You may have heard news reports recently about an elderly woman in Glendale who lost her house in a foreclosure by her homeowners’ association. Some people have pointed to that event as a demonstration for the need for closer government regulation of homeowners’ associations. My own view is that the entire episode provides a pretty good demonstration of how homeowners’ associations enforce their rules (and how not to respond when you get into a dispute with your homeowners’ association).

The homeowners’ association in the Glendale case has a pretty typical rule stating that each homeowner must keep their yard up to certain standards and that if the homeowner fails to do so, the association has the authority to cure the failure at the homeowners’ expense. The association went through the process of giving the homeowner notice of the violation as is typically required under association rules, then having the work done and sending the homeowner the bill. When the homeowner refused to pay the bill, the association, again under fairly standard rules, placed a lien against the property. When the homeowner continued to refuse to pay the bill, the association sued the homeowner to foreclose the lien, got a judgment for foreclosure, and caused the property to be sold at a Sheriff’s sale to satisfy the lien. The purchaser at the Sheriff’s sale paid the amount of their bid in cash, which went to the association to pay the homeowner’s debt to the association. The purchaser took title to the property subject to prior liens, which in this case (as in most cases) consisted of a bank mortgage and unpaid real property taxes. The purchaser had to pay those liens to keep the property, meaning that the purchaser’s investment to acquire the property was not just the amount bid at the Sheriff’s sale, but the amount of that bid plus the amount of the mortgage and the unpaid property taxes.

Despite the calls for increased government regulation of homeowners’ associations, I have heard nothing to indicate that the association in the Glendale case did anything outside of what a typical homeowners’ association can do to enforce its rules. There are state laws that limit the actions of homeowners’ associations in enforcing liens for unpaid fees. All homeowners’ associations are required by Arizona law to provide a statement of the amount of any unpaid fees upon the request of the homeowner. All homeowners’ associations are also prohibited by Arizona law from enforcing any lien more than three years after the unpaid fees became due. And Arizona law limits the amount that homeowners’ associations can charge for late payment of fees.

Contrary to the perception that homeowners’ associations are a shadow government foisted on unsuspecting homeowners, the existence of a homeowners’ association, its rules, and its powers of enforcement, are all disclosed to a prospective home purchaser when a document commonly called the CC&Rs (for “Covenants, Conditions and Restrictions”) is provided to the prospective purchaser with the preliminary title report. The Seller’s Property Disclosure Statement, and the Subdivision Public Report in new subdivisions, also provide information about the association and its impact on the property.

Another misconception fostered by the criticism of homeowners’ associations is the notion that they are ubiquitous. The fact is that very few older subdivisions have associations with enforcement powers, even those older subdivisions that have CC&Rs in place. The proliferation of homeowners’ associations is probably more associated with the spread of subdivision common areas rather than CC&Rs. Subdivision common areas are those areas found in most new subdivisions that are not part of any individual lot but that are not owned by the local government. The common areas can be as limited as the landscaped area around the subdivision entrance or as extensive as the streets throughout the subdivision. Maintaining those common areas (using the association fees paid by all of the homeowners in the subdivision) is the primary function of most associations. The common areas may make the subdivision more attractive, but having them necessitates the creation of a governing body to maintain them. If you buy a house in such a subdivision, you are knowingly entering into an agreement to live by the rules establishing the common areas and the association, i.e. the CC&Rs.

Now for the part about how not to respond when you get into a dispute with your homeowners’ association. By the accounts I have seen, the Glendale woman who lost her house ignored the association’s requests to clean her yard and the association’s notice that they would have the yard cleaned at her expense. Worse, she stopped paying her association fees in protest of their action to have the yard cleaned, refused the association’s offer (after they sued her) to settle the matter for a fraction of the actual cost of the cleaning, and failed to respond to court orders leading to the judgment for foreclosure and Sheriff’s sale. Even if the association’s actions were completely unjustified, by essentially ignoring the association’s actions, the homeowner assured herself of the loss of her home.

Homeowners’ associations are here to stay, and do perform the function of maintaining the common areas that make many modern residential communities more attractive. Some homeowners’ associations, like the one in Glendale, will exercise their substantial powers to enforce their CC&Rs. If you would prefer to be free of the financial and regulatory burden imposed by a homeowners’ association, you can as a home buyer vote with your feet on the issue by choosing, as my family did, to buy a house in a neighborhood with no formal association.