• the receipt of settlements or compensations they receive for construction defects and
• how these funds are used

The American Homeowner Resource Center (AHRC) is a non-profit, grassroots organization dedicated to the preservation of the American home.

AHRC supports AB1048 (Introduced by Assembly Member Firebaugh - February 25, 1999) for the following reasons:

1. The American tradition strongly supports full disclosure and suspects that those who desire secrecy have something to hide which should be disclosed. AB 1048 promotes that full disclosure.
   
   
2. In this instance, the opponents of AB 1048 are trying to hide information from the principals, the very people who own the information, namely the homeowners. These homeowners own the affected property. Their money financed the legal action. The CCR contract which they signed specifically states that they have the right to all financial information in the association. What right, then, do their employees, the lawyers and clerks (CAI, ECHO and CACM), have to conceal the information? Clearly, then, homeowners have every right to know how much money was obtained as a result of that legal action.
   
   
3. The Executive Council of Homeowners (ECHO), a trade industry lobby group which does NOT represent "many thousands of homeowners throughout California", falsely claims that disclosures in annual financial statements are sufficient.
   
   If that were true, why did a 92 year old resident of an association in San Diego County spend 9 years trying to find out where a $3,500,000 settlement on his condo went, and yet was never able to find out? Why did the board of directors and their lawyers fight tooth and nail to hide the information? He says repairs were made on paper and the money disappeared. Where did the money go?
   
   Similar information has been fraudulently concealed from the owners of hundreds of post-litigation, stigmatized homes. Annual financial statements are NOT enough, as monies can be hid and siphoned away in a multitude of ways. For example, lawyers get on boards and settlements disappear in sweetheart contracts and defects are never corrected.
   
   
4. ECHO further argues that AB 1048 would place a further disclosure burden on those who wished to sell their homes in a common interest development. If the association fully disclosed the amount of settlement, the burden would be very light. More importantly, a buyer is entitled to know what the damages were, and what, if any, repairs were made. Why would ECHO and vendors want to hide this from the owners?
   
   
5. ECHO speciously argues that the cost of disclosure would be burdensome. ECHO is forgetting that the homeowners own this information. The information is not owned by the lawyers whom the homeowners hire to work for them. Hence, the alleged burden is not even an issue.
   
   As a matter of fact, if the information has been disclosed already to board members, the cost to provide the same information to homeowners would certainly be minimal - the information could be routinely incorporated in regular mailings to members. The significant benefits of disclosure would far outweigh the minor cost. Common sense suggests that homeowners would be willing to bear that minor cost in order to know what happened in the law suit and where their money is spent.
   
   
6. The California Association of Community Managers (CACM) argues that AB 1048 would require homeowner associations to disclose information which no other private corporation is required to disclose. Homeowner associations are not for-profit stock corporations - where investors place their money with money managers in order to realize a profit. Homeowners contract with HOAs to do maintenance and repairs of certain common facilities.
   
   These are homes not stock certificates. They are entitled to know everything which affects their lives so profoundly. Disclosure is even more important in light of the fact that several major management companies such as CAMs and Marquis Management have defrauded homeowners of millions.
   
   
7. CACM suggests that homeowners can democratically oust a board if it fails to disclose information which they want. CACM fails to disclose that most homeowner elections are run by CACM members and CAI and lawyers. AHRC has uncovered significant fraud in the way that many elections are run. AHRC has also a body of evidence that clearly shows how CACM and CAI members conspire to remove board members whom they cannot manipulate, even using homeowner money in the process.
   
         The case of James Troutman at Loma Vista Homeowners Association says it all. Even though he was on the board, he was unable to find out how half a million in reserves went to lawyers and bankrupted the association reserves. The laws forbade this use of reserves for lawyers fees. When he raised this issue, the very lawyers who were paid the $500,000 from the reserves lobbied in Sacramento for a law which later changed the Davis Stirling to let lawyers use homeowner reserves to sue builders, tradesmen and anyone involved in the construction of homes.
   
         Members of CACM and CAI then used the homeowner reserves to sue for Jim's removal from the board. Shortly afterwards, Jim, despairing at what was happening to his beloved country, took his own life. (For more information see "The Agony of the Loma Vista Homeowners Association" under homownerassociations.org at the American Homeowners Resource Center website http:// www.ahrc.com)
   
         Even if elections were run in a squeaky clean fashion, why does CACM want to resort to such divisive tactics to hide information? What have they got to hide? They argue that disclosure is burdensome, but isn't a bitter recall election of board members even more burdensome?
   
   
8. Non-disclosure negatively impacts homeowners. Federal agencies such as Fannie Mae, HUD, FHA withdraw financing for projects that have gone into any type of litigation. Sellers, brokers and lenders face an almost insurmountable task in finding the information which these agencies need when a board refuses to reveal the financial details of a settlement.
   
   
9. Likewise, conventional financing is cut off for developments involved in litigation until information is provided that the necessary repairs have been made or that there are sufficient reserve funds to make them. As homeowner associations have no obligation to use funds received through litigation for repairs, and as there is currently no mandatory disclosure requirement for the amount of funds received, financing comes to a grinding halt and homeowners suffer. AB 1048 would help to correct this.
   
   

In light of the above, it seems compelling to require disclosure of the amounts of money received by a homeowner association in a construction defect suit. The desire of lawyers to conceal the significant sums of monies which they receive in such construction defect suits does not outweigh the rights and significant interests of homeowners. (One lawyer recently disclosed that he has recovered over $250 million for homeowner associations. A minimum 1/3 fee means that the lawyer has netted in excess of $80 million for himself).

It is the homeowners' money, period and they are due a statement of accounts from the vendors who contract to do their accounts. The vendors lobbyists such as ECHO and CACM should not be allowed to hoodwink the Legislature with its specious arguments. AB 1048 is simple, necessary and justified for all homeowners.