Interests of Homeowners Association - Essay Example

Housing association governance puts the interests of the organisation above those of residents. Discuss. Image and investment, along with safety and hassle-free living are what draws many people and families to the gated communities where the community is ruled by a homeowners association. However, this comes at a price. A residence in this kind of community means giving up certain liberties to achieve an idealized private space that is controlled by a body that resembles a corporation. The case of Bear Cree, Washington, a five-hundred-resident walled community with private streets, sewers, gun control, and design control regulations, is a case in point. This community boasts that they have moved ahead of government by being able to enforce these restrictions through the contracts signed by the homeowners that in the public sector might run afoul of constitutional restrictions and statutory limitations. This particular circumstance underscores a dimension in housing associations – whether its administration puts the interests of the organisation above those of its residents. The very name, housing association, is misleading. Housing associations or homeowners associations are often not association in the sense of an expression of organisc life as the center of communal perceptions and common activities, nor, in many cases, are they controlled by homeowners. Nathaniel Gates (1997) argued that the inhabitants of these communities, drawn from many different backgrounds, often have little in common, and the developer nearly absolute control over the community. (p. 253) In a way, housing associations became some sort of private governments that could one day overshadow cities in significance. The rules of the housing associations, no less than cities, define political spheres. An association, like any community with the power to preserve and perpetuate itself, is coercive. This paper will argue that because of this fact, it must assert its own interests against the interests both of outsiders and, at times, of some of its own members. Background The basic idea for a home association with common ownership and upkeep of open space started with Leicester Square in London in 1734, which was governed by restrictive covenants. The legal concept was exported to the New World when in 1831, Samuel Ruggles drained a swamp in New York City and built a block of homes around a park. This community was called the Gramercy Park and it consisted an eight-foot high fence. Each resident had a key to a gate in the fence for access. The residents held title to the park in trust. These gated or so-called garden communities did not really become popular. In 1962, there were fewer than 500 housing associations in the United States, but by 1988 with the boom in towns and cities, the landscape began to change: 30 million people or 12 percent of the population lived in 150,000 common interest communities and in 2004, 50 million Americans lived in 260,000 association-managed communities with an average of 6,000 to 8,000 new housing associations being formed each year. (Bruhn 2005, p. 134) The Housing Association The housing association is one of the three main legal forms of collective ownership of residential property along with the condominium and the cooperative. (Netzer 2003, p. 211) It is a private and, ideally, a non-profit organisation that operates under its own bylaws and with covenants that are recorded in property deeds. In a housing association, each person owns his or her own home individually, often including a private yard. This organisation – which any new entrant into the area is required to join – is a separate legal entity that holds formal title to the common areas such as streets, parks, recreation facilities and other common property. It also enforces rules and regulations or what is sometimes called as neighborhood covenants, particularly in regard to the allowable uses and modification of individually owned homes and structures. The individual owners of the properties within the community are also automatically the shareholders in the homeowners association who collectively own the assets and control the action of the association. Housing associations are usually organised by the developer of the housing project. Usually, from the time a plan for a residential project is drafted, covenants containing provisions which govern the housing association, its organisation, and its management is also drafted. In most cases, these associations are incorporated and have boards of directors who are under the control of the developer initially. Control is, henceforth, turned over to the homeowners themselves after the project is completed. A housing association or a private homeowners association may take the form of a decentralized power not unlike that of the administration of a city or a business organisation. Such an association enables households that have clustered their activities in a territorially defined area in order to enforce rules of conduct, to provide public goods (i.e. open space), and for other common purposes that cannot be achieved without some form of potentially coercive central agency. (Keller 2003, p. 89) In the past, these housing associations are rare but today, they have already outnumbered cities as housing developers create thousands each year – those that govern subdivisions, condominiums, and planned communities. (Ellickson 1982, p. 1520) Benefits An ideal housing association is embodied by the Residents Association of Poundbury, Dorset. This association has about 99% membership among all residents of Poundbury. Knox et al. (2002, documented: Each new resident is invited to join the Residents Association and each member pays an annual fee of £2. Meetings are held quarterly and the three local councilors are invited to attend. The Residents association acts as a forum for discussion on environmental issues, provides a point of contact with local authority, publishes an informative newsletter and carries out a semi-policing role by encouraging the observance of covenants or tenancy terms. (p. 16) The housing association contributes to the success of Poundbury. The properties are all unique because of a building design regulation, creating an interesting environment. The area is designed and planned to minimise disruptions by stray animals. All public squares, courtyards and pavements are graveled, which, although unpopular, at first, has played a significant part in deterring crime. Local residents clearly enjoy their physical environments and are keen to maintain such environment even if the rules and regulations are strict and religiously enforced. For proponents of housing association, this is exactly the reason why there are people who would want membership in a community with a strict covenant. It can assure security and an ideal environment to live in. The housing association provides integrated service delivery – from facilities, safety, among others. What is more is that the