of AHRC)
American Homeowners Resource Center -AHRC-(pronounced ARK)- is an association of individual homeowners formed
- To help preserve the constitutional and legal rights of homeowners
- . To provide information to homeowners on those rights
- To help homeowners to protect and preserve those rights
- To publicize violations of those rights
- To remedy abuses of those rights by education, mediation, legislation andlitigation
AHRC was founded 6 years ago as a result of the massive fraud and corruption which we found in homeowner associations. We believe that AHRC is needed even more today.
I am also editor of AHRC News Services, which produces radio programs, and provides information and analysis to television, radio and print media on consumer issues here in California, across the nation and around the world. (Exhibit 2 - Legislative and media communications)
We approached many elected law enforcement officials, such as Michael Cappizi, Orange County District Attorney, Dan Lundgren, State Attorney General, Clark Wallace, former head of the Department of Real Estate - and they all refused to do anything. We then approached the legislature and have attempted to explain to it what is really happening in homeowner associations.
The title of this hearing - "Is the Legislature 'Micro-Managing' CIDs?" - raises profound questions about both the nature of the American home and the role of government in relation to it in the CID context.. I will first make some brief comments about the nature of the American home.
THE AMERICAN HOME
Behind all policy debates about housing lies the fundamental question as to what sort of citizen do we wish to see in our country.
Do we wish to see servile citizens who are trained to cower before the powerful, or do we want citizens who are proud, free and independent?
Do we wish to see citizens whose prime virtue is to follow orders, follow the party line, be afraid to be different, or do we want citizens who will be creative, vibrant, ever-seeking new frontiers in all areas of knowledge?
I believe that the answer is self evident.
In light of that, then, all legislation and forms of social organization must be judged. If these conflict with the fundamental goal of our society, then they must give way.
GOVERNMENT AND THE AMERICAN HOME IN CALIFORNIA
How then HAS government in California treated the American home, and how SHOULD government treat it?
With regard to the first question, the California legislature has been micro-managing CID's for years, but the driving force behind this micro-management has been such powerful special interests as the lawyers, CAI/CLAC, the building industry, management companies, cable companies, real estate brokers and others.
For example, those who shaped the Davis Sterling Act were mostly industry lobbyists such as CAI. The voice of the homeowner was deliberately drowned out. That is why the entire act is slanted against the homeowner. It allows, for instance, that a homeowner be foreclosed on without due process for failing to pay dues, no matter how small. (Exhibit 3 - Homes confiscated for minor dues and the CAI lobbyists role) Why could not this be treated as a Small Claims matter like a delinquent credit card bill? No, CAI lawyers had to get their large fees and the best way to do this was to foreclose. The largest management company, now bankrupt, had an elaborate scheme whereby they placed false late charges so that they could foreclose.
Subsequent to Davis Sterling, industry lobbyists used their clout to continue their influence. When the CAI lawyers wanted to use our association savings to fund their lawsuits, they got it in AB 871.(Exhibit 4 - AB 871). When the developers wanted to minimize paying for their shoddy construction work, they got a bill, SB 1029, setting up a cumbersome, mine-field laden procedural process that works to their advantage, not the homeowners.(Exhibit 5 - SB1029 ) Lobbyists tried to convert fines on homeowners into liens so that they could foreclose on the home for minor fines without any due process - AB 1793.(Exhibit 6 - AB 1793 ). AB 1545 tried to place delinquent dues as a lien before even a first trust deed.(Exhibit 7 -AB 1545) Grasping hands are continually trying to grab the homes of Californians.
The net result is that the average California CID homeowner now finds him or herself trapped in a web spun by those special interests. Lawyers can use the homeowner's money to intimidate and harass those who dare to question the actions of the board. Boards will deny services and generally make life difficult.
They refuse to allow homeowners access to the minutes and records of the association - a violation of California law. The lawyers know that, but they have also made sure that it is incredibly expensive for homeowners to file suit to gain access. In addition, homeowners are intimidated by the threat of having to pay for atttorney fees and costs if they lose. Lawyers on the other hand have made sure that their fees will be paid even if they lose, by passing laws requiring homeowner associations to have multi-million dollar liability and D and O insurance policies. (Examples of victims are Vera Cherry Armstrong, Mary Lindsay, Jim Abrahams, Marlene Murphy, Pat English.) (Exhibit 8 - Victims of excessive collections by CAI lawyers)
The above are but a few of the ways that special interests have used to protect their own interests at the hands of homeowners in associations. CID's are thus very homeowner unfriendly institutions.
Lawyers and management companies conspire to keep a "friendly" board in power. They fraudulently change CCR's, file false injuctions against homeowners.(Exhibit 9 - Fraudulent CCR amendments by lawyers, management and boards) They run the elections, and even hire armed guards for them to intimidate homeowners. (An example was the Loma Vista election run by the law firm of Fiori, Nordberg and Marquis Management)
They refuse to place other names on the ballot. An example is the Palacio del Mar association where the law firm of David Peters and Marquis Management refused to place my name on the ballot for years.
Management companies feed incumbents information on how proxies are being voted - a significant strategic advantage. (See the cases of Ben Ingolia, Chantilly, Maureen Aschoff v David Peters, Pat English v Loma Vista)
There is no time here to detail the many abuses which occur in homeowner associations across this state. I can assure you that what reaches the public domain is but the tip of an iceberg which gets larger every day. In Southern California, Marquis Management practiced a sophisticated real estate fraud for many years. They would post false late charges to homeowner's accounts. Many homeowners would simply pay to avoid the hassle of objecting. Those who refused to pay would find themselves turned over to the tender mercies of a collection company, - which, of course, was an in-house sister company of Marquis. This company would tack on even more charges, and would eventually turn the homeowner to a foreclosure company - also another in-house sister company. The latter would then raise the fees into the thousands, in one case, $3,000 for a disputed $5 late charge. Diane Fullerton, the owner of these companies, was reportedly making at least $50,000 a month. This year, she went into bankruptcy again, but her managers are still running associations.
