- Homeowners associations, or HOAs, are growing as an affordable way to get into a housing unit without the hassle of outdoor upkeep.
- Along with the growing popularity, however, HOAs can present their own set of problems that may end up in lawsuits.
- Utah lacks an HOA ombudsman to help homeowners, but a legislative bill may change that.
One Utah lawmaker wants to establish an ombudsman office to issue advisory opinions for homeowner association disagreements when a dispute arises between the association and its members, while another lawmaker seeks education requirements for HOA board members.
Why the interest this legislative session?
Some of the members’ horror stories are the kind where you sit back, grab a bag of popcorn and find yourself either spitting it out or choking on it in disbelief at the drama you wouldn’t expect from an expected idyllic living situation. Your lawn is mowed and snow is shoveled by someone else. There is a community common grounds for children to play and often a swimming pool to cool the heat of summer.
HOAs are intended to erase the stress of residential repairs; a monthly fee helps tamper those costs. Some Utah residents, however, are finding the dream they signed up for has morphed into a nightmare.
Robert Tee Spjute, a founding partner of Robertson Alger & Spjute, said he has HOAs as clients but also represents residents caught up in an endless onslaught of fees, assessments, collection agencies and litigation.
“I would say that some associations, some that I represent, are actually fantastic at taking care of issues and the management company is fantastic,” Spjute said. “Some that I can think are great, but oftentimes, especially when we get kind of these midsized or even smaller associations, oftentimes the association is paying a management company, right? There are a lot of different management companies and they’re great and others are not so great.”
The bad and the ugly
Often, when a member gets in arrears (often due to a fine or fee for a purported broken rule) the HOA board ceases communications with the resident and bounces all communications to a management company, where the amount of money escalates. It then goes to a law firm, where communications can drag on and drag on for months — with costs continuing to compile.
In the case of Lon Galloway, his online portal to pay membership dues was cut off.
His problems started with the HOA in 2016 when he received approval to rent his unit as an Airbnb. He said he was given the OK to proceed because using the unit in that manner was not disallowed. Two years later, he received notice that he needed to evict his tenant. Attached was a $50 fine. Galloway said he would pay it. He did not hear back, but evicted the tenant.
About a month later, he received a fine for more than $2,000.
“I feel like during that time I was just going nowhere. They just dug in their heels and just wouldn’t respond. They wouldn’t do anything, waiting for that exact moment where they can finally basically fine me for whatever they wanted at that point. And that’s exactly what they did,” Galloway said. “So they as soon as that 60-day mark hit, they put a lien on my property.”
The money he owed began to accumulate, reaching $3,000 and eventually $13,000.
He had to hire an attorney, because even though he was paying the monthly fee in full, he found out half of that was going to a collection company.
He was making payments through an online portal, but that option was shut down for him because he was in arrears.
“So I had a lien for about $1,800 but then less than a month later, I had about $6,000 negative in my account. And then I think a few weeks later then that, I received a letter from a collections law firm saying that they’re on collections to demand it double again.”
Galloway found an attorney and took it court in a case that is still pending. By then his bill was upward of $30,000. The case remains unresolved.
Galloway and others say what is needed is an HOA property ombudsman to put a break on this runaway train.
Rep. Neil Walter, R-St. George, is running a bill to establish such an office. HB217 and set limits on the amount of fees that can be assessed by a homeowners association. It also would establish and invoke the power of the office to issue an advisory opinion.
Rep. Cheryl Acton is running HB262. The GOP representative from West Jordan wants to establish some minimum education requirements for board members for ethics and leadership, roles as a fiduciary, rule and creation of enforcement, as well conflict resolution and duty to community.
Why does this matter?
Consider this from IHOA Property Management, especially as it relates to the state’s goal of providing more affordable housing:
- There are 3,650 HOAs in Utah.
- 644,000 people in Utah live in HOA communities (about 18.8% of the population).
- The average Utah HOA has 176 residents living in 57 homes.
- For every HOA home in Utah, 3.9 homes are unaffiliated.
- HOA households in Utah average 3.08 residents, and the statewide average is 2.95; HOA households are 4.55% larger.
- The homeownership rate in Utah is 70.3%, down 0.42% since 2020.
In addition according to the U.S. Census Bureau, 84% of new construction of single family homes sold in the United States in 2022 were in an HOA, with reporting from CNBC.
Spjute, the attorney, argues that alternative dispute resolution has been built in as a component to other states that have an office of an HOA ombudsman to avert the financial burdens often inflicted on socially and economic disadvantaged people who end up in HOAs and in trouble. Nevada and some other states have that provision on the books.
Such a measure may have helped St. George resident Rolland Brown, who found himself with leak after leak on the roof of his 30-year-old unit.
He called the HOA board and eventually they sent a roofer out to fix the problem.
Then, seven days later, the fixed roof sprung another leak.
“I should be the poster child for what is going on here. In my case, you have these very large communities, some of them are $2-, $3-, $4-million real estate ventures, and you have individuals at the helm, meaning they’re at the board level that have no clue what they’re doing,” Brown said. “That is scary, and not only that, they know that they have a war chest that they can use against you. And it is just absolutely unbelievable how these HOAs are a self-willed run riot, and they do whatever they want to do, and they know that individuals don’t have the wherewithal or the financial capacity to stick up for themselves, and it’s a nightmare.”
Brown hired an independent contractor from Colorado to inspect his “new” roof.
“We flew him out. He looked at the roof and said, I don’t quite know how to tell you this. And I said, just tell me the truth. He said, ‘Roland, this roof has no less than 18 building code violations.’”
The HOA continued to stand firm on the first repair, despite evidence that showed the fix would not hold up.
“They’re not doing what they’re supposed to do. And when when we read the conditions, covenants and restrictions, the verbiage, the legal verbiage in there, plainly stated that the association is responsible for the upkeep, maintenance and replacement of the exteriors, ie, roofs, gutters, downspouts, etc.” Brown added. “So there are governing documents laid out in very plain English that somebody in the sixth grade level could understand on what needed to happen.”
Brown got the attorneys involved and went to court, adding he — unlike many others — had the financial ability to take the fight to the association.
In the judgment, the court said there is no reward for “bad behavior,” and awarded Brown $200,000 — $177,000 for his own fees and trouble while the rest went to pay for a new roof up to code. That new roof is about three-quarters completed.
“These boards have no experience, they have no business moxie. They have no common sense. And you know, the vendors that are supposed to be supporting them, ie the property management companies and the law firms, they give them lip service,” Brown said. “It’s just so sad what’s going on. They’re giving them bad advice. And a lot of the board of directors — these vendors, if you will, want them to utilize them, and they’ll tell them anything just to get them to use their service.”
Alternative dispute resolution
What Brown and others say is that the state needs is an HOA ombudsman and the teeth that goes along with it — alternative dispute resolution and not for petty things.
“The state needs to ... come up with a alternative dispute resolution that needs to be placed in the Community Association Act, which governs homeowners associations,” Brown said. “There needs to be a statute put in there mandating alternative dispute resolutions, and it needs to be specific for certain areas, because if you open it up for everybody it will be a rat race,” Brown said. “It needs to be specific to the contract.”
He’s not talking about hedges not trimmed to specifications or flags placed in the wrong position or the wrong color of dogs. The ADR needs to come into play when serious problems arise.
Even the national Community Associations Institute outlined in its 2024 state priorities the need for states to embrace alternative dispute resolution as a preferable option to litigation for housing related disputes within a HOA community.
None of Utah’s bills introduced so far this session include that provision.