covenants and the rules and regulations can be seen as one that provides structure for disputes between neighbors to be resolved and, as a result, reduces potential conflict between neighbours in the community. Another explanation for why some residents – especially those living in upscale communities and subdivisions – are willing to accept restrictions because of their anxiety about maintaining their middle-class lifestyle and socio-economic position. Association’s Interest According to Norcross (1973): Builders tend to think of an association as a means of retaining or enhancing their land values, and nothing more. While this is valid, it is hardly an adequate basis for maintaining and administering a substantial community, or encouraging maximum homeowner participation. This kind of development involves social change as well as construction problems, and a successful developer cannot be blind to the New Society he is helping to develop. (p. 37) What this tells us is that, the establishment of most housing association may not be conducive to the administration of a community because: 1) it is initially created to serve the interest of the developers, and, 2) the structure of the association may encourage the role of residents in the decision-making process. Furthermore, from the perspective of those housing association managements that are still controlled by the developers because they own the facilities therein, the residents’ involvement in the decision-making process gets in the way for a profitable business. The private rights granted to the purchasers of the homes in the development usually are such as not to impede the right of the association to borrow money for community improvements on the security of the title to the common properties. In this regard, the housing association can also suspend the enjoyment of any homeowner whenever maintenance assessment remain unpaid by him; charge reasonable admission or other fees for use of the common amenities, if necessary; convey the common properties to the public for public use and maintenance, if necessary; and, in case of financial distress, engage in salvage operations to save the common properties. (Arnold 1993, p. 261) The aforementioned information highlight one very important fact: the housing association has a legal personality, taking title to the common properties to its own name and claiming specific legal rights as well. One dimension in the housing associations that could support the argument that the interests of residents are marginalized is when it comes to the voting rights. According to Susan Keller, there are two models for allocating voting rights to residential communities: The first allocates voting rights to residents; the second allocates voting rights according to the economic stake in the community by each person, a rough index of which is the value of one person’s real property in the community. (p. 90) However, in general, perhaps even universally, voting rights in community associations tend to be apportioned according to share ownership,” or economic stake. (Ellickson 1982, p. 1540) Here, there are residents who will inevitably be at a disadvantage when their property is worth less and that they have lesser stakes in the community. In this circumstance, these residents are marginalized with their rights less respected and their voices less heard. While one might say, for instance, that the residents’ involvement in the housing association’s decision-making process does not end in the election of the board of directors because they could still be involved in resident councils, the varying degrees of voting rights will decrease the efficacy of advancing their interests in such levels of recourses and involvements. Coercive Also, because housing associations are private entities and its transactions are private in nature, the law is usually powerless to intrude in its dealings because it involves private transactions such as contracts among home owners and the existence of the association as a legal entity. In the past two decades, courts have been reluctant to apply constitutional protections to private residential communities. One of the court rulings that have elaborated on the primacy of the association over individual resident interests concerned that of the Levadunsky case in the United States, wherein a resident attempted to change the steam risers in his apartment. The resident contended that he had an oral permission to make the change. The relevant documents required written permission, which was not received. Based on professional advice, the homeowners association management believed that relocating the risers would create engineering difficulties. The resident proceeded with the riser modifications and suits and countersuits ensued. The New York Court of Appeals ruled: It is apparent, then, that a standard for judicial review of the actions of a cooperative or condominium governing board must be sensitive to a variety of concerns – sometimes competing concerns. Even when the governing board acts within the scope of its authority, some check on its potential powers to regulate residents’ conduct, life-style and property rights is necessary to protect individual residents from abusive exercise, notwithstanding that the residents have, to an extent, consented to be regulated and even selected their representatives. At the same time, the chosen standard of review should not undermine the purposes for which the residential community and its governing structure were formed: protection of the interest of the entire community of residents in an environment managed by the board for the common benefit. (Levandusky, 553 N.E.2d at 1321.) In this ruling, the court underscored that judicial inquiry may be limited into actions that are taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes in the community association. In Levandusky case, the management decision was analogous to a business judgment rule and that the court underscored that residents have entered into a contract with the association and so they are bound to surrender some rights for the good of all. As a result, housing associations have exercised a high degree of control over its members, if not in choosing its members, at least, in the way the residents live. If the housing association has control over who would join them, then it has control over the residents - excluding those people with certain profiles, discriminating over background, sometimes even race. Deeds to houses in new developments almost always include restrictions imposed by the housing associations – from the size of your dog to the colors you can paint your house to the type of front yard landscaping you can do to where and what types of vehicles you can park on your driveway. It is not easy to get out from under overly restrictive covenants after a resident moved in. It is also difficult to change the structure of the governing body. For instance, in the growing number of legal proceedings in California wherein residents seek to