Lobbyists such as CAI attempt to minimize the reality of the way things are because the system which cabins, cribs and confines the American homeowner is very lucrative for them. The liability policies of builders, the D & O policies of associations, the savings held in reserves, the equity of homeowners, - all have proved to be rich sources for these people to mine. Some have even become millionaires. ( Exhibit 10 - CID's - The slot machine to riches)
The reality is that a homeowner association is the most intrusive of all forms of government, and it intrudes in an area which is central to the life of each American - his or her home. CID's micro-manage peoples' lives. They generally regulate the color you can paint your home, often prescribe what sort of flowers you can plant, tell you how long you can keep your garage door open or whether you can have a basketball hoop. They even reach inside your home and tell you that you can have a bird or fish, but not a cat.(Exhibit 11 - Nahrstedt article from Los Angeles Daily Journal)
Our founding fathers would have certainly never regarded homeowner associations as currently structured, to be shining examples of what they meant by the land of the free. They would be further shocked at how the peace and tranquility of the home is so often shattered by litigious managers and lawyers. Yet how we structure our homes, in many ways determines the sort of nation we will be.
The glib response of the special interest groups is that you have a choice whether to live in a homeowner association or not. The reality, of course, is very different. In some areas of the state such as South Orange County, approximately 80% of all homes are in associations. If all 6 million Californians who are currently in associations chose to live in non-association housing, it would be clearly impossible. Saying that one is free not to live in an association is in many cases on a par with saying that one is free not to have a telephone.
Given that homeowner associations are here, the question is what to do about them, and what role, if any, government should play.
The American Homeowners Resource Center, believes that there should be a Bill of Rights for homeowners in CID's, in order to defend them from unjust confiscation of their homes, to prevent the stealing of the savings in their reserves, to ensure that they are provided with the services which they pay for, and to safeguard against encroachments on their liberties. This Bill of Rights would ensure the maximum of liberty consistent with living in a CID.
One of the fundamental provision of this Bill of Rights would be a speedy, effective and inexpensive way to punish those board members who violate the CCR's, California law, and fundamental provisions of the constitution. The irony of much discussion is that the focus has been on enforcing the CCR's AGAINST the homeowner, whereas the worst abuses are those violations by the board against homeowners. In my association, approximately 80% of my dues goes to benefit lawyers, the management company and board members. Board members have denied me access to the records of the association for 10 years. Until this year, they refused to even place my name on the ballot in elections. My experience is duplicated countless times around this state.
Part of the essential role then of this California legislature is to protect the fundamental rights of homeowners, but there is no agency to do it. There are 6 million Californians who need a structure whereby the conflicts which CID's generate can be quickly and expeditiously solved. I believe that if there were such a structure in place with power to fine and even remove from office those directors who flagrantly violate the CCR's and the laws of the state of California, there would be an immediate drop in such violations.
It should be funded by CID's, not out of the general fund. In Florida, each home in an association is charged $4 per year. This is certainly better than the tens of thousands which law suits currently cost. It would unclog courts and bring some peace and stability to the most precious possession of any Californian, their home. This agency should be under Housing and Community Development. It already oversees other community housing such as mobile homes. HCD is preferable to DRE as DRE is funded by fees of real estate brokers, raising concerns of a possible conflict of interest. Furthermore, as DRE is run by industry people, this may not be suitable to protect homeowners. (Exhibit 12 - Government Oversight of CID's)
The industry special interests argue that this is intrusion by government in the lives of citizens. Indeed it is, but it is brought on by the self-interested actions of those same special interests. If they had not sought to control homeowners in all facets of their lives for their own financial benefit through the Davis Sterling Act and other legislation, this intervention would not be necessary. Furthermore, this intervention is far less intrusive and far more beneficial than the intrusion which the lawyers, management companies and boards have in our present situation. Indeed, as CAI lawyers have endeavored to keep CID's in an uncharted land somewhere between private entities and a government, they have been able to exert vast governmental powers over homeowners without being subject to the constitutional and regulatory provisions which municipal and state governments have been subject to.(Exhibit 13 - Privatopia by Evan McKenzie - Fiefdom of lawyers and special interests)
It is part of the role of government to defend its citizens when liberty so requires it. Today, liberty is trampled on shamelessly in the lives of many citizens who live in associations. A home should be a place of tranquility and peace for citizens, where they can live out their lives without grasping hands continually trying to confiscate their homes and imprisoning them with petty rules. A home is where the future of this country is nurtured, where a proud and free people are raised.
If homes are turned into virtual prisons, where a homeowner is thwarted and hemned in at every turn, - what then is the purpose of this country called America? When corruption and petty tyrants surround our homeowners, how can we produce citizens who will stand tall among the nations of the world?
New situations require new solutions. It is time for homeowners in California CID's to be protected and guaranteed their fundamental rights. It is the role of their elected representatives to defend them against this new type of real estate fraud, where special interests have hijacked the entire process. It is time for a Homeowner Bill of Rights and an agency to protect them.
Respectfully submitted.
Elizabeth McMahon
Executive Director
American Homeowners Resource Center
EXHIBITS 1- 13 (113 PAGES)
