A group of Arizona citizens are gathering at the capitol every month to force a conversation on the legal powers and lack of oversight and regulation of homeowners associations throughout the Phoenix metropolitan area.
Arizona Sen. David Farnsworth (R) on the third Monday of every months hosts what he has coined, a “mastermind group” allowing everyday residents, community advocates and legal professionals to look at how certain powers granted to HOAs by the Arizona Legislature can be reined in.
“What we are we working on is to benefit the public,” said Scottsdale resident Jill Schweitzer in an Aug. 2 phone interview.
“So the public can see there is a reason behind this and there is a reason behind that — there are homeowners who don’t even know there is a problem. We are really passionate about seeing the laws changed to protect homeowners.”
Ms. Schweitzer, who has penned a book on HOA issues and produced videos on local issues impacting homeowners that can be viewed at www.hoasavers.com, says the mastermind group is looking to reinstate homestead protections for homeowners within HOA communities.
The Arizona Homestead Exemption — which, according to state statute, works in place of federal property exemptions — protects up to $150,000 of a person’s equity in his or her dwelling from attachment, execution or forced sale.
But the Arizona Legislature suspended that protection in the mid-1990s. Some point to that move as the reason why some HOA entities can now foreclose on homes for past-due HOA fees — in some cases as little as $2,000.
In addition to reigning in the foreclosure power of HOAs, Ms. Schweitzer says there is very little oversight and accountability of HOAs. She says the group is looking to develop new regulations that may include beefed up disclosure requirements for vendor gifts provided to community management groups.
“There has to be accountability,” she said of the group’s guiding mantra.
“Five years ago, I bought into an HOA here in south Scottsdale. I got on the board and this is when the trouble started. I learned about HOAs and I decided all of the stuff I learned is not going to go to waste. I want to get the laws changed to add protections for homeowners; provide them more rights.”
Sen. Farnsworth, who represents District 16 at the Arizona Legislature, says the mastermind group is not a new concept and no plan of action has been devised for HOA reforms — yet.
“We tried this last summer, but it didn’t achieve the success I had hoped it would,” he said of the HOA working group in an Aug. 2 phone interview. “It seemed like we had more lobbyists and special-interest groups to see what we were going to do.”
Sen. Farnsworth says he he is passionate about preserving property rights.
“I realize in our society, we have to find that balance as there are rights on both sides,” he said of the property rights vs. the property value legal argument.
“I feel like I need to be an advocate for property rights,” he explained. “All of our laws that have evolved over the years, they are all controls, from my point of view, erodes our property rights and restricts what we can do with our properties.”
Sen. Farnsworth says the purpose of the HOA workgroup is to discover what works and what does not in terms of HOA operations and the rights of homeowners.
“The real purpose of the meetings we are holding is to try and get to the bottom of it,” he said of the prospect of restoring homestead protections to homeowners living within an HOA, and creating some kind of licensing requirement for community management groups.
“If we can, come to the truth and either recognize that our HOA statutes are reasonably good or that they need to be changed and improved. We all know perfection is not found in statute.”
Not enough controls in place
Aside from HOA homestead exemptions, one Phoenix-based attorney says he’s fighting for more financial disclosures between vendors and community management groups.
Steve Cheifetz of the Phoenix-based Cheifetz, Iannitelli & Marcolinni has created draft bill language to be considered by the HOA workgroup for possible inclusion in the upcoming legislative session.
“I have been doing this for 20 years and I think there are a lot of inequities,” he said in an Aug. 2 phone interview. “I chose to be an attorney to do a little justice in the world — not just make money.”
Today, no community management group in Arizona is required to disclose any monetary gifts provided by vendors to community management associations who provide recommendations to HOA governing boards.
“The problem isn’t really the HOA board themselves, it’s the ones who are making all the money,” he pointed out. “They (management groups) are the ones who act as lobbyists.”
Mr. Cheifetz says wheels are greased routinely for board vendor recommendations and while the practice is not illegal it should be disclosed to the HOA board that grants lucrative service contracts.
“No community manager may accept undisclosed fees, differed compensation, commissions or similar gratuities in cash or in kind for recommending any third party to a community association or for purchasing goods or services on behalf of a community association,” Mr. Cheifetz’s bill language states.
Mr. Cheifetz thinks community managers should disclose the scope of gifts and gratuities in excess of $300 to fellow community management groups and the HOA board they provide vendor recommendations to.
“I just think that I want to pick my battles,” he said of going after disclosure requirements to create some kind of equity in the HOA bidding process.
“We are trying to limit the management company’s power because the board has to approve everything.”
Sen. Farnsworth says he is open to about 12 different pieces of potential legislation but has not yet determined which his office will pursue.
“All of these are considerations; we haven’t opened any folders but can on Aug. 6,” he pointed out of the new legislation session commencing. “I anticipate to have several HOA bills, but I don’t know what they are. The issues are not getting better. In my history, and I have been doing this for 20 years, I have never seen a group this large or passionate.”
An HOA board perspective
Paradise Valley Vice Mayor David Sherf also serves as a member of his HOA board of directors and he describes a tranquil environment where all homeowners have an opportunity to voice concerns and suggestions.
“Our HOA board comprises three people, all serving two-year staggered terms. Board members are elected by the 49 homeowners,” he said of his board of directors. “We hold an annual meeting each January to primarily approve the annual budget and about three to four meetings throughout the year to review and discuss issues that occur during the year. Our management company has worked with us for about 10 years and is very helpful regarding legal or administrative matters that we deal with.”
Vice Mayor Sherf says his HOA management company serves in an advisory role in terms of day-to-day operations.
“They are particularly helpful in quickly finding companies to bid on projects that we deal with, including tree maintenance, painting, street repairs and landscaping,” he said.
“They offer valuable insight in the capabilities and past performance of most of the companies because they represent many HOAs. The board or homeowners often ask other companies to bid on projects as well. The board always make the decision as to what contractors to employ. They also provide valuable insight into legal issues including unpaid HOA dues and code violations.”
But Vice Mayor Sherf asserts the HOA board of directors he serves on is no pushover.
“In our HOA, the board truly is the representative for our homeowners and makes the important decisions,” he said.
“If we felt the management company was not properly representing us, we could terminate them. We looked at other management companies two years ago just to see what other companies offered, and unanimously decided to stay with the current company.”
Vice Mayor Sherf says in his four years serving on his HOA board he hasn’t seen much in the way of dissent from the local homeowners.
“A validation of this statement is that our annual meeting only attracts about seven to 10 residents at most and our four to five meetings each year typically attract less people than that,” he said. “As a board, we think we must be doing the right things as we have such few people attend the meetings.”
North Valley News Editor Terrance Thornton can be contacted at 623-445-2774 or at firstname.lastname@example.org