deregulate their rigidly controlled environments, the litigants were not successful. (Low 2003, p. 19) In addition, he or she will likely have to submit an application (with fee) for a variance, get the association’s permission, and possibly go through a formal hearing. Even McKenzie in Privatopia writes about the problems and disputes from rigid enforcement of strict rules and regulations. He argued that the emergence of housing associations in communities may result to the loss of first amendment rights and the residents’ inability to challenge board rulings because they have signed contracts, or that their stakes are insignificant compared to large real estate owners. The covenants and rules and regulations may infringe personal liberties as it works around ambiguous words such as “reasonable,” “as appropriate,” and “in light of needs and circumstances.” For example, the association could stipulate in the covenant that the right to privacy merely provides that the association shall MINIMIZE intrusion into the privacy of individual units, individual affairs and personal records. Conclusion As housing associations exercise more power than governments and stifle communication among members and between members and outsiders, the risk that the communities created by such associations are tautologically justified and defined and that the internal policies of the association generate conformity rather than reflect consensus is increased. (Gates, p. 255) In the context of geographically defined associations, the question is not whether we want voluntary or coercive organisations, because every spatial association is in some sense both and neither, but rather what type of associations we will permit to monopolize scarce real estate and to what degree we will allow them to do so. Looking at themed communities such as New England Village, Greek Island Villa, Hawaiian Resort, Golfer’s Paradise, Leisure World, one could see the covenants as well as rules and regulations themed around a chosen image for the community. Here the contracted rights and obligations are even thicker and more restrictive. The fact is that these communities have a reputation to maintain at any cost even at the expense of personal liberties. An underlying issue in regard to the dramatic increase in the number of homeowners association is that this development represents a shift from individual to collective ownership of residential property, and from public to private forms of local government. One consequence in this regard is the growing social isolation among communities. All these forms of privatized community are implicated in the deep erosion of public space and the fortressing of the cities. This erosive fortressing reaches its most obvious peak in the gated communities. The shift in the zoning process from a publicly debated and voter-enacted system to a privately imposed system is in danger of becoming far more restrictive than any state statute or local ordinance. The housing association’s use of legal restrictions are both redefining and privatizing the political, social, and even aesthetic dimensions of the suburban home. In looking at the issue from another perspective, one will find that one of the main reasons why communities governed by housing associations is so attractive as a housing option is that their contractual underpinnings allow residents to define the norms of their own community. Thus, the retention of flexibility in community association governance is critical; community associations must be allowed a relatively free rein over the substantive regulations governing their community. This is where the problem arises. If the association’s management is controlled by the residents and that it looks after their welfare, the circumstance could have been preferable. However, the danger becomes apparent when the residents have limited representation and involvement in the decision-making process. Ellickson suggested that membership in a housing association is entirely voluntary, therefore making this a private activity and justifying a freedom from many constitutional restrictions applied to governmental activities. (p. 1523) However, this perspective assumes a particular concept of voluntariness that considers space as transparent and income factor irrelevant. It is impossible to determine to what extent the buyer chooses a community or the package or regulations and benefits that constitutes a homeowners association and to what extent he or she chooses a home as a result of uniqueness of location, or topography, or sheer scarcity of housing elsewhere in the vicinity, and purchases in spite of a housing association. Edward Soja (2000) has coined a term for the most extreme of these housing association administered communities. He called these as “association-administered servitude regimes” – those that represent an oppressive form of private socialism. (p. 316) Indeed, housing association resembles local/municipal governments in terms of four characteristics: 1) it is a territorially based unit in which membership is compulsory for everyone living in a geographically defined area; 2) it collects resources by levying mandatory assessments on property; 3) it uses the courts to enforce its rules; and, 4) it provides local services such as garbage collection, street sweeping, and policing. And so because of this, housing associations must be treated as a state actor for the purposes of ensuring that rights of the citizens are not brazenly violated and that they are protected from unreasonable abuse by association governments bent on advancing its own interests. The goal is not to “judicialize” the decision-making process and policy outcomes within the community. The community should be made as democratic as possible and that it should not be treated as inviolate by the laws and the courts. Regulation of these governing bodies is necessary to ensure that associations do not abuse its rights and stifle those of its residents. References Arnold, A, 1993, The Arnold Encyclopedia of Real Estate, John Wiley and Sons. Bruhn, J, 2005, The Sociology of Community Connections, Birhauser. Ellickson, R, 1982, "Cities and Homeowners Associations." University of Pennsylvania Law Review, 130, 6. pp. 1519-1601. Gates, N,1997, The Judicial Isolation of the "racially" Oppressed, Taylor and Francis. Keller, S, 2003, Community: Pursuing the Dream, Living the Reality, Princeton University Press. Knox, M, Alcock, D, Roderick, A, and Iles, J, 2002, Approaches to Community Governance, The Policy Press. Low, S, 2003, Behind the Gates: Life, Security, and the Pursuit of Happiness in Fortress America, Routledge. McKenzie, E, 1994, Privatopia. New Haven: Yale University Press. Netzer, D, 2003, The Property Tax, Land Use, and Land Use Regulation, Edward Elgar Publishing. Norcross, C, 1973, Townhouses and Condominiums: Residents Likes and Dislikes, Washington: Urban Land Institute. p. 6-11, 101-105. Soja, E, 2000, Postmetropolis: Critical Studies of Cities and Regions, Blackwell Publishing. Read More